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Why does Congress Nickel and Dime the Debt when it could just Dollarize it?

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A new bill, H.R. 2535: the American Liberty Coinage and Deficit Reduction Act of 2013, has just been introduced (June 27, 2013) by Rep. Garland "Andy" Barr [R-KY6], a rare centrist Republican, according to Govtrack (his ideology score is barely to the right of the Democrats).   This bill, which has a 27% chance of making it out of committee, but only a 4% chance of being enacted, according to Govtrack is potentially game-changing for the economic status of the Republic.  

Here is the full title:
"To cause increased seigniorage for the United States Mint leading to enhanced revenue to the Treasury and increased offsets to annual budget deficits in perpetuity, to require the Secretary of the Treasury to mint and issue coins commemorating and celebrating American Liberty, "The Union", and the American values and attributes of freedom, independence, civil governance, enlightenment, peace, strength, equality, democracy, and justice, to provide for the continued and concurrent production and distribution of existing presidentially-themed circulating and numismatic coinage designs, and for other purposes."

 

The reason this bill is so important has nothing to do with commemorations and celebrations of liberty, etc. though it would do all that, not symbolically, but in actual fact.   From section 2, paragraph 3 of this 15-page bill:

(3) During the 10 years of the 50 State Quarters Program, the cumulative production of quarter dollars exceeded 34,000,000,000, representing a 136 percent increase in quarter dollar production as compared to the cumulative 10-year period immediately preceding the program. This enhanced production level of quarter dollars resulted in increased seigniorage revenues of approximately $3,000,000,000 and, therefore, an equal reduction in the budget deficit.

 

Wikipedia defines seigniorage as "the difference between the value of money and the cost to produce and distribute it."

 

The bill states, in clear, unambiguous language, that if Congress passes this bill, it can directly create -- via Treasury, specified later in the bill -- coins valuing $3B "and, therefore, and equal reduction in the budget deficit."    Progressives may not agree with the deficit reduction emphasis of the bill, believing instead in the Keynesian idea of deficit-spending during times of economic contraction, but there is a an even larger issue at work here, whether Rep. Barr knows it or not.  

 

It is an issue of monetary sovereignty.  

 

What this bill would do, at least for coins, is firmly re-establish Congress' right, under Article 1,Section 8, Clause 5, to "coin Money" (case structure in the original document, and important, as we shall see later).   From the beginning of the Republic private banks have attempted, and often succeeded, in wresting this power from Congress by establishing private Central Banks such as the First (1791-1811) and Second (1817-1836) National Banks of the United States.   President Jackson, who loathed banks, desolved the Second National Bank in 1836, paid off the entire national debt for the first and last time, but did not avail himself of the Constitutional right to "coin Money," thereby plunging the United States into one of its deepest depressions in history, caused by deflation of the money supply.   It fell to his successor, president Martin Van Buren, to partly reverse Jackson's monetary policies and issue enough coinage to begin to lift the country out of its depression.   However, he only issued new money in species (gold), a compromise effort that finally created an independent Treasury in 1840, for a time, though the new money itself was not issued until 1843, 2 years after Van Buren had left office.

 

It fell to president Lincoln, acting under emergency conditions of the Civil War, when the North was nearly bankrupt, and the New York banks wanted 24-36% interest, to create truly sovereign paper money for the first, and so far, last, time, in the form of United States Notes.   This new and thus far, unique, form of debt-free legal tender money, constituted up to 40% of the currency ($450m) at a critical time in the Civil War when, as now, the banks private monopoly over money creation threatened to strangle the Republic.   The Supreme Court, in what came to be known as the Legal Tender cases, eventually concluded, in Julliard v. Greenman (8-1), that the federal government was authorized to create paper money as well as coins.   Although this ruling gave the right under the "borrowing clause," in fact the Greenback money was never repaid and was actually excluded from all Treasury Debt reports.   Greenbacks were officially withdrawn from circulation only in 1996, and remain our country's longest-lasting form of currency.   They can still be purchased as collector's items on eBay for approximately twice face value.

 

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http://newthinking.blogspot.com/

Scott Baker is a Managing Editor & The Economics Editor at Opednews, and a blogger for Huffington Post, Daily Kos, and Global Economic Intersection.

His anthology of updated Opednews articles "America is Not Broke" was published by Tayen Lane Publishing (March, 2015) and may be found here:
http://www.americaisnotbroke.net/

Scott is a former President of Common Ground-NYC (http://commongroundnyc.org/), a Geoist/Georgist activist group. He has written dozens of articles for (more...)
 

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