The Absurdity of Government Finance
The mind-boggling way Congress handles our money
The United States debt ceiling or debt limit is a legislative limit on the amount of national debt that can be incurred by the U.S. Treasury, thus limiting how much money the federal government may pay on the debt they already borrowed… The present debt ceiling is an aggregate limit applied to nearly all federal debt, which was substantially established by the Public Debt Acts of 1939 and 1941 which have subsequently been amended to change the ceiling amount. -As cited in Wikipedia
According to Secretary of the Treasury Janet Yellin, if Congress does not perform its regular financial voodoo of raising the debt ceiling by October 18th, the government will run out of money to pay debts already authorized by Congress at the same time it loses the ability to borrow more money by issuing Treasury bonds and bills. The consequences of a government default on its obligation to make interest payments on its bonds would send shockwaves through the global financial system. On the domestic front, there is the probability that the government would not be able to issue payments for entitlements such as Social Security. As Zachary D. Carter reported in the Washington Post last week, ”According to the number-crunchers at Moody’s, a U.S. government debt default would destroy 6 million American jobs and send the domestic unemployment rate to 9 percent.”
While the debt ceiling is an issue of fiscal policy, the question of dealing with it is strictly political. With the Senate split 50-50 and the Democrats in the majority only because Vice-President Kamala Harris is the tie-breaking vote, Republicans are using the threat of the filibuster to hinder Democratic plans to pass infrastructure bills. Minority Leader Mitch McConnell has stated that no Republicans will vote for the bills, and will instead filibuster them. Assuming all 50 Senate Democrats remain united, attracting 10 Republicans to reach the 60-vote threshold to overcome the filibuster is a near impossibility. McConnell is forcing the Democrats into using another arcane Senate procedure, budget reconciliation, which by rule cannot be filibustered. The Democrats could then pass their ambitious infrastructure package 51-50 but face the limitation that reconciliation can only be used 2 times per year. Having used the procedure to pass President Biden’s American Rescue Plan earlier this year, using it to raise the debt ceiling means the Democrats would not have it available to pass their infrastructure package.
It is obvious McConnell thinks such obstruction will allow the Republicans to use the Democratic failures in their 2022 campaign messaging next year. Of course, there is another path the Democrats might use to circumvent the GOP’s stultified approach to legislating- eliminate the filibuster by changing the rules. Again, there is reluctance among some Democrats, principally Kyrsten Sinema (AZ0 and Joe Manchin (WV) to set aside a relic of a different era.
This is a bat-shit way to run a great Republic. Perhaps it’s time to be more creative and go all-out silly.
The Coin
In 2011, when Mitch McConnell decided to weaponize the routine act of raising the debt ceiling, some people brought up the fact that a little-known piece of Federal law* gives the President the authority to direct the Treasury to mint a platinum coin in any denomination. Thus was born the idea of minting a $1 trillion coin and depositing it into the government’s account at the Federal Reserve. I became aware of this when journalist Joe Weisenthal (@TheStalwart) began leading the cheerleading for it on Twitter in early 2012. Of course, Weisenthal, now at Bloomberg and a host of the Odd Lots podcast, is back at it. And he’s not alone. The coin has been the subject of op-eds and online discussion. House Judiciary Committee Chairman Jerry Nadler (D-N.Y.) openly supports it. And for the nay-sayers who claim that the coin amounts to creating money out of thin air and would lead to inflation, two points: One, how do you think money is created; and two, it cannot add to inflation since the money has already been spent.
Face it: If you have an absurd law such as the debt ceiling and ridiculous rules like the filibuster and budget reconciliation why not take advantage of the law and create the coin. It’s certainly no sillier than what Congress does now. As Ryan Cooper wrote in The Week, “It's legal, easy, and quick — and a heck of a lot more responsible than blowing up the world economy…”
*31 U.S. Code § 5112
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