Well, it seems that as the “drop dead” date for the latest debt ceiling crisis comes closer and closer, the debate over whether or not minting a platinum coin to cover the debt is seriously heating up.
For the Right, of course, the very idea of loading up a coin with enough assets to cover up the debt that would stave off their dream of holding the country ransom for severe cuts in social spending, is simply so much sophistry and smoke and mirrors, putting off the “tough choices” required (or so they say) to reign in the “out of control spending” (defense, debt servitude for the wealthy, and corporate welfare excepted, of course).
For those in the Corporate Center who are most concerned with deficits, the idea of a platinum coin is only slightly less toxic…but unlike the TeaPublicans and the “Gold Standard” advocates, they see the threat of a general default from the government being able to pay their bills and resolve their debts as an even greater evil…but they still remain hesitant because of the ramifications of abandoning the “pay as you go” principle.
And yet, there are those establishment liberals (like New York Times columnist Paul Krugman, who assert that while minting the coin might seem like a loony idea, it’s practically sane compared to the alternative of either default or compromising away the breadth of the social welfare state and imposing austerity at the level where Greece and Spain are now imposing thanks to their IMF-led economic regimes.
Nevertheless, there is still a lot of squick going on about the tactic of the platinum coin in most establishment circles…..so much that a “compromise”, slimmed down method of introducing “The Coin” has been tossed around with surprising support.
The idea goes that if default is indeed threatened by the GOTP-led House. President Obama would direct the Treasury to mint one single platinum coin with a value of $1 trillion, enough to cover the debt for a year. He would then threaten to mint more $1T coins unless Congress ended their game of chicken and permanently raised the debt ceiling, or better yet, simply modified the process so that no more hostage crises would occur. Then, the funds covered by the coin would be reinforced through more “solid” eams, and the coin(s) would be melted down, never to be used again.
The conventional wisdom is that it never gets to that end, because either Wall Street lowers its mighty hammer on the GOTP and forces them to stand down on threatening to shut the government down, or Prez O buckles under and gives the Repubs the cuts to Social Security, Medicare, Medicaid, and other social programs that they so dearly desire.
On the other hand, the TeaPubs aren’t exactly known for their tact or their willingness to compromise, and with the protection of incumbency and their solid right-wing political base and the drive to punish Prez O for…well, simply being him, chances are that they are more than willing to push their fight to the brink and beyond.
But….this isn’t so much about the “small ball” debate about using the “Trillion Dollar Coin” to break the debt ceiling crisis. Because, lest you forget, the original idea of what is known as “Platinum Proof Coin Seigniorage” (shortened to Platinum Coin Seigniorage or PCS), went a lot further than a mere $1T coin.
Which brings us back to our man Joe Firestone, who has been the lone voice rebel on the Left who has been promoting PCS for a far more radical, and much more expansive, mission of reviving the New Deal/Great Society mission of affirmative government.
Firestone, also known in prog circles under his alter ego “Letsgetitdone“, was the first to break the ice with the idea of using platinum proof coins as a means of breaking down the limitations of government to fund programs from greatly expanded Social Security/Medicare/Medicaid, to major infrastructure upgrade/repair/reconstruction, to universal single payer health care, to universal free education, among other goodies.
He has been using the pages of Corrente and New Economic Perspectives to promote his “Go Big Or Go Home” approach…and he has plenty to say to all the doubters and haters and Cassandras who question his sanity and his economics for advocating using the Platinum Coin for “New Deal 2.0”.
In his latest barb, posted at both NEP and Corrente, Firestone goes after some of the main critics of the “game changing” potential of platinum coin seigniorage, as well as the limitations of the advocates of the “small ball” approach of the “trillion dollar coin”.
Literal TDC proposals would solve the debt-ceiling, but they won’t solve the larger problem of defeating the austerity politics that is so close to getting the cuts to social safety net and important discretionary government programs that austerians have long sought. PCS game-changer proposals are the ones calling for, or analyzing the impact of, PCS options aimed at paying off the national debt and covering anticipated federal deficit spending for some years.
Note that Firestone isn’t opposed to using the Trillion Dollar Coin as a means of breaking the debt ceiling, but he has much bigger fish to fry in tackling the predominant conservative/defict hawk centrist economic mythology that deficit spending for social needs is evil and irresponsible and that only through “balanced budgets” and “living within our means” and “shared sacrifice” and other platitudes of austerity can the US get their fiscal house in enough order to sustain “prosperity”.
This is how Firestone responds to some liberal critics like Huffington Post’s Jason Linkins, The Atlantic’s Matthew O’Brien, and even the current liberal Keynesian icon, New York Times’ Paul Krugman, who suggest that utilizing the Trillion Dollar Coin might be a whacky idea that just might work….until the hyperinflation hits. The trigger for this was a tweet from the National Republican Campaign Committee that mocked the idea of the “platinum coin” as just another “big spending liberal” ploy for President Obama to give more of that “free stuff” to the lazy “47 percent”, with the (false) implication that the coin would require enough platinum to “sink the Titanic”.
In response to a tweet from the National Republican Congressional Committee (NRCC) yesterday, Jason Linkins at HuffPo repeats Joe Wiesenthal’s earlier contention that the platinum coin has nothing to do with additional spending, but only with solving the debt ceiling problem. And Linkins says:
The only role the platinum coin plays, in the scenario described by those who promote the idea, is an emergency measure that protects the United States taxpayer and the global economy from the catastrophic effects of a debt ceiling breach.
Linkins is just wrong about this, some, like myself have been advocating game-changing platinum coin seigniorage since July 2011 to get rid of austerity politics and enable the United States to handle its various problems without progressives having to constantly struggle against memes like “we can’t afford it,” “we’re running out of money,” “we’re going to leave huge financial debts to our grandchildren,” and other nonsense memes along these lines from austerians. Linkins accuses the NRCC of lying about this and says that the idea that some people are advocating using the coin to provide the means for spending is “a myth.”
Well, I don’t know whether the NRCC knows the PCS literature well enough to know about game-changing proposals, so they may have been lying about it out of ignorance. But, nevertheless, even though they may have misrepresented the position taken by many in the MSM “liberal” blogosphere, they haven’t told an untruth about people like myself who aren’t part of the MSM echo chamber, and who think more broadly about the possibility and potential of PCS applications. The real issue here isn’t whether the NRCC is lying. It’s why people like Wiesenthal, Linkins, Krugman, and Matthew O’Brien of the Atlantic aren’t focusing on game-changing PCS. In an earlier post, I pointed out that Wiesenthal was concerned about inflation; and surprise, surprise, it turns out that O’Brien is too. He says:
So why not just mint 16 of these $1 trillion coins and retire the entire national debt, smart guy? Or, even better, create a single $16 trillion coin — scratch that, make it $100 trillion!
Now that’s just crazy talk. Let me be clear: Nobody wants to use platinum coins to eliminate the debt. As Paul Krugman points out, there’s a limit to how much seigniorage a government can extract before hyperinflation sets in, and that’s certainly far less than $1 trillion, let alone $16 trillion. . . . .
Can we cut this short? I need to run out and buy some canned food and gold bars to prep for the coming hyperinflation. A trillion dollar coin is only two orders of magnitude away from us matching Zimbabwe for monetary ignominy.
OK. So, it’s really about the fear of hyperinflation from a guy who tweets under the name @obsoletedogma, and the reference to Krugman indicates that O’Brien, like Krugman, still goes along with the Quantity Theory of Money (QTOM), which Keynes put to a well-deserved rest during the 1930s. Talk about obsolete dogma, IS-LM and loanable funds models aren’t exactly examples of up-to-date economic models.
Here’s a good blogosphere refutation for Matt to read to understand that the QTOM dog won’t hunt! And that he and the others need a specific analysis of why a $100 T coin would cause inflation including specifying causal transmission mechanisms for causing inflation when the seigniorage profits, including the debt repayment money would be paid out over a period of years, and the immediate money to be paid out, would go only to pay intragovernmental and Fed-held debt.
Before O’Brien, Wiesenthal, Linkins, and others start chanting: Zimbabwe! Weimar! I think they ought to do such an analysis and put off going out for some canned food and gold bars. I’ve done a fairly detailed analysis of PCS impact showing why it wouldn’t be inflationary, whatever the denomination of the coin(s) involved. So has Scott Fullwiler. With so much at stake in the debate over the TDC, I think they should at least read these Posts and tell us why they disagree, before they go off half-cocked about using PCS and getting hyperinflation or even inflation!
The difference here is that Firestone, like other advocates of Modern Monetary Theory, rejects fundamentally and decisively the conventional theory that government cannot create their own stash of currency and use it for social needs without fear of inflation. As a country with its own “fiat currency”, and the ability to sell bonds at low, low rates with nearly ZERO inflation, the US has the ability that very few other countries do in their ability to engage in deficit spending…but rather than for the enrichment of the superwealthy and for runaway private profit, MMT’ers would prefer that such powers be used for some actual good for average people.
And, how does “going big” improve on the mere idea of a $1T coin?? Kick it, Joe:
Some bloggers have advocated minting a $quadrillion coin, and that is another option for how to proceed with game-changing PCS. I’m not really opposed to that. But I’ve proposed the $60 T coin, because I think a game-changing PCS solution is a transitional stage preceding the reorganization of the Federal Reserve and its placement under the supervision of the Treasury Department. Since the $60 T coin will cover debt repayment and debt-free deficit spending for 15 – 25 years; it provides enough time to educate people politically about the desirability of such a change, while providing the Executive Branch with the power to fill the public purse while retaining Congressional control over the purse things themselves, as the Constitution requires.
Why do I call options like the ones above game-changing options in contrast to using the $1 T coin? The reason is that they, unlike the $1 T coin option, not only solve the debt ceiling; but also change the way the Treasury gets the credits into its spending account to deficit spend. The Treasury doesn’t create those credits directly with the platinum coin; but it does mandate the Fed to use its power to create them in response to depositing the very high value coin. Once the credits are swapped for the very high value coin involved, the national debt subject to the limit can be paid down and eventually off, without severely contracting the economy, and also deficit spending can then proceed using the credits already in the Treasury’s spending account. In short, the very high value PCS options fill the public purse with enough credits to take the debt off the table as an issue, and also to make the question of how we’re going to pay for the deficit spending we may need to adjust to the sectoral balances irrelevant, because the money will already be there to support that needed deficit spending.
With the debt ceiling, and the “how you gonna pay for it” issues gone from political debate; the foundation for austerity politics is also gone. We can forget about the Washington think tank industry talking about 50 year budget projections, fixing the debt, debating the debt, agonizing over the debt, calling for cuts to the safety net, saying we cannot afford Medicare for All, or programs for facilitating full employment, etc. This would be a new day for progressive and American politics. It would mean goodby to Bowles-Simpson, Maya McGuineas, Pete Peterson, Alice Rivlin, and all their cohorts.And it would mean hello to a new generation of progressives who could aggressively push a movement for social and economic justice for the 99%.
Now, here is where some lefty Cassandra reading this would rise up and say: “Yeah, right, Joe..you do realize that the GOTP could take control of the Senate in 2014 (and the Presidency in 2016) and use PCS the same way they ran up the deficits during the Bush era, and that none of that easy money you plant from the Great Platinum Coin tree will actually get in the hands of the people you say you want to help? And…what about progressive tax reform, or re-regulating (if not totally nationalizing or breaking up) Wall Street, or the issues of federalism and “states’ rights” and revenue sharing? Oh…and where’s the grassrotts political movement that will drive all this radical change? Labor’s nearly dead; most cultural liberal movements are deep in the Democratic Party’s pocket, with no sign of changing; and the neoliberals still control the Dem appratuses, with third parties practically toothless. How are you going to counter that, Joe??”
I guess that Joe Firestone would have something pithy to say about that…but his main concern is simply getting his ideas enough publicity and discussion that they can even begin to change the game. Thankfully, given all the hoopla of the past two weeks, he’s well on his way on that objective. He might not win any friends on Wall Street, but if this crazy plan has any chance of success, it could revive the Left in ways that could make US politics pretty damn interesting…and actually worth the drama and circus.
After nearly 40 years of being bounced between Reagan/Bush neoconservative whackery and corporate New Democratic buffonery, the rest of us could use some good news. Git ‘er done, indeed, Joe.