Wednesday, January 9, 2013

The Trillion Dollar Coin

In The Grim Future 20 Ameros Buys A 'Coke-Heroin' From A Weyland-Yutani Vending Machine
The Debt-Ceiling battle is gearing up to be one of the all-time stupidest with entrenched parties on both sides thinking (correctly) that they have an apocalyptic mandate from their loony base. Moderate ideas are being sacrificed like goats before a Roman assault: 'Ooh! Look at the entrails--Boehner's gonna cry! ... Actually, that could go either way ..."

The idea that is cresting above the churning waters of drama like a shark's fin is this: If Obama decides he wants to ignore the whole crisis he could order the treasury to mint one or more Trillion Dollar Coins and then use them to pay America's debts, thus 'resolving' the entire debt-ceiling debate in one fell--very, very, very fell swoop.

What The Heck?
Uh ... Right. Let's start with the Debt Ceiling. Prior to 1917 the president could authorize whatever national spending he wanted (or, you know, 'she*'). In 1917 The Second Liberty Bond Act was passed which set a limit on what the nation could spend: the 'debt ceiling.' If spending was under this, all was good--if exceeding it, then Congress had to step up and increase the debt ceiling. For almost 100 years this has been "standard practice" despite some rhetoric on each side of the aisle.

Here are some things to keep in mind:
  1. Unlike the deficit, the debt ceiling is money already spent. The vote to raise it is not about authorizing future spending. It is about paying debts we have already incurred. It is, sort of, paying "America's credit card bill."
  2. Failure to raise the debt ceiling has two impacts. One is 'good.' One is very, very bad. The 'good' one is that if it was not raised then the government would have a choice between paying some bills and not others. It might then be forced to make a "hard choice." The president might, for example, pay our foreign debts (to prevent default) but not pay bills for the FBI or something. Depending on where you stand on debt vs. services, this might be "okay." However, the bad part is that the treasury makes over 100 million payments per day. Many of these are automated. Due to the way the system works (computers, bureaucracy, etc.) it is not clear that in the default time-frame between Feb 15 and March 1 the treasury could determine which payments to make and then make them. In short, rather than hard decisions, the result could be financial chaos and a cross-fire of lawsuits.
  3. The Treasury notes that failure to increase the limit would have 'catastrophic' consequences. It would be unprecedented, cause financial havoc, and has been done 78 times (49 times by Republican presidents and 29 times by Democratic presidents) already.
Enter The Trillion Dollar Coin
The key law is here:
Section (k) of 31 USC § 5112, "Denominations, specifications, and design of coins" plainly states that the Treasury Secretary can create arbitrary quantities of new legal tender as long as it's made out of platinum:
"(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time."
As the linked article notes: the ability of the Treasury Secretary to mint coins (and this is, I believe, a 1996 law to allow the Treasury to mint collectible coins) with no limits is a gaping loophole. It is, nonetheless, a clearly written one. If this were done, the Treasury Secretary could march it down to the Treasury, deposit it, and the Obama treasury could continue writing checks ... while Congress rioted, presumably.

Could This Happen?!?? What Would The Effect Be?
It could happen. It probably won't because a 1T coin is silly--but a bunch of 1Bn coins would, according to some, be (a) less silly, and (b) more plausible. It's noted that very-large-denomination currency has already been created in the past for purposes of intra-government transfers. This would be politically fraught--and absurd--but it is, apparently, not illegal. An indication? There's a bill to stop it in the works--a tacit acknowledgement that it's (maybe) legit. So, yeah: It could happen.

The effects? Hyper-inflation? The destruction of the dollar? The creation of a 16T coin next Tuesday to pay off our whole national debt? No--none of these things. The money in question is already in circulation--remember #1 from above? We already spent it. The creation of the coin or the payment on the debt will have zero impact on inflation. The destruction of the dollar? Neither--this has nothing to do (directly, at least, with currency value). Paying off the national debt? We can't--that's not what this is about (and that would destroy the dollar and cause hyper-inflation).

But we don't have enough platinum, right? No problem: we're not required to--just a little. The law does not require coins to have precious metal equal to their face value. Would the courts disallow it on the face of it? Maybe: minting a 1T coin is clearly counter to the intent of the law--but it's a clearly stated law. If you want the high courts to call "balls and strikes" do you go with what the law says? Or what it means. And putting 'means' in italics indicates you are saying it slowly--forcing air out through your teeth--giving it your all because for HEAVEN'S SAKE EVERYONE KNOWS WHAT IT MEANS!?!? IT MEANS WHAT I WANT IT TO MEAN! CAN'T YOU ALL SEE!?? I'M NO JUDICIAL ACTIVIST PROPONENT--I'M A FRIKKIN' CONSERVATIVE!!

:: Gasp ::

Yeah, I got you. Airtight.

The real problem--the argument against this--is the "incredulous stare argument." We would--that's 'we' as in "our nation"--look ridiculous. The problem: if we don't raise the debt ceiling we will look both ridiculous and default on our debt.

What Do I Think?
I see no conservative principle that makes it okay not to pay your debts if you can--and we can. One of the things that this battle high-lights (interestingly) is the difference between the the positions that money is a finite resource and money is an agreed upon convention. The link makes a case that the "convention" argument is winning pretty handily--you can decide for yourself. I believe we can, and must, get our spending under control--but doing it this way is the wrong way and it is, in fact, playing bumper-cars with the nation's economy. I believe the Tea Party's stand on this issue is, simply put, reckless.

The Princeton Election Consortium is working on making the quant-case (the big-data, crunch the numbers case) that gerrymandering is much more severe right now for the Republicans than for the Democrats. I'll admit to being a little surprised and a little dubious about that--but (a) they were one of--if not the--most accurate big-data quants for the 2012 election and (b) he's, you know, making the case with numbers--so ignore it at your peril. If he is right then the inclination of the base to be extreme is incredibly high: my sense that this is reckless behavior is, in fact, in line with this argument.

If it is true that re-districting has amplified extremism and disarray on the right (moreso than the left) then we have a breakdown in the system that, with the debt limit, could be disastrous. If this is truly the case then extreme measures are called for. The executive--of any administration--would be not just within its rights but necessarily within its mandate to avoid that disaster if possible.

Talking Points Memo suggests putting Sandra Fluke's face on the coin for "maximum trolling."
It'd Be Epic Trolling For Sure

Here is a transcript from the Simpsons episode where the US Government creates a trillion dollar bill to fund the Marshall Plan ... and Castro steals it.
Mr. Burns: All we ask is preferential treatment because of my fabulous wealth!
           [Burns holds the trillion dollar bill up.]
   Castro: May I see?
Mr. Burns: Ho ho ho, see with your eyes, not with your hands!
   Castro: Please, we are all amigos here!
    Homer: Mr. Burns.. I think we can trust the president of Cuba..
Mr. Burns: [hands it to Castro, and waits a couple of seconds.] Now, give it
   Castro: Give what back?
Mr. Burns: D'ohh...
Here is a visual of what 1T looks like "in person."
Those are 100's. That little image in the left corner is YOU.

* I have seen it argued, literally with a straight face (in comments, so, you know, that's the figurative form of 'literal'), that the constitution, saying "he," precludes Hillary from becoming president because 'the founders wouldn't have wanted a woman president.' This is both toweringly stupid and ... uh ... possibly true: had we a time machine I do wonder what the founders would've made of a female candidate. The possibility that they, inevitable products of their time, might've balked, is one reason to think critically about constitutional literalism.

1 comment:

  1. If they are going to mint coins out of precious metal, then obviously a picture of crying Glenn Beck should go on the obverse.