Sunday, September 01, 2013

The undead Grand Bargain and the platinum coin option on debt-ceiling negotiations

As a new fight over the debt ceiling approaches, it's worth remembering that President Obama has a straightforward legal power to avoid the whole farce, the ability to mint a platinum coin of any value and use it to finance debt payment obligations. The power is called platinum coin seigniorage (PCS).

So if there is a negotiation in which Obama and the Democrats make concessions to Republicans, it's because Obama has chosen not use the power he has to avoid it. In other words, he wants the confrontation for some purpose, like putting through his Grand Bargain to cut benefits on Social Security, Medicare and Medicaid.

Paul Krugman has discussed the platinum coin option in Be Ready To Mint That Coin 01/07/13:

There's a legal loophole allowing the Treasury to mint platinum coins in any denomination the secretary chooses. Yes, it was intended to allow commemorative collector’s items — but that's not what the letter of the law says. And by minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling — while doing no economic harm at all.

So why not?
Yes, it's that straightforward.

Also on the platinum coin option:

Beowulf, FDL Coin Seigniorage and the Irrelevance of the Debt Limit 01/03/2011

Joe Firestone (letsgetitdone), Coin Seigniorage: A Legal Alternative and Maybe the President's Duty Corrente 07/17/2011

Joe Firestone, End the Austerity War Against the People: Mint the Platinum Coin! Corrente 08/05/2011

Joe Firestone, Beyond Debt/Deficit Politics: The $60 Trillion Plan for Ending Federal Borrowing and Paying Off the National Debt Corrente 08/01/2012

Joe Firestone, A Counter Narrative to Peterson's New Economic Perspectives 10/30/2012

Paul Krugman, Rage Against the Coin 01/08/2013

Paul Krugman, Barbarous Relics 01/09/2013

Mike Sandler, Beyond Debt Ceiling, Trillion Dollar Coin Offers New Economic Paradigm Huffington Post 01/10/2013

Joe Weisenthal, COINTASTROPHE: White House Rules Out The Trillion Dollar Coin Option To Break The Debt Ceiling Business Insider 01/12/2013

Mike Konczal, The Game Theory of the Post-Platinum Coin Debt Ceiling Rortybomb 01/14/2013; this should be read in combination with Gene Lyons, Obama Has The GOP Right Where He Wants Them National Memo 01/16/2013.

Ezra Klein, Treasury: We won’t mint a platinum coin to sidestep the debt ceiling Wonkblog 02/12/2013

And as Firestone reminds us in Declaring the Grand Bargain Dead Is Premature FDL 08/31/2013, what Obama would be offering up in such a standoff would be cuts in benefits to Social Security, Medicare and Medicaid. This is his Grand Bargain, at this point a painful misnomer. It would only be "grand" for investment banker and insurers who collected fees and bonuses while delivering substitute products for the cut programs that provide inferior service, even for those who can afford it, compared to the current arrangement.

And it this point the only real "bargain" seems to be that both Democrats and Republicans would agree to support cuts to benefits on Social Security, Medicare and Medicaid. What those would would lose from the cuts would get in the "bargain" is pretty darn vague at this point.

Lori Montgomery reports in White House, Republican senators give up on budget talks Washington Post 08/29/2013, Obama has been offering up the Grand Bargain in negotiations with Republicans even this past week:

Through multiple meetings with White House Chief of Staff Denis McDonough, Deputy Chief of Staff Rob Nabors and Budget Director Sylvia Mathews Burwell, the group discussed a range of options, including a “grand bargain” that would involve a complete restructuring of Medicare, according to people familiar with the meetings, who spoke on the condition of anonymity to describe the private talks.

The group also discussed a smaller deal that would replace much of the remaining sequester savings — about $500 billion over the next eight years — with narrower reforms to Medicare, Social Security and other ­mandatory-spending programs, such as farm subsidies.

But the talks never really gelled, in part because Republicans would not consider raising taxes on the wealthy or corporations as part of the smaller deal, arguing that congressional Republicans as a whole would never agree to replace sequester cuts with higher taxes. Nor did they offer a specific strategy for raising taxes as part of the larger deal.
In the current vocabulary of our political elites, certainly including Obama loyalists, "reform" for Social Security, Medicare and Medicaid means "cutting benefits."

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