Sunday, May 13, 2012

Yglesias — Spring the platinum coin

House Republicans just reneged on the debt-ceiling deal, making a default in 2013 almost inevitable.
Read it at Slate
America's Looming Default Crisis
by Matthew Yglesias
(h/t Clonal in the comments)
The Obama administration, if it still exists, is going to have no choice but to insist on a “clean” increase in the debt ceiling and watch a terrifying game of chicken unfold. Even if one side does back down, it would only come at the eleventh hour. There’s considerable evidence from the last showdown that the mere uncertainty and anxiety did measureable harm to the economy, and people will be even more nervous this time around. And if we do go over the cliff, then nobody really knows what will happen—but it’s unlikely to be good. On occasion I’ve raised the possibility to administration officials of financing the government with large-denomination platinum coins, always receiving laughter in response. But if the president gets re-elected, that may well be the best option we have. Alternatively—though it seems wrong to use the irresponsibility and recklessness of his co-partisans as an argument for his election—we can just hope that Romney wins in November and spares us the trouble. [Emphasis added]

5 comments:

Dan Lynch said...

Interesting that Yglesias says he has discussed the platinum coin with people in the Obama administration.

So the WH knows it has an alternative to capitulation.

John Zelnicker said...

Yglesias seems to assume that with a Romney presidency there would be no fight over the debt ceiling, but doesn't give any reason to believe that's true. The Republican leadership had a hard time getting the Tea Party reps in line last year. What is there to indicate that next time would be different?

Winston Smith said...

@John Zelnicker

Yes, a government under Republican leadership would be different. "Austerity" would be out the window on Day 1, with new tax cuts for the rich on offer. Suddenly, they too would cry "growth." Only they see no difference between economic growth driven by aggregate demand and investment, and corporate profit growth driven by internal redistribution upward. So they would simply do the latter by cutting taxes for the rich and cutting services for everyone else.

beowulf said...

"On occasion I’ve raised the possibility to administration officials of financing the government with large-denomination platinum coins, always receiving laughter in response. But if the president gets re-elected, that may well be the best option we have."

Hmm, what does this remind me of?
Oh yes...
About 11 years ago, James K. “Jamie” Galbraith recalls, hundreds of his fellow economists laughed at him. To his face. In the White House....
“I said economists used to understand that the running of a surplus was fiscal (economic) drag,” he said, “and with 250 economists, they giggled.”

http://www.washingtonpost.com/business/modern-monetary-theory-is-an-unconventional-take-on-economic-strategy/2012/02/15/gIQAR8uPMR_story.html

Has there ever been any question that nothing will come of this (trillion dollar coin and/or MM*) until a GOP administration decides to laugh last?

Jonf said...

"Has there ever been any question that nothing will come of this (trillion dollar coin and/or MM*) until a GOP administration decides to laugh last? "

No.

But I would like to be wrong.