(Article originally published here on October 18, 2013)
United States Note by Wikipedia Commons
The article below was originally published when the last debt ceiling had just passed in October, 2013, after being published during the previous debt ceiling of January 2013.
Yet, here we are again, just a week or so away from the next debt ceiling "crisis,' conveniently occurring just about the time of an off-presidential election that no one is even talking about (some local issues can be very important and with so few people voting, your vote will count more than usual).
This time around, new bills have been introduced on both sides of the aisle to pay our debts, but nothing more. These include HR692 introduced by Rep. Tom McClintock (R-CA, 4th district), which has been given an 11% chance of passage by govtrack.us since every Democrat and the president will oppose it on the grounds that it pays for no programs, but "pays China before us" as one commentator put it.
Another bill HR3807, by Rep. Mike Honda (D-CA 17th district) would raise the debt ceiling and is given 0% chance of passage in the Republican controlled House.
But there are still other ways, ways that do not require changing the debt ceiling, but allow for getting around it, permanently, so that the country is not subjected to cowardly Congressional (because Congress lacks the courage to pass spending cutting bills that they know would be universally unpopular, and almost certainly economically stultifying), back-door blackmail. Read on...
(Article originally published here on January 22, 2013)
*** Update October 17, 2013***
Well, we narrowly escaped a debt default...again. But like the Terminator, the debt ceiling will be baaaccckkk... It'll be back in January, in fact. so, it's worth reviewing the president's true options before then.
The following article was published last January, when it seemed like we were last going to hit the debt ceiling. I wish things had changed so that this article was dated and obsolete, but alas, here we are again. This is in spite of increasing evidence that the Founders believed the national debt should be paid, always and completely.
Others have testified before Congress that the president does not have the authority to violate Congress' debt ceiling, but this analysis is incomplete.
The only things that have changed is that there are now even more commentators insisting that the president has options to defeat a recalcitrant, dysfunctional, contradictory, Congress that may, in a matter of days, violate the constitution by not providing the means necessary to pay the country's existing bills. However, the president (and not Congress) is ALREADY violating the constitution by subverting the will of Congress in paying for some authorized things and not others, and needs to stop immediately, before his credibility is eroded even further by nit-picking, sound-biting, Congressional Representatives who stage photo-ops at closed WWII memorials, while allowing children on food stamps to go hungry off camera.
Whether it is with a Trillion Dollar Coin - or, as Joe Firestone has recently suggested, in an over-reach that borders on the ridiculous, while still being technically legal, a $60 Trillion dollar coin - or, as more reasonably suggested more recently by Rep. Alan Grayson but originally by former Representative Ron Paul, simply canceling $2T of the Fed-held debt we owe to ourselves, the president has several good and perfectly legal options.
For more details on other options and their justification, even necessity, read on....
From January, 2013
While it looks as though the Republican-controlled Congress will back down and postpone the debt ceiling for at least three months, and then take a self-imposed pay freeze if no budget is approved after that (undoubtedly a much more popular option among voters who give Congress just a 14% approval rating, near the lowest in history, 10%, measured just last August - despite being in violation of the 27th Amendment prohibition against any law that increases or decreases the salary of members of the Congress from taking effect until the start of the next set of terms of office for Representatives), this represents yet another in a series of lost opportunities for our DINO president.
The joke of the self-imposed debt ceiling is that it has been raised dozens of times since first being self-imposed in 1917, making the "ceiling" more of the "next floor in the debt tower." (UPDATE - a recent NY Time editorial makes it clear that the president can just ignore the ceiling altogether: click here). The newest proposal to go under the ceiling is a trillion-dollar coin (TDC). This is a workable, if guffaw-inducing, somewhat wonkish, solution to the problem. Support has come from Paul Krugman, ex-regulator of the 1990s S&L crisis Bill Black, Blogger Joe Firestone, Economist Dr. Michael Hudson, MMT co-founders Randall Wray and Warren Mosler, Ellen Brown, former head of the US Mint and co-author of the platinum coin law, Philip Diehl, Representative of NYC's 10th congressional district, Jerry Nadler (I spoke to Nadler recently at a political gathering and explained why Greenbacking would be an even better idea -- see below), and many others. There is a loophole in the commemorative coin Act of 1982, which allows coins of any amount to be minted, even though the rest of the act preventing coins from being minted in other amounts is certainly unconstitutional and not even practiced. We have had commemorative coins worth thousands of dollars in the recent past, well after the 1982 act, in fact. Commemorative coins have been quite a lucrative sideline for the mint, generating millions in seigniorage (the face value of a coin minus the cost of producing it) value for our Treasury. This is very much what the practice of creating commemorative coins was intended to do, and should put to rest the obsolete and fallacious argument that face value of coins has anything to do with their inherent value.
The coin would be issued by Treasury, and under the coinage act of 1792, and many revisions beyond, we don't have to pay a private bank for the "privilege" (read: RIGHT) to make coins (thank goodness). What this would do, of course, and what terrifies the banks, is to show how money is actually created, why we can't "run out of money" and why the private central bank or its member banks should not have a monopoly to "coin Money." Article 1, Section 8 of the Constitution gives that power to Congress, and never mentions banks. Plus it would show that wealth inequality is a result of a money monopoly, not because those with all the money are so "smart" or "productive." They are mostly neither of those things, just in the rent-seeking class, able to extract wealth from the productive class through legal and financial manipulation, while doing nothing productive themselves.
Furthermore, some form of direct money issuance by Treasury is actually REQUIRED constitutionally, when Congress blocks the funds necessary to pay for what it has already approved. From Article 12, Section 9, clause 7:
"No Money shall be drawn from the Treasury, but in Consequence of Appropriation made by Law; and a regular Statement of Account of the Receipts and Expenditures of all public Money shall be published from time to time."