America is looking down the barrel of another possible self-imposed debt default. House Republicans, now effectively run by the most disturbed members of the Freedom Caucusare openly promising to take the full faith and credit of hosting the United States to extract massive concessions from President Joe Biden and his fellow Democrats.
Tea say the consequences of a breach are well documented. US debt is virtually the foundation of the world financial system. If the rest of the world comes to doubt its reliability, a major recession is likely, if not a devastating financial crisis.
Without the currency, the president would break the law one way or another.
However, there is one aspect of the debt limit issue that has received little coverage: it would be just as illegal to obey the limit as to ignore it. If the Republicans refuse to raise the debt ceiling, they will put the president in a bind: they will require him to spend, but they will prohibit him from borrowing the necessary money. Biden would have no way out, unless he opts for the platinum coin loophole. Without the currency, the president would break the law one way or another. It’s hard to see why he would choose the option that causes an economic crisis.
Let’s review the situation. Treasury Secretary Janet Yellen said that on Thursday the department will begin several accounting reorganizations to avoid defaulting on the debt ceiling, but it is estimated that the tricks will run out in June. Republicans have disagreed on a set of demands to rescue the world economy, but some die-hards have mentioned one dollar of spending cuts for every new dollar of debt, cut spending to fiscal year 2022 levels, revoke new funding for the IRS, and reverse abortion rights. Meanwhile, the House Republican Party is reportedly working on a payment prioritization plan that would defund everything except interest payments on the national debt, Social Security, Medicare, veterans’ benefits, and the military.
Basically, they want the Democrats to repeal all their hard-won legislation from last year, or shut down something like a quarter of the government, including “Medicaid, food safety inspections, border control and air traffic control.” by The Washington Post -indefinitely. But such measures would have to be approved by both Senate Democrats and Biden, who have dismissed any concession outright. It’s more, approved experts that prioritizing payments would be logistically impossible, given the sheer volume of payments the government makes every day.
On the other hand, during the lame duck session, Congress passed a $1.7 trillion spending bill that keeps the government funded through September, which Biden signed into law on December 29. That’s the legal link: Congress instructed the executive branch to operate the government at specified spending levels through the end of the fiscal year, but now refuses to give it the borrowing authority to carry out its own instructions.
If the debt ceiling is reached and the coin is discarded, then Biden must choose which legal violation he will commit.
All of this is why the famous platinum coin is Biden’s most legally defensible option, silly as it sounds. A 1997 law clearly bestows the treasury secretary the ability to mint platinum coins of some denomination, in part for the purpose of making profit for the government through seigniorage. If Congress says the president must spend, he can’t borrow, but may mint, then the way is clear for a rigorous legal. Mint a trillion or two in platinum coins, deposit them with the Federal Reserve, and voila, problem solved. From an economic point of view, it would be virtually identical to borrowing the money, and presumably at some point the ceiling could be raised and the spending in currencies replaced with normal debt.
However, the administration’s lawyers apparently disagree. Yellen has further said the currency is a “hack” that “compromises the independence of the Fed, fusing monetary and fiscal policy.” This is a weak argument in context – it’s hard to see why a hack that supposedly erodes the (very overrated) Fed independence would be worse than financial Armageddon.
But in any case, it is profoundly strange that both the administration and almost all mainstream media coverage treat the debt limit as a stiff legal hurdle, but do not accord the same treatment to the spending law. “Once the government exhausts its extraordinary measures and runs out of cash, it won’t be able to issue new debt.” Alan Rappeport wrote in The New York Times, as if it were a real physical mechanism that would forcibly prevent new loans. Nowhere does he mention that Biden would also be breaking the law if he doesn’t spend as mandated.
If the debt ceiling is reached and the coin is discarded, then Biden must choose which legal violation he will commit. Surely any sane person would choose the option that does not cause drastic and completely pointless damage to the global economy. That choice becomes even clearer when you consider that the debt ceiling itself is possibly unconstitutional under the 14th Amendment, what states, “The validity of the public debt of the United States, authorized by law… shall not be questioned.” ace President Abraham Lincoln argued when Chief Justice Roger B. Taney tried to stop him from jailing a man accused of treason during the Civil War, “All laws but one must go unenforced, and government itself will collapse unless one be raped?”
House Republicans, most of whom voted to overturn the 2020 electionthey are completely slaves to qanon lunatics. They are ignorant and insane enough to blow up the world economy so they can blame Biden or just revel in the resulting chaos and destruction. The idea that it could be a bipartisan vote, as Senate Majority Leader Chuck Schumer, DN.Y., said has defended, It is an illusion. Something like the platinum coin will most likely be necessary to avoid disaster. Biden must summon the courage to break the debt ceiling forever using his own power.