Once again, the Republicans are holding the economy hostage with the debt ceiling limit. Unlike civilized countries, the U.S., since 1917, must pass legislation authorizing the Treasury to issue debt. This means that we have the ridiculous situation of Congress approving a certain amount of deficit spending, yet refusing to give the executive branch (the Obama administration) the authority to sell bonds to finance that very same deficit spending. Awesome.
Historically, this has never been a serious threat: politicians will use this on occasion to grandstand about deficit spending and then raise the debt ceiling. Until 2011 that is, when the slavering Uruk-hai Republicans of the House used this weird quirk of U.S. government financing to extort the Obama administration. As Jon Perr points out, the debt ceiling crisis of 2011, cost several hundred thousand jobs and dramatically lowered consumer confidence, so, like it or not (and who in his or her right mind would like it?), this matters.
There has been a solution to this all along–you can read the details and responses to criticisms here–mint a $2 trillion dollar platinum coin (boldface mine):
An alternative strategy that sounds much more ridiculous but is arguably on firmer legal footing refers to 31 USC § 5112 – Denominations, specifications, and design of coins.
Section (k) of this statute states that the secretary of the Treasury “may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.” The intention here is to have the mint make a small number of platinum collector coins as a minor giveaway to platinum interests. But the plain text of the law appears to indicate that Secretary Geithner can mint a $2 trillion platinum coin, give it to the Federal Reserve, and then use that deposit as the backing to finance government operations.
This isn’t ideal–issuing federal debt is a very important tool for regulating interest rates and controlling overall lending activity. But if the Republicans are going to dick around with the full faith and credit of the U.S. of A., then Obama should just pull the trigger on this and do an end-run around these idiots.
We can not afford any more economic hostage taking.