The Trillion Dollar Coin Fantasy: GOP Extremism Can’t Be Wished Away

Platinum coins can’t make congressional Republicans disappear, and platitudes won’t make them cave. If Obama wants a debt ceiling deal, he’s going to have to pay a ransom.

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Andrew Harrer / Bloomberg / Getty Images

The Federal Reserve building stands in Washington, Oct. 23, 2012.

After I spent the last two weeks explaining that the Treasury would mint a second Joe Biden before it minted a trillion-dollar platinum coin, that President Obama would make Kim Kardashian his chief of staff before making the coin fantasy a reality, it would be easy for me to gloat. So I will! The coin was a self-evidently wackadoodle idea, and the pundits who fell in love with it should have remembered Obama isn’t in vaudeville. But there’s more to say about the coin farce than my four favorite words. (Count ‘em: I…told…you…so.) The debt ceiling disaster that the coin was supposed to avoid through metallic magic still looms. And the understandable impulses that led otherwise smart coiners to crusade for a WTF policy are producing equally muddled thinking about the next round of fiscal negotiations.

The idea of a trillion-dollar platinum coin was not quite as insane as it sounded. It was a response to the insanity of congressional Republicans, who have refused to raise the debt ceiling and let the U.S. pay its bills unless Democrats agree to massive cuts in Democratic priorities. The GOP is holding the economy hostage, using the threat of a confidence-destroying default to try to extract a policy ransom. The coin would have been an accounting trick designed to allow Obama to ignore the debt ceiling and keep fulfilling obligations Congress had already incurred. I could explain how, but it’s complex, which is why it was such a lousy idea; no politician wanted to explain why his response to a tough fiscal situation was to create a magic trillion-dollar coin out of thin air. Fortunately, now that the Obama Administration has officially rejected the coin, I don’t need to explain it.

(MORE: Is a $1 Trillion Coin a Good Way to Avoid Another Debt-Ceiling Impasse?)

It was always unrealistic to imagine that Obama could sidestep Republican extremism and obstructionism through a kooky loophole in monetary regulations. Big ideological battles don’t get settled through technicalities. But especially on the left,  there is still a powerful urge to believe that Republican extremism and obstructionism can be sidestepped. If only Obama sticks to his guns and refuses to negotiate with the hostage-takers over the debt ceiling, the argument goes, there will be a righteous public backlash against GOP political terrorism, and eventually Republicans will be forced to cave.

In my taxonomy of lefty Obama-bashing, these pipe dreams constitute a mixture of Heighten The Contradictions Liberalism and Choose Your Own Adventure Liberalism. In fact, current polls suggest that refusing to raise the debt limit is pretty popular, especially in the heavily Republican districts that Republicans tend to represent. Maybe a catastrophic default would change that, but Obama recognizes that a catastrophe for which Republicans were blamed would still be a catastrophe. Those of us who believe the modern GOP is an extraordinarily irresponsible party, remarkably brazen in its rejection of reality and consistency, still have to acknowledge that Republicans control the House of Representatives and can filibuster legislation in the Senate. They cannot be sidestepped or ignored or wished away. Congressional elections have consequences, too.

At his news conference Monday, Obama called out the Republicans for threatening to destroy the economy, and vowed that he wouldn’t negotiate with them over the debt ceiling. But as the president acknowledged, he has no choice but to negotiate with Republicans over the so-called “sequester,” $1.2 trillion in spending cuts that will begin March 1—and could tip the economy back into recession—unless there’s a bipartisan deal to replace it. And once you’re negotiating with terrorists, you’re negotiating with terrorists. It’s surely infuriating to try to reason with hostage-takers whose position is: If you don’t agree to hurt the economy with premature austerity, we’ll croak the economy with an unprecedented default. Alas, nobody said the presidency was an easy job.

(MORE: Hope Lives for $1 Trillion Platinum Coin Enthusiasts)

The larger point is that you don’t have to endorse hostage-taking to recognize that the demands of the hostage-takers are relevant to the negotiations. You can’t just say abracadabra and wish them away if you don’t want the hostage to get shot. If Obama wants a deal, he’s going to have to pay a ransom. The Republicans aren’t going to raise the debt ceiling for free; their supporters wouldn’t let them. Obama might get more of what he wants than the Republicans do—he has in the last four bipartisan deals—but he won’t get everything he wants. Khrushchev only took his missiles out of Cuba once Kennedy agreed to dismantle his missiles in Turkey.

None of this is meant to suggest that reaching a deal will be easy, or that Obama should give away the store. Republicans may insist on maximalist demands; the last four years have demonstrated that they don’t believe that standing up to Obama hurts them politically. Obama may be forced to issue California-style IOU’s to avoid a default; they might provoke a constitutional crisis, but unlike the platinum coin, they would at least be easy to explain. No matter what happens, though, protecting the recovery and avoiding a default will ultimately require a bipartisan deal. It won’t be perfect, and Ivory Soap liberals, for whom 99.44% pure is never good enough, won’t like it. But platinum can’t make congressional Republicans disappear, and platitudes won’t make them cave. If you don’t like it when Obama negotiates with terrorists, vote out the terrorists in 2014.

MORE: The Next Cliff: Another Round of Debt Brinkmanship Looms

49 comments
nostalgia
nostalgia

"vote out the terrorists in 2014"

We can't, they managed to gerrymander their way into a seemingly permanent majority.

Wchris
Wchris

So for those of you who want to keep spending like we have been, how do you suggest we pay for it ???

HenryFarnsworth
HenryFarnsworth

So we should continue to spend our country into the ground, blindly raise the national debt, and ignore the fact that Obama's negotiations regarding the fiscal cliff included promising spending cuts. A fact he no longer wants to acknowledge. I can smell the inflation from here.

shepherdwong
shepherdwong

Again, the choice between using a "kooky loophole in monetary regulations," and global economic catastrophe is a no-brainer (at least theoretically). Obama has decided he doesn't need it, since Boehner and the rest of the Wall Street tools have already shown they won't take it over the cliff when push comes to shove. Standing up to Obama has indeed hurt them politically, at least on the national brand level. What's important here has nothing to do with the Platinum coin, it is that the era of the Hastert Rule is finally over and the Teatards are now marginalized.

DonQuixotic
DonQuixotic

Speaking of the usual GOP/Conservative drum-beat: Entitlements

Entitlements -- including Social Security, Medicare and safety net programs such as Medicaid and food stamps -- don't just benefit the poor and unemployed. More than 90% of the benefits go toward working families, the disabled and the elderly. And more than half of all entitlement spending helps middle class Americans.

In 2010, those age 65 and older collected 53% of the dollars, while the non-elderly disabled received 20%, according to the Center on Budget and Policy Priorities, a left-leaning group. And folks in working families collected 18%.

As for income levels, those in the middle -- earning between $30,000 and $120,000 -- received 58% of all entitlement dollars in 2010.

One reason so many middle income Americans are using the safety net is the recession. Workers nearing retirement age have found themselves without work in recent years and were forced to go on Social Security and Medicare earlier than planned.

In 2007, the middle class received 52% of entitlement benefits, but three years later, that figure rose by 6 percentage points, largely because more older workers were flooding into Social Security and Medicare after losing their jobs.

The share of middle-income American households receiving Social Security benefits jumped to 69%, up from 63%. Likewise, the share of Medicare recipients in that group rose to 64%, up from 58%.

"These are programs that are of great concern to the middle class and greatly affect their well being," said Arloc Sherman, senior researcher at the center. "Social Security has the large effect of keeping people in the middle class."

Is it safe to say then, at this point, that the GOP's war on "entitlements" is really a war on the middle class?


destor23
destor23

"no politician wanted to explain why his response to a tough fiscal situation was to create a magic trillion-dollar coin out of thin air..."

Which means that, in effect, we have a monetary system that no politician wants to explain. Monetary creation is after all, oar for the course.  The fun thing about the coin, which I didn't support, is that Treasury could have sterilized its inflationary effects by selling bonds from its own account, in effect replacing the Treasury as bond issuer for the next trillion dollars.

OkikiolaBeckley
OkikiolaBeckley

It's the global economy that's under threat this time,they're really playing with fire. Their paymasters on Wall Street will skin them alive. They have no choice but to raise the limit with or without spending cuts.

outsider
outsider

This is brilliant, MG:


And the understandable impulses that led otherwise smart coiners to crusade for a WTF policy are producing equally muddled thinking about the next round of fiscal negotiations.

The idea of a trillion-dollar platinum coin was not quite as insane as it sounded. It was a response to the insanity of congressional Republicans, who have refused to raise the debt ceiling and let the U.S. pay its bills unless Democrats agree to massive cuts in Democratic priorities. The GOP is holding the economy hostage, using the threat of a confidence-destroying default to try to extract a policy ransom



Read more: http://swampland.time.com/2013/01/15/the-trillion-dollar-coin-fantasy-republican-extremism-cant-be-wished-away/#ixzz2I3FJ5vkc

gysgt213
gysgt213

I have a idea more insane than the coin.  It's my position that we are having the wrong debate in the first place.  People want jobs so that they can then consume and then help the economy by consuming because we have a consumer driven economy.  Crazy as it sounds people cannot buy goods, services and pay taxes with no money.  The private sector has proven itself incapable of providing the needed jobs on its own. So we have only one other place to turn and that is the government.   If you want people off of welfare, off food stamps and not asking their government for handouts then you have to give them an alternative and pursue polices that put them to work.  Kicking them off the social safety net does not improve the economy it masks the symptoms of a bad and failing economy.

forgottenlord
forgottenlord

In the midst of your article, you hinted at the real flaw in the logic behind either the 14th or platinum coin solutions: the sequestration.  If the debt ceiling was the only problem and Obama wanted to make the point of "the debt ceiling is not a toy", he has options (though not without their own flaws).  The sequestration - plus the budget extension in mid-March - make for three problems in under a month and Obama only has the power to tuck one of those - the debt ceiling - away.  At some point, he has to negotiate with the hostage takers.

PaulDirks
PaulDirks

It's unfortunate that we have to deal with the degree of ignorance that thinks that a default might NOT be a calamity, but the fact of the matter is that the debate is proceeding exactly as the framers of the Constitution intended. The experience of being taxed from across the ocean made them aware that the issue of taxation and spending should be decided as close to the people affected as possible. That the House is the only body that can appropriate funds is a direct result of this thinking. What they didn't anticipate is that as the country expanded, the division of interests between urban and rural voters would result in large segments of the Congress representing people who don't give a hang about the majority of their Countrymen who nevertheless call themselves patriots. Obama seems to understand the problem significantly better that the coin activists, but then again, Illinois represents the exact same dynamic in miniature.


Paul,nnto
Paul,nnto

The negotiating between the White House and the republican controlled House is fantasy. Boehner is incapable of handling his TP wing.

As you point out staking out a "burn the city down to save the city" approach is actually popular with their districts. Any pressure will have to come from the old republican hands in the Senate where there will be electoral consequences to screwing with the economy. 

And the only way that the old guard of the Senate will exert influence is if BHO holds a hard line. 

outsider
outsider

@shepherdwong 


I'm not as optimistic as you are regarding the marginalization of the TPers. But i like what you wrote, just the same. 

bryanfred1
bryanfred1

Question for you - how long do you think it is sustainable for everyone to receive entitlement benefits when we're a trillion dollars or so short to pay for them?  I already know the answer, which Howard Dean so helpfully spilled earlier this week - it's not sustainable, and taxes are going to go up on the middle class to pay for them.  So celebrate the rich seeing their taxes going up, which covers about 5% of the deficit, while you can.  Because everyone else's will follow suit soon enough.

Only in Washington can slowing the rate of growth be considered "draconian cuts."

roknsteve
roknsteve

@sacredh Nate needs to stick to politics because his football predictions suck.  I think Pres. Obama is gonna drive the zombies over the cliff.  When you keep walking next to dangerous ground you're gonna fall off sometime. 

forgottenlord
forgottenlord

@paulejb 

Nobody ever disputed that Chrysler was going to manufacture cars in China.  What was said was that Chrysler was going to manufacture cars to meet demand that was beyond the capacity of its existing factories in the US - and as such, not a single job would be cut.  In other words, Mitt Romney's lie was that this was offshoring of production that would result in fewer jobs for Americans - it's not, and never was

MrObvious
MrObvious

@paulejb 

Back to this shit again. I still laugh when you fist yourself with the nonsense that you're somehow Mr Original. Months later and you're regurgitating the same stuff, pull the same flawed conclusions and can't even be bothered with reading the article.


Some just can't or won't be saved by themselves.

roknsteve
roknsteve

@paulejb If you update to Google Chrome you might read some stories that are up to date and not from 1913.

PaulDirks
PaulDirks

@paulejb Chrysler CEO Sergio Marchionne said the automaker plans to build some Jeeps in China for the local market.

Again we are forced to choose whether paulie's problem is with reading comprehension or dishonesty. But knowing his nasty streak, we have to conclude the latter. 



bryanfred1
bryanfred1

Without reading the link I'll assume it boils down to this - servicing the Federal debt is a constitutional obligation.  It comes first, before any other spending.  Paying entitlement benefits is not.  So you are correct that the U.S. is not at risk of default, since by law it must pay interest before anything else and there is indeed plenty to cover that amount.

Problem is, we are currently borrowing at historical lows, less than 2%.  The long-term average for Treasuries is around 6%.  So just a return to normalcy will mean a tripling of interest expense to service- which again comes first before any other government program.  So by all means, let's borrow to cover deficits to pay ever-more entitlements and rack up even more debt so that when rates return to average those entitlement programs will be even more screwed.  Completely logical.  God forbid we change the growth indexing or ask people to work another year before eligibility.

forgottenlord
forgottenlord

@paulejb You seem to fail to understand the distinction between failing to pay our debt obligations and failing to pay our creditors.  It's kinda like saying "oh, we're fine if we don't have money because we can still pay for our credit card minimum payments" - while ignoring the costs of mortgage, car loan and food.

PaulDirks
PaulDirks

@paulejb — about a non-existent “default crisis.” Default is the failure to meet contractual obligations by paying the interest and principal on the bonds which represent our public debt.

Paulie lives in a world where vendor invoices don't count as debt. just interest payments. Typical deadbeat.

outsider
outsider

@paulejb


Hey Paulie - welcome back/ 


This tweet, which arrived midafternoon yesterday from the redoubtable @LOLGOP, really does say it all: “The GOP is rebranding itself from a party that accidentally blows up the world economy to one that purposely blows up the world economy.” How quaint today seem George W. Bush and his economic minions, with their endearing good intentions! We learn now from Politico that the current crop is ready to take the country, and the world, down to the gates of hell. Many of them have now passed the point of wanting to get their way. On some twisted level, they want not to get their way—to blow up the building just to see what happens.


There is no other rational way to interpret the following quote from the Politico piece, which is by the way another of those textbook Politico pieces in which the entire moral universe of these debates consists of little more than perception and positioning. If Politico had been around in 1934, it would have been entirely capable of sentences like, “Even the young chancellor’s opponents, while citing his maneuver’s apparent illegality, concede that his move to wrest power from the ailing von Hindenberg may prove to be a political masterstroke.”



In any case, it seems that many Republicans are willing to risk default for the sake of making their point. But if somehow John Boehner folds on default and helps the president and the Senate prevent it, he may at least have to throw his rabids the bone of a government shutdown. “We might need to do that,” a GOP aide said, “for member-management purposes—so they have an endgame and can show constituents they’re fighting.”

We’ve all read plenty of cuckoo quotes from these people, but please, I implore you to read that one again. It deserves to occupy a place of honor in your memory banks. They’ll deny people Social Security and veterans’ checks for member-management purposes?


http://www.thedailybeast.com/articles/2013/01/15/government-shutdown-insanity.html

Paul,nnto
Paul,nnto

@PaulDirks "What they didn't anticipate is that as the country expanded, the division of interests between urban and rural voters would result in large segments of the Congress representing people who don't give a hang about the majority of their Countrymen who nevertheless call themselves patriots."


I wonder what the breakdown in federal dollars to Congressional districts is vis a vis urban versus rural. We already know the so called "red states" take much more than they give, does it follow down to the district level? 



shepherdwong
shepherdwong

@outsider2011 Don't get me wrong, they will still be the source of a lot of monumentally stupid Kabuki theater for the benefit of the brainwashed Republican base that will continue to hurt and embarrass the country. But they don't run the joint and the banksters and bond traders who do simply won't allow themselves to be harmed by the lunatic fringe.

forgottenlord
forgottenlord

@roknsteve

That's why he got into politics in the first place: he analyzed baseball numbers, came out with a model, and got whooped by the traditionalists who were supposed to have been whooped by statistical analysis

notsacredh
notsacredh

Lemmings are unaware of the danger. They blindly run to their doom.

outsider
outsider

@roknsteve @sacredh 


Trust in Nate! 

Also (aside from trusting him because of his past record), he makes a good case. 

Dachman
Dachman

Why cant we make cars for China?

forgottenlord
forgottenlord

@paulejb 

Ok, technically it's more like saying "we can still pay off our mortgage" while ignoring the costs of the car loan, the credit card and food.  Either way, there's all these other short term debts that have nothing to do with the treasury bonds that still need to be paid off.

paulejb
paulejb

@PaulDirks @paulejb ,

Vendors would be wise to recognize that Barack Obama's profligate spending cannot be sustained indefinitely. Get cash upfront or accept the 10 cents on a dollar that will be available when Uncle Sam hits the wall.

paulejb
paulejb

@outsider2011 @paulejb ,

The Republican party does not have the cojones to call Barack Obama's bluff. They will be buffaloed by the media and the Democrat party lie machine and surrender all principle. The USA will continue on the road to inevitable bankruptcy with nary a stutter step.

Dachman
Dachman

So what do you want?

Dachman
Dachman

FYI lemmings do not actually run over cliffs that is false.

DonQuixotic
DonQuixotic

@outsider2011 @DonQuixotic @paulejb @PaulDirks 

That he's going to build Jeeps intended for sale in China and Russia - jeeps that wouldn't be sold on the global market due to pricing differences, as anyone with half a brain can figure that out.  Paul logic.

DonQuixotic
DonQuixotic

@paulejb @PaulDirks

Chrysler CEO Sergio Marchionne said the automaker plans to build some Jeeps in China for the local market — and later, in Russia.

Can you not even read the FIRST LINE of your articles?

MrObvious
MrObvious

@paulejb @PaulDirks 

Irrelevant.

Congress approved the spending and now one party don't want to pay for it. You're dumb for not understanding this and GOP is a bunch of deadbeats for not wanting to pay for the party they approved and plunge our economy into the abyss to make that point.

GOP just don't like the whole governing part and GOPs base can't be bother with a reality based argument.

outsider
outsider

@paulejb @outsider2011 


Actually, that's neither here nor there at the moment. It's the debt ceiling that is looming - and that is simply paying for things that Congress already agreed to. 


That, paulie was deflection. 


But welcome back. 

paulejb
paulejb

@outsider2011 @paulejb ,

Republicans, in their fecklessness, have had little effect in delaying the impending train wreck that Barack Obama's left wing, big government policies will create.

outsider
outsider

@paulejb @outsider2011


I dunno; you obviously didn't read the article - it finishes like this:

You know how when you hear the long screech of a car braking for several seconds you’re a bit disappointed if you don’t hear the crash right after it? Well, that’s where House Republicans are now, in psychological terms. The brakes are screeching in their ears. They have been since 2011. The brakes have been screeching so long that they’re itching for the wreck to happen, just to make their point, just to see what goes down, just to say to Barack Obama and The New York Times and mainstream economists and the reality-based community across America that, no, they don’t care. They want to hear the glass shatter and the metal twist.

They’ve been wanting to force a catastrophe, really, since the day Obama was first sworn in. They can’t abide the fact that he is president, they can’t believe he beat them a second time, and they live in a world that the other two thirds of the country doesn’t live in. And yet they have the power to drag us all down to their level. One hopes not for long.


That's a pretty scary kind of crazy.