The USA's Debt Ceiling Fight

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Techne

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Paul Krugman from the NYT:
Coins Against Crazies

So, have you heard the one about the trillion-dollar coin? It may sound like a joke. But if we aren’t ready to mint that coin or take some equivalent action, the joke will be on us — and a very sick joke it will be, too.

Let’s talk for a minute about the vile absurdity of the debt-ceiling confrontation.

Under the Constitution, fiscal decisions rest with Congress, which passes laws specifying tax rates and establishing spending programs. If the revenue brought in by those legally established tax rates falls short of the costs of those legally established programs, the Treasury Department normally borrows the difference.

Lately, revenue has fallen far short of spending, mainly because of the depressed state of the economy. If you don’t like this, there’s a simple remedy: demand that Congress raise taxes or cut back on spending. And if you’re frustrated by Congress’s failure to act, well, democracy means that you can’t always get what you want.

Where does the debt ceiling fit into all this? Actually, it doesn’t. Since Congress already determines revenue and spending, and hence the amount the Treasury needs to borrow, we shouldn’t need another vote empowering that borrowing. But for historical reasons any increase in federal debt must be approved by yet another vote. And now Republicans in the House are threatening to deny that approval unless President Obama makes major policy concessions.

It’s crucial to understand three things about this situation. First, raising the debt ceiling wouldn’t grant the president any new powers; every dollar he spent would still have to be approved by Congress. Second, if the debt ceiling isn’t raised, the president will be forced to break the law, one way or another; either he borrows funds in defiance of Congress, or he fails to spend money Congress has told him to spend.

Finally, just consider the vileness of that G.O.P. threat. If we were to hit the debt ceiling, the U.S. government would end up defaulting on many of its obligations. This would have disastrous effects on financial markets, the economy, and our standing in the world. Yet Republicans are threatening to trigger this disaster unless they get spending cuts that they weren’t able to enact through normal, Constitutional means.

Republicans go wild at this analogy, but it’s unavoidable. This is exactly like someone walking into a crowded room, announcing that he has a bomb strapped to his chest, and threatening to set that bomb off unless his demands are met.

Which brings us to the coin.

As it happens, an obscure legal clause grants the secretary of the Treasury the right to mint and issue platinum coins in any quantity or denomination he chooses. Such coins were, of course, intended to be collectors’ items, struck to commemorate special occasions. But the law is the law — and it offers a simple if strange way out of the crisis.

Here’s how it would work: The Treasury would mint a platinum coin with a face value of $1 trillion (or many coins with smaller values; it doesn’t really matter). This coin would immediately be deposited at the Federal Reserve, which would credit the sum to the government’s account. And the government could then write checks against that account, continuing normal operations without issuing new debt.

In case you’re wondering, no, this wouldn’t be an inflationary exercise in printing money. Aside from the fact that printing money isn’t inflationary under current conditions, the Fed could and would offset the Treasury’s cash withdrawals by selling other assets or borrowing more from banks, so that in reality the U.S. government as a whole (which includes the Fed) would continue to engage in normal borrowing. Basically, this would just be an accounting trick, but that’s a good thing. The debt ceiling is a case of accounting nonsense gone malignant; using an accounting trick to negate it is entirely appropriate.

But wouldn’t the coin trick be undignified? Yes, it would — but better to look slightly silly than to let a financial and Constitutional crisis explode.

Now, the platinum coin may not be the only option. Maybe the president can simply declare that as he understands the Constitution, his duty to carry out Congressional mandates on taxes and spending takes priority over the debt ceiling. Or he might be able to finance government operations by issuing coupons that look like debt and act like debt but that, he insists, aren’t debt and, therefore, don’t count against the ceiling.

Or, best of all, there might be enough sane Republicans that the party will blink and stop making destructive threats.

Unless this last possibility materializes, however, it’s the president’s duty to do whatever it takes, no matter how offbeat or silly it may sound, to defuse this hostage situation. Mint that coin!
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I wouldn't mind one of those trillion dollar coins...
 
The debt ceiling is simple. Congress has to pay the bills IT PASSED! IE, the House (Republicans) have to pay for what they signed off on. Now they fighting it. Can you be any more pathetic?

Basically the republicans holding the American economy hostage again. *******s.
 
ghoti said:
The debt ceiling is simple. Congress has to pay the bills IT PASSED! IE, the House (Republicans) have to pay for what they signed off on. Now they fighting it. Can you be any more pathetic?
Click to expand...

Obama needs cut back expenses, then they will get the money to pay their bills (i.e have the debt ceiling raised)
 
While a trillion dollar coin sounds fantastic if you overspend, I find myself agreeing with the person that said this:

Increasing America's debt weakens us domestically and internationally. Leadership means that ``the buck stops here.'' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

I therefore intend to oppose the effort to increase America's debt limit.
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That's irresponsible. It's unpatriotic
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Those dumb Republicans :wtf:.
 
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ghoti said:
The debt ceiling is simple. Congress has to pay the bills IT PASSED! IE, the House (Republicans) have to pay for what they signed off on. Now they fighting it. Can you be any more pathetic?

Basically the republicans holding the American economy hostage again. *******s.
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I blame all of them over the last 12 years.
The all made this mess, and they all refuse to work together.
 
JStrike said:
Obama needs cut back expenses, then they will get the money to pay their bills (i.e have the debt ceiling raised)
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The right wingers are upset that taxes went up on their rich friends. They now want to cut social programs for the poor and middle class just to be vindictive idiots. They could easily cut the defense budget but then their buddies wont get any lucrative contracts.

Its strange, they had no issues raising the debt ceiling a record number of times when Bush was president.
 
manesan said:
The right wingers are upset that taxes went up on their rich friends. They now want to cut social programs for the poor and middle class just to be vindictive idiots. They could easily cut the defense budget but then their buddies wont get any lucrative contracts.
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That is one possible reason. Another reason is that empirical evidence suggest that it is better to cut back on spending than raising taxes (or a combination) when the economy is ailing. Btw, both the democrats and Republicans are right-wingers when it comes to economics. The one is just a little more than the other.

manesan said:
Its strange, they had no issues raising the debt ceiling a record number of times when Bush was president.
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Strange indeed. Obama opposed the debt ceiling while campaigning for president now he no issues with it. Politicians...
 
JStrike said:
Obama needs cut back expenses, then they will get the money to pay their bills (i.e have the debt ceiling raised)
Click to expand...

I'm waiting for the USA to devalue the dollar ..
 
Techne said:
That is one possible reason. Another reason is that empirical evidence suggest that it is better to cut back on spending than raising taxes (or a combination) when the economy is ailing. Btw, both the democrats and Republicans are right-wingers when it comes to economics. The one is just a little more than the other.


Strange indeed. Obama opposed the debt ceiling while campaigning for president now he no issues with it. Politicians...
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Then cut the defense budget. Cutting social programs for the middle class in a depressed economy is idiotic. Secondly, there is no empirical evidence that raising taxes on the mega rich will hurt the economy, it quite the opposite.

Obama has acknowledged his comments about the debt ceiling from 2006, and has admitted that he was a young senator at the time and was incorrect. He has said that the US has to honor its debts.
Edit: http://www.huffingtonpost.com/2011/04/11/obama-debt-ceiling-vote_n_847627.html
 
rrh said:
I'm waiting for the USA to devalue the dollar ..
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You can keep waiting. Ive heard the libertarians making this prediction for a long time, not gonna happen unless the right wingers continue behaving like retards.
 
manesan said:
Then cut the defense budget. Cutting social programs for the middle class in a depressed economy is idiotic. Secondly, there is no empirical evidence that raising taxes on the mega rich will hurt the economy, it quite the opposite.
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The evidence suggest that cutting on spending is better than raising taxes or a combination. Doing something that is likely not optimal for your economy is a sign that you are hurting the economy. Just one example is the current woes of California who recently raised taxes yet lost revenue.

manesan said:
Obama has acknowledged his comments about the debt ceiling from 2006, and has admitted that he was a young senator at the time and was incorrect. He has said that the US has to honor its debts.
Edit: http://www.huffingtonpost.com/2011/04/11/obama-debt-ceiling-vote_n_847627.html
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Shame, that is how Bush must have felt. Glad Obama grew up. Now he just have to wake up and do a better job at trying to balance the budget by cutting spending.
 
Geez man, if it is not the fiscal cliff then it is the debt cieling. No wonder these guys jump out of high rise windows. Tomorrow it will be a new buzz word.... the fiscal ass or the debt pit.
 
The debt ceiling should be repealed in its entirely. Congress can then control federal debt simply by paying attention to the gap between spending and taxes.
 
the few individuals in congress who wanted to do the sane thing of actually spending less and paying off their debt are labeled to be extremists.
 
JStrike said:
Obama needs cut back expenses, then they will get the money to pay their bills (i.e have the debt ceiling raised)
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Er...dude. Congress aka Republicans control the purse. They are the ones who voted for spending the money. Now its time to pay for what congress decided.

Ironically this can be solved easily enough. If they work together. The Republicans need to stop holding the American economy hostage. When the Dems were in control of the purse they did not do retarded moves like this.

If you wanna do cut backs on social programs. No problem. Itll **** Republican states up the most. They are the biggest welfare queens and most fed money is spent by them.
 
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Nicodeamus said:
the few individuals in congress who wanted to do the sane thing of actually spending less and paying off their debt are labeled to be extremists.
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Well not just for that bad theory, but also for their views on abortion, woman, weapons, creationism, etc. They pretty well rounded retarded :)

Though now that I think about it... Ive only heard them labeled fundamentalists and not extremists.
 
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