And if there happened to be an extra one of those $1 trillion platinum coins lying around, you could stick it in my account

from TPM

"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."

-- Paul Krugman, in his NYT column Coins Against Crazies

by Ken

"Mint that coin!" exclaims Paul Krugman at the end of his NYT column today, "Coins Against Crazies." so I guess that means we need to get up to speed on the subject.

Oh, probably you've already doped out this platinum-coin business -- trillion dollars the limit, or maybe not even, if we don't want it to be! However, I'm playing catch-up, so I'm grateful for this quick rundown PK provides today (more links onsite):

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.

PK acknowledges that yes, "the coin trick" would be "undignified" -- "but better to look slightly silly than to let a financial and Constitutional crisis explode." He has in fact already written about the platinum-coin scheme, in a blogpost a couple of days ago called "Rage Against the Coin." (That's the link embedded in the text above. I mention this because I wasted a NYT click on it, just to be able to embed the link. Now I'm already up to five clicks down, five to go, and it's only January 11.) As today's column makes clear, while he's serious about the Coin Trick, what he is more than anything is seething with rage 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.

PK allows freely that "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!

So there he is, once again -- as usual -- pulling his punches, refusing to tell us how he really feels about those Republicans.

In the title of this post I made my little joke about maybe having an "extra" one of those $1 trillion coins plunked into my bank account. Ha ha! Of course the vastly greater likelihood is that this will give rise to a new generation of online scams, whereby solicitations claiming to offer astonishingly legal transfers of all or part of the value of one of those coins to private citizens through a virtually unknown mechanism, which you can participate in by clicking through -- or, better, by supplyhing your bank routing number and account number.

Maybe this is the kind of economic program those Republicans can get behind.

Meanwhile, hold onto that "unavoidable" image of Republicans being "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." I know PK says that this analogy drives them wild. So I think we owe it to them to use it as often as possible.

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