For the last couple of days, we’ve been talking about the “Platinum Coin Solution” to the debt ceiling crisis.
This is the idea that the Treasury could mint a trillion dollar platinum coin and deposit it at the Fed, so that the Treasury could continue to pay the country’s bills without breaching the debt ceiling, in the event that the debt ceiling wasn’t raised by Congress.
I walked through most of the concept here.
This idea been getting a lot of attention, and a lot of folks in the media think it’s a big joke.
I was on CNBC yesterday discussing it, and clearly the anchors thought it was just a joke discussion. The video is here, if you want to watch it.
So is it a joke discussion?
Well, plainly, the idea of a “trillion dollar coin” is like something out of fiction, but it’s not the silliest idea that’s floating around.
The silliest idea that’s floating around is the discussion we had in 2011, and now again in 2013, about whether a rich nation like the United States should voluntarily consider not paying some of its bills.
That we’re even having this debate is much sillier than this talk of minting a coin.
Apologists for the GOP who think it’s OK to use the debt ceiling as “leverage” in a fight to reshape fiscal policy deny that this brinksmanship is reckless, because they say not raising the debt ceiling wouldn’t cause a debt default. They say that we have plenty of tax revenue to cover interest payments, and that we would be able to prioritise payments to make sure our creditors get paid first.
But even if it were true that the Treasury has the technical capacity to prioritise payments like this, and even if it were the case that the Treasury “prioritizing” the budget didn’t result in legal problems, the fact of the matter is that some bills would go unpaid. The country would be a deadbeat.
The argument from most fiscal conservatives is that our country’s finances should be “balanced” the way a business’s need to be, and that, if the country doesn’t get spending under control, then interest rates will soar like they have in Greece.
But if you think government spending should be analogized to a business, then any creditor should start to get nervous once they see the government not making some of its legally-obligated payments, even if the credit payments are temporarily maintained.
So, make no mistake, the debt ceiling fight is about whether the US is going to pay legally obligated bills, even if a debt default wouldn’t necessarily come with it.
Suggesting that you will voluntarily force a rich nation to stop paying its bills just to achieve your own budgetary agenda is far more absurd than the trillion dollar coin.
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