The coin doesn't pass the laugh test. If you do it, regular people will never take you seriously again. Partly because Biden is about as close to a regular person as we've had be president in the last century, I'm pretty doubtful it will happen.
A related advantage of the Premium Bonds strategy (which you mentioned in your previous post) is that we can try it out now. While I tend to think that the Fed would accept the coin if the alternative were default, I'm fairly confident they won't accept the coin *in advance*. But as you persuasively argued earlier this week, Janet Yellen could sell premium bonds next week. Let's see how it goes!
Interesting stuff Josh. I would be interested in reading an update on your thoughts regarding why Republicans will not want a debt limit fight like this as a follow on to your post from a few months back.
I agree that Republicans will bear political pain for the problems caused by approaching or breaching the debt limit. But that pain will be felt by the people in swing seats, not the people in safe seats who are driving this strategy. Based on the speaker fight, it seems the safe seat hard liners are the ones with the clout in the conference. Additionally, they used their leverage in that fight to negotiate a compromise with McCarthy that enhances their leverage operationally. For example, apparently these folks are in the rules committee and can 'vacate the chair.' I don't know exactly how they can exercise power through those maneuvers, but they seem to think they can put a stop to any debt ceiling deal they don't like.
You may be right that the political fall out will be born by Republicans, but if the people who will bear that fall out are operationally powerless to avoid it, doesn't that mitigate the premise of your post?
Biden should just declare the debt limit unconstitutional and ignore it.
Appropriations are laws too. If it’s impossible to execute both laws the president has to choose which one to respect. And the 14th amendment says the debt can’t be repudiated. Should he let all the laws but one go unexecuted and the government itself go to pieces lest the debt limit be violated?
What do you think of Jacinda Ardern resigning? I'm not really asking for an NZ politics take, I'm just annoyed by the international reaction to what strikes me as a selfish decision. She clearly *had* been planning to run for re-election, but (like several of her parliamentary colleagues), she read the polls and decided not to run in an election she seemed likely to lose: theguardian.com/world/2023/jan/19/jacinda-ardern-shock-exit-imperils-her-legacy-and-her-party
This was unfair to her colleagues and supporters: the Labour campaign is all about her. The way she framed the decision was particularly off-putting. The line is that she's a young mother and people are rude about her on the internet so she "ran out of gas." The international press is eating this up, but if what's she's saying were true, the practical takeaway would be that young mothers are too emotional for big jobs like hers.
You say that "the existing set of 'extraordinary measures' is important for avoiding default crises, but nobody sees it as a substitute for eventually raising the debt limit and financing the government in the normal manner."
That seems true, but isn't that because everyone knows there's an inherent time limit to how long the existing set of extraordinary measures can be sustained? Would the same be true of premium bonds? We might want to think of them as a temporary measure, but in principle once Treasury decides to start issuing them, is there any reason it can't continue to do so indefinitely? And what happens then? Once the game of chicken goes away, and there is no longer some date by which Congress has to take action or face disaster, it seems like whatever political pressure there is on Republicans to reach a deal becomes much less. And given their zealotry, it's extremely hard to imagine them backing down under those circumstances. So if Treasury opts to do premium bonds, how do we avoid them becoming the new normal until the next Democratic trifecta?
If we pursued the platinum coin gambit, I have questions about the physical handling of it. Basically, what if it turned up lost or stolen? If the Fed no longer has possession of the coin, does the Treasury have $1 trillion of credit it can draw on to fund operations?
I assume the Fed would put the coin in the gold vault in the basement floor of its main building in Manhattan and would presumably have good security and it wouldn't disappear somehow. So I figure the odds of it getting lost would be as small as (at least) one ex-president and two ex-vice presidents all having misplaced highly classified documents at their homes at the same time.
It's honestly interesting to see the people who've become Coin dead-enders on twitter in the last couple of days.
I'm a Coin moderate - it very much seems like it's legal to me, but there's some obvious practical issues in co-ordinating with the Fed and getting past a federal judicial system that seems increasingly unbothered by the black letter text of the law. The premium bond approach seems cleaner.
But there's a few people who are incredibly committed to the coin specifically, seemingly beyond the instrumental question of if it solves the accounting problem the administration will find itself in. Doesn't seem to be a huge co-incidence that they're all hardcore perma-dove MMT people.
So, Why Not the Coin?
The coin doesn't pass the laugh test. If you do it, regular people will never take you seriously again. Partly because Biden is about as close to a regular person as we've had be president in the last century, I'm pretty doubtful it will happen.
I think the real problem here is that not everyone likes mint. If we could Oreo a platinum coin, I think we would have greater public buy-in.
A related advantage of the Premium Bonds strategy (which you mentioned in your previous post) is that we can try it out now. While I tend to think that the Fed would accept the coin if the alternative were default, I'm fairly confident they won't accept the coin *in advance*. But as you persuasively argued earlier this week, Janet Yellen could sell premium bonds next week. Let's see how it goes!
Interesting stuff Josh. I would be interested in reading an update on your thoughts regarding why Republicans will not want a debt limit fight like this as a follow on to your post from a few months back.
I agree that Republicans will bear political pain for the problems caused by approaching or breaching the debt limit. But that pain will be felt by the people in swing seats, not the people in safe seats who are driving this strategy. Based on the speaker fight, it seems the safe seat hard liners are the ones with the clout in the conference. Additionally, they used their leverage in that fight to negotiate a compromise with McCarthy that enhances their leverage operationally. For example, apparently these folks are in the rules committee and can 'vacate the chair.' I don't know exactly how they can exercise power through those maneuvers, but they seem to think they can put a stop to any debt ceiling deal they don't like.
You may be right that the political fall out will be born by Republicans, but if the people who will bear that fall out are operationally powerless to avoid it, doesn't that mitigate the premise of your post?
Does anyone believe that once politicians get their hands on a trillion $ created out of thin air they wouldn't just use it and not replace it?
I think more likely the response would be I liked that, order another one!
Biden should just declare the debt limit unconstitutional and ignore it.
Appropriations are laws too. If it’s impossible to execute both laws the president has to choose which one to respect. And the 14th amendment says the debt can’t be repudiated. Should he let all the laws but one go unexecuted and the government itself go to pieces lest the debt limit be violated?
Why not? who’s going to stop him?
What do you think of Jacinda Ardern resigning? I'm not really asking for an NZ politics take, I'm just annoyed by the international reaction to what strikes me as a selfish decision. She clearly *had* been planning to run for re-election, but (like several of her parliamentary colleagues), she read the polls and decided not to run in an election she seemed likely to lose: theguardian.com/world/2023/jan/19/jacinda-ardern-shock-exit-imperils-her-legacy-and-her-party
This was unfair to her colleagues and supporters: the Labour campaign is all about her. The way she framed the decision was particularly off-putting. The line is that she's a young mother and people are rude about her on the internet so she "ran out of gas." The international press is eating this up, but if what's she's saying were true, the practical takeaway would be that young mothers are too emotional for big jobs like hers.
You say that "the existing set of 'extraordinary measures' is important for avoiding default crises, but nobody sees it as a substitute for eventually raising the debt limit and financing the government in the normal manner."
That seems true, but isn't that because everyone knows there's an inherent time limit to how long the existing set of extraordinary measures can be sustained? Would the same be true of premium bonds? We might want to think of them as a temporary measure, but in principle once Treasury decides to start issuing them, is there any reason it can't continue to do so indefinitely? And what happens then? Once the game of chicken goes away, and there is no longer some date by which Congress has to take action or face disaster, it seems like whatever political pressure there is on Republicans to reach a deal becomes much less. And given their zealotry, it's extremely hard to imagine them backing down under those circumstances. So if Treasury opts to do premium bonds, how do we avoid them becoming the new normal until the next Democratic trifecta?
If we pursued the platinum coin gambit, I have questions about the physical handling of it. Basically, what if it turned up lost or stolen? If the Fed no longer has possession of the coin, does the Treasury have $1 trillion of credit it can draw on to fund operations?
I assume the Fed would put the coin in the gold vault in the basement floor of its main building in Manhattan and would presumably have good security and it wouldn't disappear somehow. So I figure the odds of it getting lost would be as small as (at least) one ex-president and two ex-vice presidents all having misplaced highly classified documents at their homes at the same time.
When are you going to get Joe Weisenthal (Twitter's preeminent platinum coin liker) on the pod to talk about the coin?
It's honestly interesting to see the people who've become Coin dead-enders on twitter in the last couple of days.
I'm a Coin moderate - it very much seems like it's legal to me, but there's some obvious practical issues in co-ordinating with the Fed and getting past a federal judicial system that seems increasingly unbothered by the black letter text of the law. The premium bond approach seems cleaner.
But there's a few people who are incredibly committed to the coin specifically, seemingly beyond the instrumental question of if it solves the accounting problem the administration will find itself in. Doesn't seem to be a huge co-incidence that they're all hardcore perma-dove MMT people.