by Linda Beale
Trillion Dollar Coins, Fourteenth Amendment Powers, Executive Duties versus the Zanies on the Right who Want to Send us to Economic Purgatory: Krugman on the dysfunctional politics of the US economy
Paul Krugman appeared on Bill Moyers PBS program Sunday night, talking sanely and rationally about the economy and why jobs (should) come first–and along the way noting how politics now dominates what and how we can talk about economic policies. See Moyers & Company, Paul Krugman on Why Jobs Come First (Jan. 11, 2013).
(While you are at the site, also watch Moyers’ essay, The Crony Capitalist Blowout, about the goodies that corporations got out of the fiscal cliff deal, which included everything from immediate expensing to the active financing exception and the R&D credit–all subsidies for big corporations that spent lots of lobbying power ensuring they would get them).
We have all kinds of reasons to know that the US is not Greece and will not be like Greece–we are a powerful economy, we have our own currency, and our debt is widely respected. Nonetheless, the right-wing radicals want to destroy the New Deal programs–Social Security, Medicare, and Medicaid, and they are willing to take the entire economy hostage to try to get their way. Just look at Pat Toomey in the clip Moyers shows on the show, threatening to put the US government into default unless the majority in Congress accedes to the will of the wacky minority.
That wacky minority hopes to use brinksmanship games around the debt ceiling to force progressives to yield on their dream target–decimating the New Deal.
The radicals on the right don’t really care about the debt ceiling–look at the way they willingly raised it throughout the Bush administration, even while viciously cutting taxes for the wealthy and creating huge deficits out of the surplus existing when Bush took office! They don’t really care about deficits. Look at the way they viciously cut taxes for the wealthy and spent on military budgets and preemptive wars when Bush was in office!
What they want is a radical restructuring of the economy in a way that will maintain and further the new gilded age, where bankers and private equity titans get rich off the labor of ordinary folk and ordinary folk find themselves eeking out a living at more or less the same rate they were before the Bush decades. The top 1%, as Moyers pointed out, have seen a 275% increase in incomes over the last decade (due in large part to the Bush tax cuts, but also to the misappropriation of productivity gains by the rich). Meanwhile, average American workers have seen their wages barely increase by $1.23 an hour…..not even keeping up with inflation.
Obama has said he will not negotiate on the debt ceiling. He must hold firm. There are various ways he can combat their “leverage”. The obvious one is that it is unconstitutional for Congress to pass laws that require spending, pass laws that raise too little revenue to pay for that spending, and then refuse to permit the government to borrow to make up the difference that they have legislated into being. That is irresponsible, and can be viewed as a violation of their constitutional obligation to ensure that the nation can pay for the debts it has already incurred. See Taylor, Top Dems Urge Obama to Weigh Unilater Debt Hike, Salon.com (Jan. 13, 2013). Obama is correct when he highlights this. And surely as President, his power reaches to borrowing to fund the government that he is obligated by Congress to run under the laws he is obligated to implement. He should make it clear that he is willing to risk impeachment to test that power rather than be held hostage by their petty, selfish games.
What about the “trillion dollar platinum coin” idea? This is the law that grants the executive the right to mint platinum coins of any denomination. Why not mint a few that add up to a trillion, and then pay it to the Fed and draw cash from the Fed based on that coin, to pay our bills? That is perfectly legal–Congress did not limit the use of the coins in the legislation authorizing them. If Congress can play brinksmanship games by threatening to put the US in default and destroy our economy unless the majority enacts the pet legislation of the minority to destroy the Social Security, Medicaid, and Medicare safety net programs, then the Executive should be willing to use every tool at his disposal to prevent that. Of course, Treasury today said it wouldn’t do that. See Anne Lowrey, Treasury Won’t Mint Coin to Defy Debt Ceiling, New York Times (Jan. 12, 2013). Stupid of them to do so, since it is clearly within the law. Obama cannot “wimp out” on this debt ceiling issue (to use Krugman’s term): if he lets the zanies in the GOP use these tactics to force changes in the safety net programs, he will have destroyed the Democratic party and the recovery from the Grand Recession in one fell swoop.
Remember, the analogy of US government debt to household debt is a silly one, just as is the analogy to Greece. The government is not a family; our income is not the fixed wages of a head of household; our debt may feel staggeringly large for ordinary people to comprehend, but it is not too large a share of our GDP and our cost-of-funds right now is incredibly low. We should borrow while the borrowing is good, to pay for the vital infrastructure repairs that need to be made and to ensure that we do not default on a key obligation to our people–the provision of a decent standard of living through measures that encourage job creation (by creating demand) and provide security against job loss and the vulnerabilities of old age and sickness.
The Peterson Institute is spending half a billion dollars to distort the public’s understanding of debt and deficits, in order to convince Americans that we should run the government like they run their households, in terms of amount of debt. But Peterson is a right-wing billionaire whose views are antiquated and wrong for the time. Keynes is the only one who has had it right, and we should listen to Keynes, not Friedman’s brute capitalism theories of a “free” market in which the wealthy control the assets and confiscate the rewards, not Peterson’s cacophonous sounds about debt.
Look again at Moyers’ program. He runs a tape where Lloyd Blankfein–head of Goldman Sachs, filthy rich, and one of the culprits of the financialization of the economy and the speculation that threw us into the Great Recession–talks about how ordinary people will have to give up on their expectations from Social Security and Medicare. Entitlements, he says, just can’t deliver what people want–we can’t afford it. This from a guy who has socked away millions garnered from the everyday lives of ordinary people. This from a person who has ridden the easy street rail line of subsidized profits for his banking firm (cost-of-funds extraordinarily low due to the government bailout; and subsidies in the code both internationally (active financing exception) and at home (the tax treatment of derivatives has been extraordinarily kind to banks in terms of sourcing and therefore taxability), etc. This from a person who has enjoyed a priviledged preferential rate of taxation on much of his income, lobbied for through the revolving door of Treasury officials and banksters and their attorneys.
No, Obama shouldn’t listen to the Blankfeins of the world, or the Norquists, or the Toomeys. He should turn a deaf ear to Mitch McConnell and to Rand Paul and all of those who insist that we have to keep funding the military-industrial oligarchy but that we can’t afford to keep funding the earned benefit programs that have made the difference between an intolerable standard of living and a decent standard of living for millions of Americans.