To coin or not to coin, that is the question
A lot can go wrong with a platinum coin
By Ezra Klein, WashPost, Updated: January 11, 2013
Jonathan Bernstein and Paul Krugman both have thoughtful responses to my case against minting a platinum coin to solve the debt ceiling. Reading their replies — and talking Thursday with Bloomberg View’s Josh Barro — has helped clarify the issue for me.
Let’s start with where we agree: Going over the debt ceiling would be horrible. I am not, in any way, arguing for complacency in the face of that threat. Nor do I think we should go over the debt ceiling to prove a political point. My argument is not, as Krugman suggests, a “shock doctrine” argument. If it came off that way, that’s merely my poor writing. My view on breaching the debt ceiling is clear: It would be a disaster of unbelievable proportions.
Where we disagree is in where we see the dangers. Supporters of the coin seem oddly sanguine that we can mint this coin and use it to pay off our debts without matters going horribly awry at some juncture. They’re confident that the political backlash will be manageable, the Federal Reserve cooperative, the technical challenges feasible, the market reaction calm, and the legality unquestioned or at least not judiciable. Moreover, they’re mostly confident that once the coin is used, Republicans will fold on the debt ceiling, recognizing their leverage gone. At that point, we can melt the coin, no harm done. Few seem to be contemplating a scenario in which we embark on a platinum-coin-based approach to funding the government in perpetuity, perhaps realizing that under that scenario, the problems compound mightily.
At the same time, supporters of the coin are quite fearful that Republicans are indeed as extreme as some (though not all) of their public rhetoric would suggest. They think that Republicans really will push the country into default rather than, say, fold and choose to fight over the sequester or the continuing resolution. They think the media will report on the debt ceiling as if it’s the fault of both sides, obscuring the lines of accountability. They think the business community either won’t involve itself or won’t be able to move the Republicans.
(More here.)
Jonathan Bernstein and Paul Krugman both have thoughtful responses to my case against minting a platinum coin to solve the debt ceiling. Reading their replies — and talking Thursday with Bloomberg View’s Josh Barro — has helped clarify the issue for me.
Let’s start with where we agree: Going over the debt ceiling would be horrible. I am not, in any way, arguing for complacency in the face of that threat. Nor do I think we should go over the debt ceiling to prove a political point. My argument is not, as Krugman suggests, a “shock doctrine” argument. If it came off that way, that’s merely my poor writing. My view on breaching the debt ceiling is clear: It would be a disaster of unbelievable proportions.
Where we disagree is in where we see the dangers. Supporters of the coin seem oddly sanguine that we can mint this coin and use it to pay off our debts without matters going horribly awry at some juncture. They’re confident that the political backlash will be manageable, the Federal Reserve cooperative, the technical challenges feasible, the market reaction calm, and the legality unquestioned or at least not judiciable. Moreover, they’re mostly confident that once the coin is used, Republicans will fold on the debt ceiling, recognizing their leverage gone. At that point, we can melt the coin, no harm done. Few seem to be contemplating a scenario in which we embark on a platinum-coin-based approach to funding the government in perpetuity, perhaps realizing that under that scenario, the problems compound mightily.
At the same time, supporters of the coin are quite fearful that Republicans are indeed as extreme as some (though not all) of their public rhetoric would suggest. They think that Republicans really will push the country into default rather than, say, fold and choose to fight over the sequester or the continuing resolution. They think the media will report on the debt ceiling as if it’s the fault of both sides, obscuring the lines of accountability. They think the business community either won’t involve itself or won’t be able to move the Republicans.
(More here.)
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