On Crazy And Irrelevant

A few days ago Paul Krugman jumped the shark:

Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely. He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous. The decision should be obvious.

So, there ya have it.  Paul’s contribution to the debt ceiling problems.  And his reasoning?

For those new to this, here’s the story. First of all, we have the weird and destructive institution of the debt ceiling; this lets Congress approve tax and spending bills that imply a large budget deficit — tax and spending bills the president is legally required to implement — and then lets Congress refuse to grant the president authority to borrow, preventing him from carrying out his legal duties and provoking a possibly catastrophic default.

I think Paul is forgetting that we can service our debt very easily with existing revenues.  The money we don’t have is for additional spending.  There really is very little danger of defaulting on our debt.

Anyway, cooler, calmer and more rational minds have saved the day:

The U.S. Treasury Department said on Saturday it will not produce platinum coins as a way of generating $1 trillion in revenue and avoiding a battle in Congress over raising the U.S. debt ceiling.

The idea of creating $1 trillion by minting platinum coins has gained some currency among Democrats in recent days as a way of sidestepping congressional Republicans who are threatening to reject a necessary increase in the debt ceiling unless deep spending cuts are made.

The Treasury Department and the Federal Reserve, both independent of one another, each concluded this was not a viable option.

“Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” said Treasury spokesman Anthony Coley in a statement.

File this under “no kidding”.

11 responses to “On Crazy And Irrelevant

  1. No, the debt ceiling is not about additional funding, it’s funding what Congress has already approved. When people say it’s giving “Obama power to increase debt” that is wrong – it’s Congress paying its own bills. Not raising the debt ceiling would by like you deciding not to pay the electric bill. I think the White House knows that if the Republicans hold the economy hostage and do not increase the debt ceiling, the likelihood of a complete Democratic take over in 2014 (keeping the Senate and winning the House) will go up dramatically. He’s not going to negotiate (why should he – this is money Congress already voted to spend) and use the bully pulpit to make sure those who would pay Russian routlette with America’s credit rating have to pay an immense political price.

    • No, the debt ceiling is not about additional funding, it’s funding what Congress has already approved. When people say it’s giving “Obama power to increase debt” that is wrong – it’s Congress paying its own bills. Not raising the debt ceiling would by like you deciding not to pay the electric bill.

      Two different concepts.

      1. Paying on our debt obligations. Loans and interest.
      2. Paying for further programs, salaries, benefits and such.

      We will never default on our debt. We may stop spending more money.

      Instead of thinking about it as an electric bill, think of it as a “Wine of the Month Club” bill.

      • If I understand you correctly what you’re saying is that the government would stop functioning so that money coming in via taxes could be spent to pay what we owe. If that’s possible (and I don’t know that it is), that would be awful and counter-productive in and of itself. It would send our economy back into a tailspin. It would send a very bad message to those who wish to invest in America, to those who lend us money because we are viewed as being a safe investment.

        • If I understand you correctly what you’re saying is that the government would stop functioning so that money coming in via taxes could be spent to pay what we owe.

          So, the term “default on our debt” is often used. I’m saying that we can afford the debt payments to the people we have borrowed from, without raising the limit.

          Now, could we continue to pay for all the things that we have been paying for in the past? I don’t think so, if so, we wouldn’t need to raise the limit.

          It would send a very bad message to those who wish to invest in America, to those who lend us money because we are viewed as being a safe investment.

          Well, it could also be seen as a positive to those who would borrow us money. We will honor our debts even at the expense of cutting programs that we have approved spending money on.

          What is truly annoying is the Washington Monument Syndrome:

          http://en.wikipedia.org/wiki/Washington_Monument_Syndrome

          Washington Monument Syndrome, also called the “Mount Rushmore Syndrome”,[1] is the name of a political tactic allegedly used by government agencies when faced with reductions in the rate of projected increases in budget or actual budget cuts. The most visible and most appreciated service that is provided by that entity is the first to be put on the chopping block.[1] The name derives from the National Park Service’s alleged habit of saying that any cuts would lead to an immediate closure of the wildly popular Washington Monument.

  2. Suzy Orman is on CNN now and she is saying that Obama’s right that this is about paying for what we already consumed and NOT about financing new spending. Not rising the debt ceiling is like not paying the credit card bill. Debt is a problem, but has to be separated from the debt ceiling. It’s insane to hold the economy hostage.

    This is not about new spending, this is about paying for what we’ve already consumed. It is, as the President said, “holding a gun to the head of the American people.” He’s not going to back down. If the GOP follows through on its threats, they’ll get the blame for what comes next. Social security checks not arriving, VA benefits not being paid, etc. The GOP can’t do that. BUT once the debt ceiling is raised, there does indeed need to be a real discussion of debt. But again, not with a gun to our heads.

    • Suzy Orman is on CNN now and she is saying that Obama’s right that this is about paying for what we already consumed and NOT about financing new spending. Not rising the debt ceiling is like not paying the credit card bill.

      The money that we borrowed needs to be re-payed, with interest. That’s “servicing the debt”. We can and should do that. However, not raising the debt ceiling is in no way like not paying a credit card bill. Not raising the debt ceiling is like putting the credit card back in your wallet before you buy the car that you already received permission to buy, but not yet have.

      This is not about new spending, this is about paying for what we’ve already consumed.

      Nope.

      It is, as the President said, “holding a gun to the head of the American people.”

      Such gentle and sensitive words right in the middle of a debate surrounding a national tragedy about guns.

      Social security checks not arriving, VA benefits not being paid, etc

      See Washington Monument Syndrome above.

      • No, if we don’t raise the debt ceiling we won’t be able to pay our creditors. You are stating an opinion that contradicts what the economists and experts are saying. Where are you getting your information – I think you’re severely misunderstanding this issue and its consequences. The President needs to use strong language because what the GOP is threatening is literally a potential collapse of the US economy. It’s going to increase the debt dramatically and ruin our credit rating. It would be insanity. Please, read up on this – and not just from right wing pundits who are in the game only to make some bucks.

        • No, if we don’t raise the debt ceiling we won’t be able to pay our creditors.

          I’m saying that we will be able to service our debt.

          By definition, because we run at a deficit, we won’t be able to continue paying for all the things we pay for today. But we CAN stop paying for stuff like….

          Salaries
          Department of Education
          Tax Refunds

          and many many more.

          My point is that we won’t default on our debt.

          The President needs to use strong language because what the GOP is threatening is literally a potential collapse of the US economy. It’s going to increase the debt dramatically and ruin our credit rating. It would be insanity.

          Scott, this same thing happens every time we bump into this issue. There’s video of Obama arguing against raising the ceiling when he was a senator and of Reid making the same points himself. To claim that this is a tragic issues and blame the republicans is irresponsible.

  3. The Republicans could choose to risk a government shut down on March 27th – that would be better politics than risking economic collapse, and Obama could negotiate on that. I still think it would be a political loser for the GOP, but without the long term economic damage (assuming its a relatively short shut down).

  4. Don’t believe Obama if you distrust him, but listen to Lisa Murkowski, Susan Collins, the Chamber of Commerce, and others who realize that it would be a disaster for the US not to raise the debt ceiling.

    • it would be a disaster for the US not to raise the debt ceiling.

      Yes, shitting the government would be a big deal. I think that Obama should negotiate on spending in order to resolve the crisis.

      If he doesn’t, and only promises to later, we get what we got with the sequestration deal. A promise, even codified, that can be changed later.

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