Plan B Forum

If you had to flip a coin over whether the US Congress will raise the country's debt ceiling, here's the ultimate one - a freshly minted trillion-dollar platinum coin.

A formal petition has been started asking the White House to create such a coin in order to avoid another high-stakes fiscal battle to raise the debt ceiling.

The Treasury secretary has the authority to mint platinum coins in the denomination of his choosing. Meant for commemorative products, US law grants Treasury permission to "mint and issue platinum bullion coins and proof platinum coins", which would allow the Treasury to get around legal limits on printing money to pay the bills.
Depositing it would technically pay down US debt, buying time before the country reached the limit on it (the "debt ceiling") again.

It's an idea that's been discussed favourably (albeit cautiously) by everyone from Democrat Representative Jerry Nadler to economist Paul Krugman, who calls it a gimmick but says "there’s a pretty good case for using whatever gimmicks come to hand".

"Should President Obama be willing to print a $US1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely," Mr Krugman writes in his New York Times blog. "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.

"By minting a $US1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling - while doing no economic harm at all," the Nobel prize laureate writes.

However, it's likely the idea would run into stiff opposition from lawmakers who have been trying to reduce the budget deficits. Creating the cash would also completely override the independence of monetary policy, something the Obama administration has been very careful not to do in the past.


The coin petition is one of many wacky requests to alight on the White House's website. People have petitioned the President to nationalise the Twinkie industry, deport British CNN talk show host Piers Morgan for gun control comments he made on air, and give Vice-President Joe Biden his own TV show.

About 4000 signatures have been collected for the coin petition, which was created two days after lawmakers passed a bill to avert austerity measures of higher taxes and spending cuts.

Shown are the petitioner's first name, first initial of surname, and in most cases, the city. In order to get a formal response from the White House, 25,000 signatures must be collected by early February.

"While this may seem like an unnecessarily extreme measure, it is no more absurd than playing political football with the US - and global - economy at stake," the petition said.

The TV series The Simpsons could take credit for at least some of the inspiration. In an episode in 1998 a $US1 trillion dollar bill from the postwar years went missing. It was Homer Simpson's mission to find it.

The US Treasury began shuffling funds in order to pay government bills after the country hit the $US16.4 trillion legal limit on its debt December 31.

However, the Treasury's accounting maneuvers will last only until around the end of February, giving Congress two months to raise the debt limit before the US defaults on its debt.

Last week's deal forced Republicans to forgo their anti-tax pledges and give in to Democratic demands to raise taxes on the wealthiest.

Now Republicans want to use the debt limit increase to win spending cuts from Democrats as well as major changes to Social Security retirement and Medicare health care programs.



Read more: http://www.smh.com.au/business/world-bu ... z2HLNIn5XM

The validity of the public debt of the United States, authorized by law ... shall not be questioned.

Andrew D wrote:Obama need not go to such lengths.

The congressional Republicans have behaved, and have indicated their willingness to behave again, in blatant violation of the Constitution:

The validity of the public debt of the United States, authorized by law ... shall not be questioned.

(Amdt. XIV, Sec. 4.)

The national debt is "the public debt of the United States". That debt is authorized by law, because Congress authorized by law the spending of the money which now constitutes the national debt. Threatening to default on the national debt is "question[ing]" "the public debt of the United States".

It is the President's constitutional duty to "take Care that the Laws be faithfully executed" (Art. II, Sec. 3). The Constitution is "the supreme Law of the Land" (Art. VI).

The President must, in accord with his constitutional duty, ensure that the constitutional mandate is "faithfully executed". And the congressional Republicans who want to prevent him from doing his constitutional duty -- and in the process, breach their own oaths of office -- should suffer the maximum penalty which the Constitution permits.

Developments

On Dec. 31, 2012, the United States government officially hit its current authorized borrowing limit — also known as the debt ceiling — of about $16.4 trillion. Treasury Secretary Timothy F. Geithner had informed Congress the week before that he will be able to avoid breaching the limit through “extraordinary measures,’' but only for a matter of weeks.

The news sets up a renewal of the conflict in 2011 that brought the country within days of default and led to the first ever downgrading of the federal government’s credit rating. Congressional Republicans insist that they will continue to demand, as they did in 2011, that any increase in the debt limit be tied to significant spending cuts. But President Obama has said that this time he will not negotiate over the limit.

“I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed,” the president said on New Year’s Day, as the House prepared to approve a deal averting the so-called fiscal cliff of scheduled tax increases and spending cuts.

But that bill put off the need for action on sweeping, across the board budget cuts set in motion by the 2011 debt deal for two months — right around when the government might be nearing default.

Overview

Federal law requires Congress to authorize the government to borrow any money that is needed to pay for the programs that Congress has passed.

The Constitution gives Congress the power to control spending and borrowing. The debt limit or debt ceiling was introduced during World War I and was meant to give the Treasury greater flexibility by not having to have Congress approve every new issuance of debt every time the government needed to borrow to pay for things Congress had already voted for.

As the national debt has grown, the Treasury has periodically bumped against this debt limit or debt ceiling. While votes to raise it are among the least popular things Congress does, the limit has been raised dozens of time, generally with little fanfare.

But in 2011, the debt ceiling became the central battleground for the budget conflict between the Republicans who took control of the House in the 2010 elections, and President Obama and the Democrats who still control the Senate, as Republicans refused to raise the limit without a deficit-reduction package.

The impasse over finding spending cuts and tax increases was resolved by a plan to force broad spending cuts if no deal was reached on large-scale deficit reduction. The deal’s so-called sequestration cuts are scheduled to take effect on Jan. 1, 2013 — the day after the Bush-era tax cuts and other stimulus measures are set to expire. The confluence of the spending hikes and potential tax increases became known as the fiscal cliff.

The 2011 deal pushed the next collision with the debt ceiling past the 2012 elections, but by late that year the Treasury Department was warning that it would run out of room to maneuver on the debt sometime in early 2013.

When Mr. Obama presented House Speaker John A. Boehner with his “fiscal cliff’' plan in late November 2012, one proposal was to take the debt ceiling more or less out of Congress’s power. Originally put forward in 2011 by the Republican leader in the Senate, Mitch McConnell of Kentucky, the plan would allow the president to raise the the debt limit unilaterally. Congress could block any increase, but only if it could muster the two-thirds majority that would be needed to override the presidential veto that would be sure to follow.

Both Mr. McConnell and Mr. Boehner rejected Mr. Obama’s plan.

In December, Republicans began discussing a fallback plan in which they would agree to a relatively limited package — like the one that eventually passed — and then dig in on negotiations over raising the debt limit, when they would feel like they had more leverage.

Mr. Obama responded by saying flatly that he would not “play that game.’' He did not say what he would do in response, but some Democrats have urged him in the past to simply raise the borrowing limit using his own executive authority and let the courts determine if he overstepped his constitutional bounds, an approach the White House has rejected.

Later in the month, however, Mr. Obama appeared to drop his demand that Congress give up its power over the debt ceiling, proposing instead that it raise the ceiling by enough to cover two years’ worth of borrowing. And Mr. Boehner offered to extend the debt ceiling by a year, although his proposal went nowhere.

After his talks with Mr. Boehner on the “fiscal cliff’' broke off, Mr. Obama reverted to his firm line on the debt limit. The president and his aides have signaled that they will try to educate the public by explaining that the increase in the borrowing limit is necessary to cover debts that the government has already incurred.

Juggling Bills and Cash

The day after Christmas, Treasury Secretary Timothy F. Geithner informed Congress that the government would hit its $16.4 trillion borrowing limit on Dec. 31.

He said the Treasury would “shortly” begin undertaking “extraordinary measures” to avoid the limit — essentially moving money from pocket to pocket to give the government enough breathing room to pay all of its bills, from soldiers’ salaries to Social Security payments, after that date.

But within weeks — sometime in February or March, analysts estimate — its required payments would overwhelm its receipts, leaving an unprecedented cash shortfall.

The 2011 Debt Ceiling Fight

In May 2011, the Treasury Department said that the debt limit of $14.29 trillion had been reached, but said it could keep the government functioning normally by “extraordinary measures’' that would run their course by Aug. 2. Bipartisan negotiations began, led by Vice President Joseph R. Biden Jr., and in late May he said progress had been made toward outlining $1 trillion to $2 trillion in possible savings.

But the talks collapsed in June, as Republicans rebuffed Democratic insistence that a deal include revenue increases as well as spending cuts.

In July, President Obama pushed for a sweeping $4 trillion deficit-reduction deal that would include reductions in Social Security, Medicare and Medicaid as well as changes to plug tax loopholes. The House Republican leader, Speaker John A. Boehner, expressed interest, but quickly backtracked in the face of protests from conservatives opposed to tax increases.

At the end of July, an event that had once seemed unthinkable — a default by the federal government — loomed only days away.

Late on the night of July 31, President Obama and Congressional leaders of both parties announced an agreement that would raise the debt ceiling by up to $2.4 trillion in two stages, enough to keep borrowing into 2013. The pact called for at least $2.4 trillion in spending cuts over 10 years, with $900 billion in across-the-board cuts to be enacted immediately.

A bipartisan Congressional commission, or “super committee,” was given the task of coming up with the second round of deficit reduction. To put pressure on, a “trigger’' was adopted that meant a failure by Congress to enact those cuts would lead to across-the-board cuts in military spending, education, transportation and Medicare payments to health care providers. The committee reached a stalemate in November.

In accordance with the July 31 deal, Congress raised the debt limit to $15.2 trillion at that time; in January 2012, the limit rose to $16.4 trillion after Senate Democrats voted down a “resolution of disapproval’' that had been passed by House Republicans.

Girding for Another Fight

In May 2012, Speaker Boehner set the stage for a bruising election-year showdown on fiscal policy, vowing to hold up another increase in the federal debt ceiling unless it was offset by larger spending cuts.

The Boehner comments, made at a fiscal summit meeting in Washington on May 15, were the first public shot in what promises to be the most consequential budget fight in a generation. On Jan. 1, 2013, nearly $8 trillion in tax increases and across-the-board spending cuts are scheduled to take effect.

Mr. Boehner said he would not allow Congress to duck tough decisions with another round of short-term measures. He also said the House would pass an extension of the Bush-era tax cuts before the November elections, and he urged lawmakers in both parties to reach a long-term deal on spending and tax changes — but no additional taxes — to head off a fiscal calamity.

Democrats immediately accused Mr. Boehner of once again holding the nation’s full faith and credit hostage to his conservative political agenda, even as Republicans cut corners on the deal struck last summer to end the last debt-ceiling crisis.

Treasury Secretary Timothy F. Geithner, speaking at the same meeting, said the government could bump into its borrowing limit before the end of the year, but, he said, the Treasury has enough “tools” to keep the government afloat into early 2013.

While the Republicans largely prevailed in 2011, this time the Obama administration believes it has the greater leverage. The pain of the reductions is being felt as House Republicans advance the annual spending bills; already they have proposed to raise the spending caps for the military, and they are squabbling over domestic programs.

Long Run wrote:Imagine that, the Republicans using the leverage they have -- the debt ceiling -- to get what they want -- budget cuts. Kind of like the Democrats using the leverage they had -- the expiring Bush tax cuts -- to get what they wanted -- tax rate increases on upper incomes.

“They’ve got to find, in the House, a totally new strategy,” Gingrich said on MSNBC’s “Morning Joe.” “Everybody’s now talking about, ‘Oh, here comes the debt ceiling.’ I think that’s, frankly, a dead loser. Because in the end, you know, it’s gonna happen. The whole national financial system is going to come in to Washington and on television and say: ‘Oh my God, this will be a gigantic heart attack, the entire economy of the world will collapse. You guys will be held responsible.’ And they’ll cave.”

PRESIDENT OBAMA should announce that he will raise the debt ceiling unilaterally if he cannot reach a deal with Congress. Constitutionally, he would be on solid ground. Politically, he can’t lose. The public wants a deal. The threat to act unilaterally will only strengthen his bargaining power if Republicans don’t want to be frozen out; if they defy him, the public will throw their support to the president. Either way, Republicans look like the obstructionists and will pay a price.

Where would Mr. Obama get his constitutional authority to raise the debt ceiling?

Our argument is not based on some obscure provision of the 14th amendment, but on the necessities of state, and on the president’s role as the ultimate guardian of the constitutional order, charged with taking care that the laws be faithfully executed.

When Abraham Lincoln suspended habeas corpus during the Civil War, he said that it was necessary to violate one law, lest all the laws but one fall into ruin. So too here: the president may need to violate the debt ceiling to prevent a catastrophe — whether a default on the debt or an enormous reduction in federal spending, which would throw the country back into recession.

A deadlocked Congress has become incapable of acting consistently; it commits to entitlements it will not reduce, appropriates funds it does not have, borrows money it cannot repay and then imposes a debt ceiling it will not raise. One of those things must give; in reality, that means that the conflicting laws will have to be reconciled by the only actor who combines the power to act with a willingness to shoulder responsibility — the president.

Franklin D. Roosevelt saw this problem clearly, and in his first inaugural address in 1933, addressing his plans to confront the economic crisis, he hinted darkly that “it is to be hoped that the normal balance of executive and legislative authority may be wholly equal, wholly adequate to meet the unprecedented task before us.”

“But it may be,” he continued, “that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure.” In the event, Congress gave him the authorities he sought, and he did not follow through on this threat.

The basic problem today is that the president and the House Republicans are locked in a classic bargaining game. The worst outcome for both is default on the debt, but each side holds out for a favorable deal. They will certainly go to the wire, but economists who have studied bargaining games have shown that there is always a real possibility of breakdown rather than compromise, because only by refusing to deal can each side convey the seriousness of its position. That is why labor strikes occur even though workers and managers do jointly better if they make a deal. Failure to raise the debt ceiling, however, is not akin to any old plant shutdown: it would be catastrophic.

A proposal has been floated by Senator Mitch McConnell of Kentucky, the Republican minority leader, under which Congress would delegate to the president the power to raise the debt ceiling, subject to some minor procedural constraints. Mr. McConnell’s ploy is suspect, because it assumes away the problem that it attempts to solve: the internal paralysis of Congress. Congress probably cannot act on its own — for example, by creating a veto-proof budget — because it is internally deadlocked. Not only do Democrats and Republicans disagree, but so do the Republican leaders, who want to avoid a debt default, and the Tea Party-inspired Republican back-benchers, who appear to believe that only a purifying Götterdämmerung can put public finances back in order. The latest proposed deal negotiated by House Speaker John A. Boehner and President Obama is vulnerable to the same problem.

Discussions of an earlier proposal to rely on the 14th Amendment for the President’s authority to raise the debt level centered on whether the debt issued after the president’s action would be under a cloud. Commentators pointed out that the language in the 14th Amendment, which commands that the validity of legally authorized public debt shall not be questioned, does not explicitly authorize the president to do anything. But debt under a cloud is better than default. It would be better if the parties made a deal, but if they don’t, default is the worst outcome.

The 14th Amendment is a red herring, however; even if its debt provision did not exist, the president would derive authority from his paramount duty to ward off serious threats to the constitutional and economic system.

Mr. Obama needs to make clear that he will act unilaterally to raise the debt ceiling if Congress does not cooperate; if he does so, then we predict that Congress will cooperate by enacting the McConnell plan or a similar fig leaf, and so Mr. Obama will not need to follow through on his threat, and the constitutional crisis will pass — just as it did with Roosevelt. Republicans will be publicly outraged, but privately relieved. They do not want an economic catastrophe; they can avoid violating their no-taxes pledge; and they retain the power to fight the budget battle another day. As for the president, he really has no other choice.

Eric A. Posner, a professor of law at the University of Chicago, and Adrian Vermeule, a professor of law at Harvard, are the authors of “The Executive Unbound: After the Madisonian Republic.”

Specifically, more than 70 percent of Americans favor a plan that raises taxes on “those who make more than $250 thousand a year,” businesses that own private jets, oil and gas companies – as well as ending the federal subsidies that those businesses receive.

Spending cuts, however, get minimal support. Just 12 percent say they would support cutting the amount spent on Medicare, and only 22 percent would support cuts to Medicaid. Cutting federal subsidies to farmers or benefits for retired government workers get support from just 31 percent and 30 percent of Americans, respectively. Cutting defense spending would seem to be the most acceptable of the cuts, with 47 percent saying they would favor such a measure.

Plenty of poor leadership on all fronts

Long Run wrote:It is bad governance to use the debt ceiling limit rather than the normal legislative process to address policy concerns. And it appears to also be bad politics (and look to the future when the situation could well be reversed -- note that the Ds gave Bush grief on raising the debt ceiling limit as well). ... Of course, if there was any sign that the Ds were serious about proposing or negotiating a long term plan to address the budget deficit, then the debt ceiling issue might also be off the table.

Maybe I am missing something, but that looks like a "serious ... propos[al] ... [of] a long term plan to address the budget deficit" to me.

Long Run wrote:

Maybe I am missing something, but that looks like a "serious ... propos[al] ... [of] a long term plan to address the budget deficit" to me.

When it actually receives one vote from any House member or Senator, then we can say it is serious. (97-0 and 414-0 votes last time around).