Right on the heels of the Jan. 2 fiscal cliff deadline will come an even bigger concern — raising the debt ceiling. Obama administration economists are seriously considering minting a trillion-dollar coin to settle the issue.
One can almost hear the collective groans emanating from deep within the bowels of the nation whenever “debt ceiling” is mentioned. The subject is as painful to contemplate as a root canal and colonoscopy in one — where one’s body is invaded at both ends. It is, however, as inevitable as the rising sun.
It’s pretty apparent that the White House doesn’t like talking about the subject. President Obama’s latest fiscal cliff proposal included a provision giving him absolute authority to raise the debt ceiling at will. Treasury Secretary Timothy Geithner, had a simpler answer — eliminate it altogether.
White House officials are contemplating two methods of dealing with the limit — invoking 14th Amendment provisions and minting a trillion-dollar coin.
Section 4 of the 14th Amendment states simply that the United States obligates itself to pay all legal debt it incurs. If it has to borrow funds in order to meet those obligations, so be it. The amendment provides in pertinent part:
Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.
Although it may be constitutional to invoke the 14th Amendment, it would also be something of a nuclear option. Every member of Congress from both parties would raise the alarm, and the general populace’s revolt would make the tea party protests of a few years ago seem like a meeting of the Ladies Quilting Society.
Neither the president nor his Treasury secretary has the authority to order the printing of money — that power rests with the Federal Reserve. The Treasury secretary does, however, have the power to mint coins.
The secretary could then authorize that one or more trillion-dollar coins be minted. As legal tender, the secretary could present them to the Federal Reserve to buy back a like amount in federal debt.
Wednesday’s edition of Business Insider actually endorses the trillion-dollar coin idea, arguing that it’s preferable to defaulting on our obligations. It sounds too cockamamie and hocus-pocus to me.
I’m a simple man who believes that neither printing currency nor minting coins will create wealth. Wealth is the combination of labor and raw materials to come up with something that is more valuable than its individual parts. The government can’t wave a magic wand to perform that trick — only business can.
I have a third suggestion. Instead of engaging in tortuous machinations to get around the subject, why don’t we deal with it like adults, the way we did way back in the old days — pre-2009.
For those who may not remember, the president would put together a proposed budget – a realistic budget — and present it to Congress. Congress then yelled, screamed, pissed and moaned until something came out that was equally distasteful to everyone.
What’s more unrealistic — my way or a trillion-dollar coin?
Read more at Business Insider.