Now that attention has shifted from the resolution of the first “Fiscal Cliff” drama to the upcoming and much more anticipated political Wrestlemania/Pier Six Brawl/Lights Out/Texas Death Match battle between President Obama/the Democratic-controlled Senate and the GOTP-controlled House of Representatives over the next resolution of the debt ceiling/sequestering/funding the government/deficit reduction saga…the political world is all a twitter (and I don’t just mean on Twitter, either) over how the President will respond to the next Repub attempt to force a reckoning on the fabled New Deal/Great Society programs that have defined the Democratic Party for four generations.
On the side of the optimists are those loyalists who say that Prez O and the Democrats will stand firm on their promise that they will not allow the GOTP to exploit the debt ceiling drama again to threaten a general default that would trigger a worldwide recession/depression, since public opinion and the full weight of Wall Street would crush any Tea Party attempt to force the issue like an avalanche on Mount Everest over a grape. Not to mention, solidify Democratic control of Congress and the Presidency for the next 30 years due to continued public outrage at the Golden Dawnification and re-Confederatization of the GOTP.
The pessimists, on the other hand, counter with the fact that Prez O has promised all this, and still managed through his skillful negotiating skills to cave in to TeaPub demands and steadily move the Overton Window further and further to the Right….by slowly and stealthily adopting New Democratic/Third Way corporate policies emphasizing “common sacrifice” and exchanging modest revenue increases for “reasonable entitlement reform” (read: cuts in social spending only slightly less severe than what the GOTP would want). To them, the willingness in the last round by Obama to erase so quickly his “line in the sand” campaign promise to only allow tax cuts for people making $250,000 and below and surrender half his potential revenue in exchange for short-term fixes (albeit important ones like extending unemployment benefits and working class/middle class tax credits), does not bode well for when the real pressure comes to give up Medicare, Social Security, Medicaid, and other pillars of the social welfare state to the altar of “deficit reduction”.
Of course, for the Tea Party and New Right, the social welfare state is simply just another cash cow to be picked clean and stripped down in the name of drowning evil liberal/socialist “big government’ and promoting “individual responsibility” and privatization in the name of “free enterprise”, “rugged individualism”, and “bootstrapping”/”downsizing”/”rightsizing” government so that only the “right” and “deserving” people get assistance and aid. For everyone else? Well, just either “Work” (for the pennies your employer masters give you), “Save” (whatever crumbs you have left after all the hidden and not-so-hidden user fees are garnished from your paycheck), and “Invest” (especially on your local fundamentalist Christian church or Wall Street-owned pyramid scheme), or simply pray for the next Powerball/Lotto ticket.
Throughout this, the traditional Left (meaning those who truly believe in the New Deal/Great Society principles of affirmative government assistance to the poor and working class) have been mostly cast to the side as outsiders carping at the windows in the margin while the Big Boys within the Beltway fight it out between the “Sensible Adult Conservative/Realist Neoliberal” wing within the Democratic Party Establishment Center, and the “Nuke ’em All, Throw The Bombs, Shoot First and Let God Sort It Out Later, Because You Never Know When The End Times Is Coming” approach of the TeaPublican Right. And within the “progressive” intellegensia itself, there is an ongoing donnybrook between the “realist” and “pragmatic” Obama /Democratic loyalists (labeled “Obamabots” by their detactors), who believe that Prez O is only doing the best he can with what he’s working with and under the intense hatred of the TeaPubs who barely respect him as a person, never mind as the POTUS; and the more populist progressive critics (equally flamed as “emoprogs” and “firebaggers”, the latter reference to a particular house organ of populist criticism of Prez O,the blog Firedoglake) who say that Obama simply isn’t trying enough to represent Democratic values, either because he’s spineless and witless or he’s deliberately tanking the game to serve his DLC/corporate masters.
The split verdict on the first resolution of the Fiscal Cliff deal has hardened opinions on both sides of that debate, as the optimists claim that the Repubs have simply shot their wad and don’t have any more strength to challenge Prez O; while the pessimists counter that the deal shows that Obama will simply give in any leverage he gets because he simply WANTS to cut the Big Three to show his “bipartisan” legacy as the mini-Ronald Reagan (who happens to be the first Black POTUS).
However…there is a rapidly emerging alternative school of thought that is engulfing some distaff segments of the Left that there is a way to square the circle and end this standoff if only Prez O was willing to take off the Wall Street blinders and blow the debt ceiling debate wide open by simply ignoring the noise of the Right and the Deficit Hawk Center.
Essentially, the idea is to resolve the debt ceiling (and social spending) barrier by simply blasting right through it…with platinum coins from heaven. Made by the US Treasury.
Now, this idea is different from the other popular idea put forth for busting the debt ceiling debate, which is invoking the Fourteenth Amendment Clause 4 that reads:
“The validity of the public debt of the United States, authorized by law, including debts incurred for payments of pensions and bounties for services in suppressing insurrection or rebellion shall not be questioned.”
That particular idea has some serious Constitutional issues regarding seperation of powers, and would risk a knock-down, drag-out, nuclear war between the President and Congress, probably leading up to the US Supreme Court….not to mention the risk of impeachment. (Of course, right now the TeaParty/Religious Right/Neo-Confederate wing that now dominates the GOTP leadership in the House would probably initiate impeachment procedings on President Obama for looking the wrong way in any case, and the President does have some protection of a Senate majority…at least for the next 2 years.)
Plus, thus far, the White House has explicitly rejected the idea, saying that they don’t think the executive branch has that authority; they for now favor the idea that if worst comes to worst and there is a crisis, their initial move would be to shut down all but critical functions of the federal government, and let the resulting shock and pain of payment by IOU’s and furloughs and massive economic destruction clear the heads of the GOTP very quickly. Big issue with that, though, is that the GOTP would probably see a shutdown as a benefit, showing how much “big government” is not needed; and the TeaPubs in particular would simply welcome such a “strike” to simply sit on their heels and wait for Obama to cry uncle…if not before. And, it’s possible, if you believe the pessimist view, that simply signalling the threat of a shutdown is Obama’s way of forcing the Left to accept ihe inevitability of some social spending cuts as a “compromise” avoiding a far worse fate.
Which brings us back to the idea of that $1 trillion platinum coin. Or, maybe $3 trillion. Or, $5 trillion. Or…if you really want to go BIG….how about a $60 TRILLION coin?
If you remember a ways back in July of 2011, I introduced you to the concept of Platinum Coin Seigniorage through the pixellated voice of Joe Firestone, a progressive economist and policy analyst who has been an advocate for what is called Modern Monetary Theory (shortened to MMT). The radical breakaway of MMT from the classical conservative monetary theory is basically that a country like the United States, with the power of its own currency, can basically make it’s own currency and use it to fund whatever it wants, because unlike a household that is limited by its means, a government like the US can simply print money out of its bowels, backed by the full faith and credit of the US Treasury, without the fear of cost-push hyperinflation. The advantage here is that long abandoned social needs, such as adequately funding the social welfare state, or upgrading public infrastructure, or public education from cradle to grave, or universal health care, don’t have to go through the usual “pay as you go” rigamarole that requires every dollar spent to be backed up and paid for with a dollar in taxes or cutting a dollar from somewhere else.
Now, some would say, But, ‘Dog…isn’t that exactly like what the Bush Administration did in running huge deficits by taking tax cuts and spending on wars and the Homeland Security Police State and that boondoggle privatization scheme called Medicare Advantage off budget for eight years? And….look at what that did to destroy the US economy in the late 2000’s!!” Not really, because remember that Dubya, like Ronald Reagan before him, simply ignored deficits to impose what they called “military Keynesianism” and supply-side economic theory…but they did their damage to favor the super wealthy and the corporate class in the name of “lassiez faire capitalism”. Of course, the TeaPubs would squawk back that the only thing missing from the Dubya boom (and whose lacking they say led to its ultimate downfall) was the full commitment to “Cut, Cap, and Balance” and drown “Big Government” (defense and the neo-Confederate Christian Dominionist Theocracy excepted) to the size of Grover Nordquist’s bathtub…which is exactly what they hope their leveraging of the debt ceiling will force out of Obama.
Most traditional liberals still insist on the “pay as you go” principle that what you spend, you must back up with taxes or cuts in other areas…but they are willing to go along with some temporary deficits to pump up the economy in slowdown periods. Things like progressive taxation, corporate regulation and taxation, and income supplements like the minimum wage, the Earned Income Tax Credit, Social Security, and Medicare/Medicaid are basically intended to cushion the blow for working class and poor families and individuals during the lean times, while maintaining a stable “middle class” of professionals and middle-level management to keep things cool and level. The main problem is, though, the impact of 30 years of hegemonic right-wing economic policies led by Reagan-Bush Republicans, combined with the death of the Soviet Union and the neoliberalization of the Democratic Party through the regimes of Bill Clinton and Barack Obama (and let’s not also forget Hillary Clinton, either); also abetted by the rapid decline of the trade union movement and its replacement with the corporate lobbyist-led Democratic Leadership Council, now refined as the “Third Way” and “Progressive Policy Institute” as the main power center of the Democratic Party. While there does remain a presence of more traditional “progressive” Democrats who still retain somewhat a commitment to the old New Deal principles, the majority of them have long since abandoned it for a much more corporatized image of neoliberalism which combines social liberal/libertarianism in sexual and racial matters (as in more racial/religious diversity; greater reproductive autonomy for women, especially middle-class professional women; more racial and cultural diversity in business/sports/entertainment endeavors; and more open entry of women and racial/cultural “minorities” into the seats of political and social power) with full faith in free market capitalism smoothed over by limited but assertive government regulation and the good will of diversity.
Problem is, though, those liberals, while slowly winning the demographic war, still don’t have the political or economic push to take on either wing (neoliberal Dem or TeaPublican) of the Two Party Corporate Collossus, which now has garnered even more political power thanks to the Citizens United decision in 2010 by the US Supreme Court liberating corporate spending on political campaigns as “free speech”. Combined with deliberate and highly successful efforts by the Right to defund and declaw unions and other organizations used by liberals to aid the poor and working class, and the successful gerrymandering of Congressional districts by TeaPub-led state legislatures after their breakthrough win in 2010 (also abetted by the Roberts/Scalia/Thomas/Alito hard Right faction), this has all but neutralized any effective opposition to the corporate offensive.
Strangely enough, the emergence of Barack Obama as the ultimate Celebrity Democratic President for his breakthrough legacy as the First!! Real!!! Black!!! President!!!!!! has hampered the Left as well, as his nearly Martin Luther King-esque status in the Black American community and the hysterical personal assaults on him from the TeaPub and Fringe Fascist Right combine to throttle legitimate criticism of his policies and tactics. Plus, there is still the notion that good old fashioned pragmatism and waiting out the ultimate overextension of the Right’s hyperrage will ultimately win out, and that in the real world of two-party politics and grind-it-out attrition wars, better to stick with the lesser evil than risk the greater evil of Republican fascism.
(That would normally segue into the principled Left position that Obama might be not the lesser evil, but “the more effective evil”, by being able to pursue conservative polices more efficiently than any TeaPublican could accomplish…but now we’re getting far away from our original subject. I’ll save that for another blog entry.)
Anyways…the idea of PCS solving the current deficit ceiling crisis is that: When the time comes and House Speaker John Boehner (BTW, he did survive the attempted coup of New Years’ Eve and was reelected today) announces that the House of Representatives simply will not budge with any money to raise the ceiling unless President Obama gies up the ghost and agrees to those big cuts to Social Security, Medicare, Medicaid, SNAP, and all those other “47%” moocher programs that stifle the incentive to work and channel “government dependency”, Prez O will step up to the White House Briefing Room with the full contingent of media at hand, and, instead of simply giving up or announcing a shutdown of all government save for bare essential functions, announces that he has ordered whomever he replaces Timothy Geithner with as Treasury Secretary to mint a nice, shiny platinum coin, give it a value of $1- to $3-trillion, and use it to purchase Treasury bonds that will be used to cover the debts owed by the United States until at least 2015 or 2017 or 2020, or whatever year he chooses. And then, he dares the House TeaPubs to initiate impeachment procedings and thusly threaten a world recession or depression by challenging his actions. “Go ahead, Joe Wilson, Louie Gohmert, Michelle Bachmann, Steve King…make my day.”
Obviously, the political risks are there….if you thought that the Right-Wing Noise Machine over at FOX News and radio pundits like Rush Limbaugh and Sean Hannity and Michael Reagan were hyperbolic before, just imagine how they would be after “King Obama” punks them by usurping “the People’s House” and “traditional democracy” by “printing money out of thin air” for more “free stuff” for those “losers”. Those initial cries for secession from the US that energized those White House petitions after the ass kicking Obama delivered on November 6, 2012, would probably be upgraded to actual state petitions for dissolving the Union in at least 5 states. Hell, the GOTP would probably petition Orly Taitz to become Majority Whip of the House just to file impeachment procedures agains Obama based on her Birther campaign alone. Plus, the old-school “hard money”/”gold standard” advocates such as Ron and Rand Paul would probably not be too happy, either.
But…not everyone on the (further Left than “progressive”) Left is down with MMT and just minting platinum bling, either. There are the traditional neo-Marxist economists, such as Left Business Observer’s Doug Henwood, who thinks that MMT and PCS is only so much monkeyshine and carnie show that distracts from the real issue of private control of the means and ends of production. His solution is the old school formulae of nationalization of production combined with full liquidation of the wealthy and jailing the bankers that stole from the public fisc through stringent progressive taxation and redistribution of wealth and production down to the “little people”. And on the other extreme, you have the anarchist and “libertarian Left” critique that no bit of government action will resolve the issue because global warming and overpopulation and peak oil will ultimately melt us all into oblivion until we get right with Mother Nature and think “greener” and smaller and adjust our lifestyles to become more agrarian.
But, while that debate continues, the crisis remains….and according to Firestone, even $1T may not even be enough to resolve the issue of using PCS to resolve the “how to revive the New Deal” debate.
So, he proposes, let’s think bigger. Much bigger. As in….$60 TRILLION big.
He uses a proposed speech by President Obama to express how he thinks PCS could be used beyond the debt ceiling crisis and perhaps unlock the key that liberates social spending from all the constrains and strait jackets imposed by the Right and Center. I’ll simply repost it in its entirity and let you judge for yourself. (Adapted from here. And also here.)
My Fellow Americans:
1) Until now the Treasury has been borrowing the money the Government created back from the private sector, in order to cover our deficit spending, so the national debt has been steadily growing.
2) That’s silly! According to the Constitution, this Government, of the people, by the people, and for the people, is the ultimate source of all US money. So why should we ever borrow US money back and pay interest on it, since we can create it any time by the authority of the Constitution and Congress?
3) Congress has also imposed a debt ceiling, so, if and when we reach it, we can’t borrow back our own money without Congressional approval, anyway, and lately Congress has been using the need to raise the debt ceiling as an excuse to extort cuts in safety net and discretionary programs that the majority of Americans support.
4) So, on my order, and in accordance with legislation passed by Congress in 1996, and with the US Code, the US Mint has issued $60 Trillion using a single 1 oz. platinum coin, and deposited it at the NY Fed. It’s legal tender, so the Fed credited the Mint’s Public Enterprise Fund (PEF) account with $60 Trillion in US Dollar credits using its unlimited authority from Congress to create them.
5) This is not inflationary because the Fed will put our coin into its vault, and keep it there permanently out of circulation, and the Treasury will use the $60 T in USD credits only to pay back the national debt and to spend what Congress has already approved, which is only a small fraction of these credits and far from the amount needed to cause inflation.
6) My action ends any possibility of a debt ceiling crisis in February or March, because we have no further need to borrow our own money back in the markets, and that’s why we don’t need the tea party or other Republicans, or even my fellow Democrats to agree to raise the debt ceiling any more.
7) Now the Treasury, has plenty of money, much more than we need, in fact, to pay for all appropriations Congress has already approved for 2013, and may approve in March, including all deficit spending and, again, we won’t have to borrow our own money back, either to repay debts or to implement future deficit spending.
8) So, we will pay all Government debts which will come due in 2013 and 2014. Treasury securities and all other debts included. We will also pay back all debts held by other agencies of Government and the Federal Reserve. When we do this we will lower the national debt by about $12 T, reducing the “debt burden” by about 75% by the end of 2014, and creating an actual Social Security trust fund with 2.7 T in cash reserves in it; and again, to do this we don’t have to borrow any of our own money back, and we will also reduce our interest costs on the outstanding national debt all through the remainder of 2013, 2014, and beyond until it is all paid off.
9) None of the $60 T in new credits created by our actions is “money” in the private sector economy until the Treasury spends it. For now it is just capability to spend awaiting the appropriations of Congress to mandate deficit spending, should it need to compensate for the reduction in demand, probably close to 10% of GDP right now, caused by your own desire to save (which we want to do our best to facilitate), and your desire to import goods from foreign nations.
10) We have created $60 Trillion in new credits even though we probably needed less than that to cover anticipated deficit spending and debt repayment until at least 2028. The reason for this, is that I wanted to have enough capability created in the Treasury account, so that the national debt could be completely paid off (except for a small amount in very long-term Treasury debt still not mature by 2028), and all projected Federal deficits covered over the next 15 years, even extraordinary deficit spending needed to be performed without further borrowing over this period.
11) Of course, we can always make new coins if our projections about future deficits turn out to be wrong; but I thought it would be best to ensure that all $16.4 T plus of the “debt burden” can be completely eliminated from our political concerns; and also to provide enough funds in our spending account at the Fed, so that it would be very clear to Congress and all newly elected Representatives and Senators, that even though they, as required by the Constitution, continue to control the purse strings, the national purse is very, very full, and that we would be able to cover from the Treasury General Account whatever deficit spending for the public purpose, including for full employment, Medicare for All, infrastructure, education, and other things, that Congress, in its wisdom, chooses to appropriate now, before the next election, and for some elections to come.
Good night, my fellow Americans! Rest well knowing that our beloved country won’t be defaulting on any of its debts when the debt ceiling is reached, and that I’ve prevented this without going over the legal debt ceiling, or borrowing any more, by providing money for spending mandated appropriations, in compliance with the laws authorizing Platinum Coin Seigniorage, while supporting the Constitution’s prohibition against our Government ever defaulting on its debts. I hope that, in the future, everyone in Congress will obey the 14th Amendment’s prohibition against questioning the validity of Federal Government debts, and think twice before they indulge themselves in loose talk about the possibility of the Federal Government defaulting on its obligations.
America will always pay its debts in US Dollars according to the terms of the contracts it has concluded, and in line with the pension payments and other obligations that it owes. Neither you, nor the rest of the world need ever doubt that again! Nor need you ever think that our Government is running out of money for the things we must do. We can never run short of money unless Congress refuses voluntarily, to use its unlimited constitutional authority to make more of it. But as long as it delegates to me the authority to create high value platinum coins to cover our needs, you can be sure that running out of US money will never happen!
If Barack Obama actually did make that kind of a speech, and held his actions to it, I might even consider becoming a Democrat again. Sigh…
Personal thought here…I’m a bit worried myself about using the platinum coin option alone to fund the entirity of the social welfare state, since I believe that there should be some element of “pay as you go” and backing up social spending with taxes and spending cuts in other areas (such as defense and corporate welfare and tax subsidies that supports outsourcing overseas and the superrich). I would prefer a balanced approach that has elements of targeted nationalization of financial institutions to gain control of assets for redistribution, breaking up of other institutions into smaller regional public structures that can meet the regional and local needs of their locale’s residents, and empowering people through democratic, non authoritarian means to form unions and other charter groups to gain greater financial and social autonomy and protections from abusive and exploitative practices and behaviors. Social Security, Medicare, and Medicaid, as well as other social welfare programs, should remain autonomously funded through payroll taxes, though they should be made more progressive and egalitarian by removing the cap on eligible income for businesses and individuals.
However, I do think that platinum coin seigniorage could be particularly effective in funding a program of infrastructure upgrade and education reform, by funding a major rebuilding of our physical plant, such as our transportation system, our electronic and telecommunications grid, and developing a more sustainable energy grid. Building a national high-speed rail system and upgrading our present low-speed rail grid to move both people and goods more effectively could be a potential beneficiary of PCS-based stimulus spending (though, unlike some on the Left, I would NOT abandon highways just yet). Transforming education and health care into a public right from cradle to grave is another form of stimulus that could be covered by the use of PCS. For me, the issue is that PCS be understood as one of many options for Lefties and progs to be used to address financial inequities and shortfalls in funding progressive initiatives. It’s not a substitute for progressive taxation or redistribution or nationalization or charterism….but it can be an effective accompaniment to them.
Shalle we start the discussion about start of the rest of our lives now, Clones?? Let’s break the ice and bust some wingnuts, please.