More from Comments: Rev Up the Damn Printing Press Already!

July 23rd, 2011 at 11:17 pm

“Damn it…let’s print some money (or cash in on some seignorage) and be done with it!”

I’m not buying it and neither is Felix Salmon.  First of all, the debt limit includes debt the gov’t owes to itself.  That may not make sense, but IMHO neither does the whole ceiling concept itself—in other words, I’d be happy to raze the debt ceiling.

So regardless of whether the money comes from new investors, the Fed’s digital printing press, or seignorage (essentially the profit the Fed claims from minting currency), the Treasury simply can’t borrow more than $14.3 trillion until the ceiling is raised.  Or razed.

Baker/Paul (again, that’s just a weird combination) is different, because they retire gov’t debt.  We’re still bound by the same ceiling, but we now have more borrowing room.

Then there’s the 14th Amendment, which, as I’ve written before, seems to speak mainly to paying creditors.  My read is doesn’t help us in paying Social Security, the military, or to send out the 70 million checks due to go out Aug 3.

I don’t see any way around this other than House R’s grow up really, really fast.

 

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9 comments in reply to "More from Comments: Rev Up the Damn Printing Press Already!"

  1. azlib says:

    Compared to the alternatives (crashing the economy, massive cuts which cause a severe recession), printing more dollars may be a lesser evil.


  2. Stuart Levine says:

    You say: “Then there’s the 14th Amendment, which, as I’ve written before, seems to speak mainly to paying creditors. My read is doesn’t help us in paying Social Security, the military, or to send out the 70 million checks due to go out Aug 3.”

    While I am not an expert in this area, I would tend to agree except with respect to Social Security. It seems to me that the Social Security payments can still be made because the system can operate on its dedicated tax “income” (i.e., FICA and SECA taxes that will continue to flow in) and savings (i.e., interest income and payments from the redemptions of bonds held in the trust fund) for a good while.


    • pjr says:

      The Supreme Court might have something to say about the interpretation of the 14th amendment, which includes, within the concept of debt, military pensions for Union soldiers. Debt to those who provided goods and services, and debt to those who loaned money, may be encompassed by the amendment, as might be debt to those who paid insurance (FICA).


  3. John says:

    You’re not “buying” it… 8^) Good pun… 8^)

    I like etymology, and this is interesting to me (it really is on topic; bear with me).

    Our form of government is a republic, from the Latin “res publica,” literally “public issue.” From Wikipedia: “res publica usually refers to a thing that is not considered to be private property (or, in Latin: res privata, the private matters of the society), but which is rather held in common by many people.”

    A publican was a tax collector, during the Roman empire.

    Given that bit of etymology, what should one think of our so-called Republican Party? Newspeak? Anyone? Anyone?

    In the US Federal government, we have the legislative, judicial, and executive branches in our republican form of government – supposedly “co-equal.” The legislature has two bodies: Senate and House of Representatives. Republicans have a majority in the House: 240 seats of 435 – or 55%. Barely more than half.

    So the thing is, not only are that 55% of the House not the whole government, but that 55% are not even “republicans” in the original sense – they should be called “reprivatans,” since they oppose the very notion of taxation to support public affairs.

    In their view, they are grown up. They just have a different idea of what “grown up” means. And the rest of us should have no doubts by now about what that idea truly is. We’re fooled by things like our optimism, to believe anything else.

    For the rest of us, the issue here is how to sustain a true republic when those who call themselves “Republicans” flat reject the very idea of a republic. Ideologically, this is a situation no less serious, in my view, than the Civil War.

    Practically, it means getting around the power of that 55%, by any legal means necessary. But they’re not going to change their minds. If I believed as they do – truly, I’d not change my mind either.

    The 14th Amendment solution gets around that 55%. So does the idea of coin seignorage. Neither has to get the approval (before the fact) of that 55% – and that’s not just a good thing, it’s a necessary thing, and the most important thing – getting around that 55%. But it’s OK because it’s still valid governmental action, and that 55% is not the whole government.

    Nobody has to like either idea. But I, for one, don’t like having to resort to war to resolve issues, either. And a lot of this because we’re funding ongoing wars – and I might remind you that neither side has put those wars on the chopping block fiscally. Under the circumstances, is minting a few coins and hiding them in a vault really such a bad thing? How many young men and women does it kill?

    So it’s not crazy at all. Neither, might I add, is the ideological opinion of that 55%. I don’t agree with them; I think they’re wrong, but I don’t think they’re crazy. And they probably think I’m crazy for being a socialist, but we really just have legitimate differences of opinion, and unfortunately for all of us, our opinions can have consequences – life and death consequences.

    There’s a new term being applied to Internet business: gamification. Fiat money fits the term. Fiat money issued by a sovereign government – especially that of the US – is not a finite real resource – it’s like game points, e.g. airline miles or gas station “reward” points. It’s value is defined by the trust put into by the holders – think “consent of the governed.” Otherwise, it’s just a number, and its use is a game in the literal sense, not a cynical or sarcastic one.

    Republicans are changing the game. They can only do that if the rest of us let them. But we don’t have to let them. We have options.

    Al Capone wasn’t arrested, convicted, and imprisoned for his many crimes against. Tax evasion is what got him. Food for thought, I would hope.

    Felix Salmon has a right to his opinion. But he’s just a blogger, not even an economist; no significant credentials, no advanced degree, as far as I can tell.


    • John says:

      I very much like this idea also – from Calculated Risk via Brad DeLong:

      http://delong.typepad.com/sdj/2011/07/what-to-do-about-the-debt-ceiling.html

      But I would stress the point, that it’s not waiting for the 55% to act like “grown ups” – it’s getting around their power, which is and should be limited by other “checks and balances” of the federal government. And this kind of thing is not a failure of government – it speaks to the wisdom of its structure, of it being more than just a single instrument with absolute power.

      Hopefully, those who vote will “throw the bums out” in 2012, but we have to survive until then.


  4. Mitchell Freedman says:

    I wrote this over at Digby’s place, and I’ll say it here: Obama has cut his deal with Republicans. We knew for months there was this kabuki dance with Republicans, who promised their financial backers they would raise the debt ceiling.

    This means Democrats who hold any belief in the best values of the New Deal should say: Mr. President, you’ve made your deal with Republicans. Have the Republicans in the House majority vote for it. Then, the Republicans in the Senate can vote for it, along with their reliable-as-Republicans the Nelson Boys, Baucus, etc., and you can sign it. We’re not part of the conversation anyway, and we’re not part of your deal. You live with it. And you can run on it. With Republicans. Enjoy yourselves.”

    I do not fear the default any longer, not when the price is the destruction of the last two parts of any social safety net in the USA. Our leaders have failed us, and the only thing any sensible people should be discussing is who will run against Obama in the 2012 Democratic Party primary or as a third party. Staying with this Hooverite bum is a losing ticket no matter what.


  5. Steve Goldstraw says:

    The simple proplem is that Congress has passed 2 absolutely contradictory mutual exclusive LAWS. One law MADATES the executive to SPEND a certain amount of money. The second MANDATES that they can only borrow to a certain limit. SOLUTION: Whenever there are 2 laws that mandate contradictory actions the executive is free to interpret AND to execute their choice.


    • Dick C says:

      GWB would have used that “free to interpret” suggestion in a heartbeat… and would have probably been praised for it.


  6. Dick C says:

    “Raze the Debt Ceiling!” There’s something for t-shirts and bumper stickers.


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