Return of the Coin?
The last few weeks have seen at least two posts calling attention to the potential use of the platinum coin in America's political economy. The first to appear was Rob Urie's piece in Counterpunch provocatively titled: “The Trillion Dollar Catshit Coin” And the second was Mike Sandler's post in The Huffington Post called “Greece and the U.S. Senate: Economics for the 99%.
Let's begin looking at these with Sandler's effort. He reports on two challenges to austerity. The first is from Syriza's victory in Greece and its promise to Greek voters that it will end austerity. The second:
The austerity mindset faces a new foe in the U.S. Senate as well. The re-shuffle of the last U.S. election that put austerity-minded Republicans in power has ironically resulted in a new anti-austerity economist being hired by Senator Bernie Sanders (I-VT) in the Senate Budget Committee -- Professor Stephanie Kelton of the University of Missouri-Kansas City. Professor Kelton is a proponent of Modern Monetary Theory (MMT), a very pro-stimulus economic approach. Her hiring represents the biggest step forward for MMT, since the PR coup of the Trillion Dollar Platinum Coin in 2013. At that time, Kelton reportedly created the #mintthecoin hashtag that was featured in columns by Paul Krugman and others.
Sanders' hiring of Kelton is a break from the more conciliatory "balanced budgeting" approach of some Democrats, such as former treasury secretaries with ties to Wall Street and fiscally-conservative "deficit hawks." Kelton and her MMT colleagues go beyond the traditional Keynesian stimulus of short-term deficit spending. They seek to unleash the power of monetary policy to circumvent the scarcity mindset imposed on government action, perhaps even bringing the Trillion Dollar Coin back into the discussion.
Of course, Sandler means to say fiscal policy in the above, since MMT economics greatly favors reliance on fiscal, rather than monetary policy, in spite of the “monetary” in its name. But apart from that, he projects that we may see the platinum coin come back into prominence soon.
Rob Urie's article is even more focused on the likely return of the platinum coin. He says:
Some fair proportion of readers are already aware of the proposal to have the U.S. Mint produce a $1 trillion face amount coin to be deposited at the Federal Reserve and credited to the account of the Treasury Department to pay Federal bills. The $1 trillion would render the ‘debt ceiling’ debate irrelevant because it wouldn’t be funded with debt. It would demonstrate the contrived nature of the austerity ‘debate’ in Washington. . . .
This isn't quite right because money issued by the US Government is a liability of the Government; a debt in the sense that it is a tax credit that must be accepted in payment of taxes by the Government. However, had Urie said “interest bearing debt” rather than debt, then he would have been right, since Government issued money, cash or reserves, isn't interest bearing debt that counts against the debt ceiling.
Urie's point that using a $1 Trillion coin to render the debt ceiling irrelevant would demonstrate the “contrived nature of the austerity 'debate' in Washington . . . “ is however, right on. It's also true, in addition, that the larger the face value of the coin is, the more convincing would be the demonstration that the 'debate' is a contrivance to fool people. So, if that coin were to have a $100 Trillion face value, then the contrivance aspect of the debate would be clear to all but those willfully blind to the truth that the Constitution provides the Government with the authority to create as much money as it wants to create to fill the pubic purse.
Urie goes on:
What is useful in the platinum coin idea, and the central point of derision amongst protectors of the status quo, is if taken to its logical conclusion, there is no need for debt—government could create and distribute as much money as is needed via public policies in the public interest. . . .
And so it follows that:
What the platinum coin idea should generate is a robust dust-up over the use by plutocrats and their servants in government of contrived emergencies such as the debt ceiling and the ‘fiscal cliff’ to pose existing institutional arrangements as immutable facts in order to push ever more social wealth up the income and wealth ladders. . . . the direct issuance of money by the government would remove the rationale for the moral chide over government spending from deficit hawks and could explicitly establish serving the public interest as the goal of government spending.
Or as I've said elsewhere, using the platinum coin, especially with extremely high face values in the many trillions of dollars would be a progressive game-changer in politics, because it would remove the moral foundation of austerity in claimed scarcity of Government money. And the new standard for fiscal policy could not be either deficit reduction or budget balance, but always and everywhere would have to be whether Federal spending, deficit or otherwise, was intended to accomplish the public purpose. So, the platinum coin would enable the economics for the public purpose that John Kenneth Galbraith envisioned in the 1970s.
So, Urie ends with this very significant point:
Regardless of whether or not official Washington uses the idea, radical versions of the platinum coin idea should continue to be put forward. The broad frames used in political-economic debates in Western Capitols are designed to bring about outcomes in line with the interests of Western plutocrats. In fact, without effectively calling into question these frames the cognitive disjuncture needed to shift these institutions back toward the public interest won’t be found. The existing money system is at the heart of these institutions and it is not socially ‘neutral.’ And only by putting it forward as if it was does the existing order retain control of ‘the conversation.’
That is a conclusion I heartily endorse, and I would also add these thoughts on how to break the austerity frame.
– There are two key Congressional deadlines coming up that may be occasions for more fiscal crises that Republicans will use to try to impose further austerity on the nation. First, there will be a deadline, unknown at this time, for the Republicans to agree to raise or suspend the debt ceiling. Right now, the debt ceiling, suspended since February 14, 2014 is scheduled to be re-instituted on March 16, 2015. Shortly thereafter, the Treasury will have to take extraordinary members to continue to spend its mandated 2015 appropriations.
At this point, we don't know whether it will be a month or two or three until those measures and the Treasury's credits at the Fed are exhausted. But at that time the Government will be facing another shutdown and a hard negotiation with the Congress that may result in hurting millions. As has been the case since 2011, such negotiations can be avoided by minting a very high value platinum coin and depositing it at the Federal Reserve. Will the President do it this time?
The only chance that he will is if enough people know about and believe in the platinum coin option that the President comes to know very well that if he refuses to mint the coin with a high enough face value to remove the rationale for austerity from the playbook of Republicans and Democrats that have used spending cuts and austerity morality as their coin of the political realm, he will be unmasked entirely as the servant of the plutocracy that so many already think he is. There is no guarantee, of course, that he fears unmasking himself so much that this will provide the motivation needed to get him to move. But perhaps this, along with the humiliating terms the Republicans impose on him, will be enough to get him to do it. For if he does not, he will then be the proverbial lame duck, unable to mobilize the Democratic wing of the Democratic Party for anything he may want to do for the rest of his term.
– The second upcoming deadline is the date on which a 2016 budget resolution is due from the Congress. That date is April 15, 2015. Of course, the Republicans might postpone that and let the pressure build until the Government needs a continuing resolution to avoid a shutdown at the end of September or the beginning of October. Then again they will negotiate for more tax and spending cuts crying poverty all the while. Of course, a huge balance in the Treasury's spending account, would make it very hard for them to justify draconian cuts by pleading poverty. So, again, the platinum coin would break the framing of their argument.
– The platinum coin if used with extremely high face values introduces cognitive dissonance in the ideological belief that the Government is just like a large household that must live within its financial means, because this belief is inconsistent with the demonstration that the Treasury suddenly has, for example, $100 Trillion in financial resources to repay all its interest-bearing debt instruments as they fall due, and also “pay for” all deficit spending appropriated by Congress for many years to come without issuing any more interest-bearing debt instruments counting against the debt ceiling. This dissonance would kill the Government is like a household belief in short order. And then the political debate over spending and tax cuts would have be carried out on the basis of what serves the public purpose and then the red herring of financial poverty would be gone from our politics as we move into the election of 2016. But for all this to happen, the President will have to act. He will have to mint the coin.
So, will we see the return of the coin? I think the President will do what he can to stop its return to the public debate because it makes things much more difficult for the plutocrats to maintain their long-term mission to increase inequality and end political democracy.
Since this is the case, it will be up to us to bring the coin back again, and this time not to cease talking about until the public knows that there is no reason to cut or privatize Social Security or to have unemployment, or to tolerate the most stingy and inadequate social safety net among Western so-called Democracies, or to avoid addressing the many, many, problems that are currently casting a dark shadow across the future of the United States and our Grandchildren. It is the platinum coin and its use that will allow us to take back the frame of acting in the name of our children and grandchildren from the plutocratic austerians who have stolen that rhetoric from progressives. Time to take it back!
(Cross-posted from New Economic Perspectives.)