If you listened to our latest podcast (and I’m sure you didn’t), you could have heard what we at the Step Aside Show think of the whole trillion dollar coin debate. To quickly reiterate, the trillion dollar platinum coin would be minted and deposited at the treasury so that the treasury could continue to pay the government’s bills. Usually, the government would borrow the money to pay its bills, however our government has a “debt ceiling” and they can only borrow so much before congress votes to increase the ceiling. If you’re a regular reader of the blog, you know Dick Sharpe thought this was a great idea, a way for Obama to completely ignore the GOP and keep the government at work. I on the other hand disagree immensely.
The reason I disagree is quite simple: the debt ceiling exists simply so that the government (mainly the executive and legislative branch) can keep spending under control, so the government does not borrow too much too fast. In theory, this is a good idea because no entity should ever be in a position to borrow too much money in too short a period of time, that’s how people get into trouble. However, when it comes to government, this ceiling is merely symbolic. At the moment, the US government is running a budget built on natural deficits, meaning the laws the country has enacted up to this point cost the country more money than the government is taking in. The fault of this deficit can be blamed on A LOT of people, including past Presidents, wars, greedy bankers, the unemployed, poor/old people, etc. Regardless of fault though, the bills the government has to pay are simply that, bills that have to be paid. So, should the president really use a trillion dollar coin?
No. Why you ask? Because apart from being a completely ridiculous idea, it undermines the government greatly. It’s basically a huge overstep of the executive branch if the president can avoid hitting the debt ceiling simply by printing new money within the system. Some argue that printing the coin increases inflation, which depending on your economic philosophy may or may not be true. Let’s pretend that it doesn’t increase inflation (which I actually believe wouldn’t), it’s still a terrible idea because of the moral principle of the debt ceiling’s intentions.
Funny enough, two pundits I follow very closely – Jon Stewart and Paul Krugman – got into a bit of a spat over the whole ordeal. Stewart essentially takes the side that the idea is ridiculous while Krugman seriously believe Obama should absolutely use the coin to avoid economic problems. I bring this up for no significant reason other than the comedy involved.
Ultimately, Obama’s strategy thus far is perfect in my opinion, and if it wasn’t for re-election hopes in 2011 is something he should have done the first time he needed to raise the debt ceiling. Obama is telling Congressional Republicans that there will be no negotiation, and that if the Congress does not act and raise the limit, the government shutdown that will result will be on their hands, not the president’s. Many thought this was a huge bluff by the president, however I’m willing to bet it’s not a bluff Republican congress people are willing to call. Just today, news of a minor lift in the debt ceiling is being discussed, and leading the discussion is the Any-Rand-loving-conservative Paul Ryan. And if they don’t raise the ceiling, then let the government shut down and watch how fast the citizens of the country start to rise up against the government. It could be exactly what this country needs right now, even though it is certainly not what the economy needs right now. I’ll say that the state of politics in this country is far worse right now than the economy, and if one was in dire need of serious improvement, it’s our government. And what better way to improve government than pissing off a lot of citizens.