The American Bear

Sunshine/Lollipops

Co-author of platinum coin law weighs in on trillion dollar coin

I’m the former Mint director and Treasury chief of staff who, with Rep. Mike Castle, wrote the platinum coin law and produced the original coin authorized by the law. Therefore, I’m in a unique position to address some confusion I’ve seen in the media about the $1 trillion platinum coin proposal.

* In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary’s authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8). What is unusual in this case is that the law gives the Secretary discretion regarding all specifications of the coin, including denominations.

* The accounting treatment of the coin is identical to the treatment of all other coins. The Mint strikes the coin, ships it to the Fed, books $1 trillion, and transfers $1 trillion to the treasury’s general fund where it is available to finance government operations just like with proceeds of bond sales or additional tax revenues. The same applies for a quarter dollar.

* Once the debt limit is raised, the Fed ships the coin back to the Mint, the accounting treatment is reversed, and the coin is melted. The coin would never be “issued” or circulated and bonds would not be needed to back the coin.

* There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the $1 trillion dollars would be taken off the books, and the coin would be melted.

* This does not raise the debt limit so it can’t be characterized as circumventing congressional authority over the debt limit. Rather, it delays when the debt limit is reached.

* This preserves congressional authority over the debt limit in a way that reliance on the 14th Amendment would not. It also avoids the protracted court battles the 14th Amendment option would entail and avoids another confrontation with the Roberts Court.

* Any court challenge is likely to be quickly dismissed since (1) authority to mint the coin is firmly rooted in law that itself is grounded in the expressed constitutional powers of Congress, (2) Treasury has routinely exercised this authority since the birth of the republic, and (3) the accounting treatment of the coin is entirely routine.

* Yes, this is an unintended consequence of the platinum coin bill, but how many other pieces of legislation have had unintended consequences? Most, I’d guess.

Philip N. Diehl
35th Director
United States Mint

Section 4 of the Fourteenth Amendment provides that ‘the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.’ Its purpose was to prevent Southern Congressmen and Senators from trying to hold payment of the nation’s debts hostage in order to get their way on Reconstruction policies. The point of Section 4 was to put this sort of hostage-taking beyond ordinary politics. The framers of the 14th amendment did not want future politicians to threaten to destroy the country’s finances by refusing to pay the country’s debts in order to win political concessions from their opponents. After all, once politicians did so successfully, they would try it over and over again and it would become a normal feature of politics. That is precisely what we are seeing now. How Obama Can Prevent Another Debt-Ceiling Crisis | Jack Balkin

Apocalyptic GOP Is Dragging Us Into a Civil War | Matt Taibbi

Lofgren, in describing the reasons for his defection from the Republican party, describes a Republican camp that increasingly acts not like a traditional peacetime political organization, but more like an apocalyptic cult or one of the authoritarian movements from early 20th century European history.

In particular, the insane decision to turn the once-routine procedure of raising the debt ceiling (Lofgren notes it was done 87 times since WWII) into a political crisis revealed that the GOP party mainstream had sunk to the level of terrorism – holding our economic system hostage in exchange for political concessions. 

This was a form of violence, and a serious escalation even from the days of George W. Bush, when the party was mostly limited in its willingness to use human beings as pawns in homicidal ploys for political power. Bush and Rove were willing to sacrifice Iraqi lives, and the lives of American servicemen, for oil and votes. But this current crew of Republicans shook canisters of kerosene over the entire American population and threatened to light a match if it didn’t get what it wanted. 

As Lofgren notes, this was insurrectionary, revolutionary behavior. Only the massive scale of the gambit prevented it from being easily identified as terrorism and criminal blackmail. If in exchange for not defaulting on our debt Boehner, Hensarling, Cantor and the rest of them had asked for a billion dollars worth of gold bullion deposited in Swiss bank accounts, or the release of a dozen Baader-Meinhofs from German prisons, it could hardly have been much different from what they actually did.

I think most Americans can agree that reducing the public debt is a goal we can all share – and in the old days of thirty or forty years ago, when congress operated on a more collegial model that involved members from opposing parties getting together on weekends to achieve reasonable compromises over golf and highballs, the Rs and Ds could have found a way to press forward with reasonable deficit reduction plans without pushing us all to the edge of a cliff. 

But for the new GOP, compromise of any kind defeats their central purpose, which is political totale krieg. This party’s entire reason for being is conflict and aggression. There is no underlying patriotic instinct to find middle ground with the rest of us, because the party doesn’t have a vision for society that includes anyone outside the tent.

I’ve always been queasy about piling on against the Republicans because it’s intellectually too easy; I also worry a lot that the habit pundits have of choosing sides and simply beating on the other party contributes to the extremist tone of the culture war. 

But the time is coming when we are all going to be forced to literally take sides in a political conflict far more serious and extreme than we’re used to imagining. The situation is such a tinderbox now that all it will take is some prominent politician to openly acknowledge the fact of a cultural/civil war for the real craziness to begin. 

Reading Lofgren’s piece, and a piece by John Judis of the New Republic, makes one realize that we came pretty close to real chaos in that debt ceiling debate. Had Obama invoked emergency powers to raise the debt limit unilaterally – and I think he had good reasons to do that – we might have had a revolt on our hands.

(Source: sarahlee310)

So, Is Representative Eric Cantor swimming in extra cash right about now?

I thought I should remind my readers of this apparent conflict of interest:

Last year the Wall Street Journal reported that [Rep. Eric] Cantor, the No. 2 Republican in the House, had between $1,000 and $15,000 invested in ProShares Trust Ultrashort 20+ Year Treasury EFT. The fund aggressively “shorts” long-term U.S. Treasury bonds, meaning that it performs well when U.S. debt is undesirable. (A short is when the trader hopes to profit from the decline in the value of an asset.)

Nothing to see…

mohandasgandhi:

shortformblog:

So much for leaving; Timmy Boy Geithner sticking around for a while: While there was word on the street that he was going to depart after the brutal debt ceiling crisis, Obama wanted him to stick around instead. This sounds like an aneurysm waiting to happen. source
Follow ShortFormBlog

It’s things like this that make me think Obama really just doesn’t give a shit anymore.

mohandasgandhi:

shortformblog:

So much for leaving; Timmy Boy Geithner sticking around for a while: While there was word on the street that he was going to depart after the brutal debt ceiling crisis, Obama wanted him to stick around instead. This sounds like an aneurysm waiting to happen. source

Follow ShortFormBlog

It’s things like this that make me think Obama really just doesn’t give a shit anymore.

(Source: shortformblog)

Sen. Bernie Sanders: Why I Voted No on the Deficit Deal

A $2.5 trillion deficit-reduction deal brokered by Senate Minority Leader Mitch McConnell, House Speaker John Boehner, and President Barack Obama is grotesquely unfair. It also is bad economic policy. In the midst of a terrible recession, it will cost hundreds of thousands of jobs.

At a time when the wealthiest people in this country are doing extremely well, and when their effective tax rate is the lowest in decades, the rich won’t contribute one penny more for deficit reduction. When corporate profits are soaring and many giant corporations avoid federal income taxes because of obscene loopholes in the tax code, corporate America will not be asked to contribute one penny more for deficit reduction. On the other hand, working families, children, the sick and the elderly - many of whom are already suffering because of the recession - will shoulder the entire burden.

[…]

There is a great irony in all this. The deficit deal does exactly the opposite of what the American people wanted. In poll after poll, the American people said they believe in shared sacrifice. Instead of putting Social Security, Medicare, Medicaid, education and environmental protection on the chopping block, overwhelming majorities say the best way to reduce the deficit is to end tax breaks for the wealthy, big oil, and Wall Street and take a hard look at military spending. What President Obama and Congress did, however was to let the wealthy and large corporations contribute nothing while making major reductions in services for working families and the most vulnerable people in our country.

Enough is enough! The American people must fight back. We need a government which represents all the people, not just the wealthy, campaign contributors and lobbyists. In these tough and discouraging times, despair is not an option. This fight is not just for us, it is for our children and grandchildren and for the environmental survival of the planet.

Washington’s appetite for self-destruction | Financial Times

circlingtheroundabout:

Jacob Weisberg: Washington’s appetite for self-destruction | Financial Times

It is difficult to remember a more dismal moment in American politics. The debt ceiling crisis and the agreement that ended it point to deep dysfunction in our system. In a variety of ways, the episode portends continued short-term economic misery and long-term national decline. It is as if the US chose at the last minute not to commit financial suicide – but only out of preference for a slower, more excruciating form of self-destruction.

 

The crisis has, however, been clarifying in several respects. We can now say with some confidence that Washington will be doing nothing more to help the ailing economy. President Barack Obama is trying to push an employment agenda. But for the federal government to spur growth or create jobs, it has to spend additional money. The antediluvian Republicans who control Congress do not think that demand can be expanded in this way. They believe that the 2009 stimulus bill, which prevented an even worse economy over the past two years, is responsible for the current weakness. Their approach of depression economics – embedded in the debt ceiling compromise – demands that we address the risk of a double-dip recession by cutting public expenditure immediately.

Enormous Cuts in Military Spending? Read the Fine Print

[The] Obama administration’s proposed military budget for 2012 – the baseline from which future cuts are projected – is at its “highest level since World War II,” according to the non-partisan Center for Strategic and Budgetary Assessments, “surpassing the Cold War peak” set by Ronald Reagan and a Democratic House of Representatives in 1985. Even if, instead of over a decade, the whole, entirely-subject-to-change $350 billion was cut from the defense budget in one fiscal year alone, the U.S. would still lead the globe in military spending, devoting twice as much to guns and bombs as its closest and much more populous rival, China. And that’s without factoring in the cost of any new wars. 

Of course, official budget numbers don’t tell the whole story. Factoring in interest payments for past military expenditures, spending on veterans’ care and other defense-related items not included in the Pentagon budget, economist Robert Higgs estimates the yearly grand total spent on the military is $1 trillion or more, with over half of the federal income tax going to the military. And that massive national debt that’s being used to justify cuts in social spending? Nothing has contributed to it more than the dramatic rise in military spending over the last decade, a factoid you might have missed if you get your news from a television. 

The tragic irony is that debt caused in large part by foreign military adventures is being used to further a class war here at home, even as the bloodshed continues in Afghanistan, Iraq, Libya and beyond. Too bad that, rather than denounce this morally and fiscally damaging addiction to militarism, politicians prefer to orchestrate the decline of the American empire from within.

Now, Barack Obama has surrendered control of the budget to the Tea Party… . Commentators everywhere are killing the president for his seemingly astonishing level of ball-less-ness… . The Democrats aren’t failing to stand up to Republicans and failing to enact sensible reforms that benefit the middle class because they genuinely believe there’s political hay to be made moving to the right. They’re doing it because they do not represent any actual voters. I know I’ve said this before, but they are not a progressive political party, not even secretly, deep inside. They just play one on television… . Matt Taibbi (via azspot)

(via azspot)

Man, That Debt Ceiling Fight Sucked! Let's Do It Again! | Mother Jones

Andy Kroll:

On Monday, with a flick of his pen, President Obama signed the Budget Control Act of 2011, ending a contentious, months-long fight over the nation’s debt ceiling, spending, and taxes that brought the nation to the brink of default and possibly economic catastrophe. You could almost hear the collective sigh of relief as the president turned the lopsided, GOP-friendly bill into the law of the land.

At least we won’t have to go through that again—or so you might think.

Bzzt. Wrong. If you listen to Republicans, you’ll know the debt ceiling fight was just the beginning.

Sen. Mitch McConnell (R-Ky.), in remarks on the Senate floor on Monday, described the Republican tactic of refusing to raise the debt ceiling in order to extract favorable concessions as “a new way of doing business in Washington.” He went on: “One of the most important things about this legislation is the fact that never again will any president, from either party, be allowed to raise the debt ceiling without being held accountable for it by the American people and without having to engage in the kind of debate we’ve just come through.”

McConnell is the Senate minority leader and one of the most influential Republicans in Washington. He shapes GOP strategy in Congress as effectively as any fellow party member. You should believe him when he says that the rancorous fights over lifting the nation’s borrowing limit are here to stay.