Friday, July 29, 2011

Debt Watch / Coin Trick: the Trillion Dollar Coin

One creative solution to the U.S. Government's debt-ceiling, which has bubbled up from the progressive MMT (Modern Monetary Theory) economic community, has been called the #trilliondollarcoin meme.

The looming August 2nd deadline for raising the debt-ceiling, and the stalemate in Congress make this plan a possible option for the Obama administration. It is a maneuver where the President can bypass the will of Congress and skip over the debt limit by having the Treasury mint a trillion dollar platinum coin. The idea, in one sense, is reminiscent of other Presidential end-runs like a recess appointment or a pocket veto. In this case you could call it finding monumental pocket change in the seat cushions at the Treasury.

At first, it might look like a magic trick because the Obama administration will be pulling a trillion dollar or even larger platinum coin out of thin air. However, if you study the details of the plan, you will find it does offer a quick and legal way to get around the debt limit by using what is called coin seigniorage.  Seigniorage (pronunciation guide) is a word derived from the old Anglo-French word seignurage, meaning the "right of the lord to coin money."  In this case, the legal right of the Treasury Department and the U.S. Mint to make high denomination platinum coins is the loophole that is being exploited.

Ed Harrison at the Credit Writedowns blog succinctly summarizes the plan:
The #trilliondollarcoin meme --
Just so you know what I am talking about, the idea is an end-run around the debt ceiling and it works like this:
  1. The Treasury mints a $1 trillion coin, or whatever amount is desired.
  2. The Treasury deposits the coin into the Treasury’s account at the Fed.
  3. The Treasury buys back bonds
  4. The retirement of bonds is an asset swap, no different from QE2
  5. The increase in reserve balances is not inflationary, as Credit Easing 1.0, QE 1.0, and QE 2.0 already have shown.
  6. These operations by the Treasury create no new net financial assets for the non-government sector
  7. The debt ceiling crisis is averted
Dave Winer at Scripting News called it "currency hacking" and added "I like it." That seems to be the consensus of most progressives who have studied the plan, they like it. Most Republicans and Tea Party people, you can be sure, will not be so keen on this trillion dollar coin if it does get minted.

The idea originated** from a writer named "Beowulf," who is a frequent commenter on lefty blogs like FireDogLake, New Deal 2.0, and also Warren Mosler's MMT blog. Beowulf posted an article fully explaining the idea on the Fire Dog Lake blog back in January. Since then that the idea has been kicked around on liberal and MMT blogs. Proponents of Modern Monetary Theory (MMTers), previously critiqued here, like the coin seigniorage idea because it dovetails nicely with their economic and monetary worldview.

In a January 20th blog post, MMT creator, Warren Mosler reviewed the idea and said:
As far as I’ve been able to determine, it does work operationally. It seems the US Treasury is already legally empowered to simply mint it’s own platinum coin in any denomination it wants and effectively deposit it in its Fed account, rather than sell bonds to the public to fund its Fed account.

This process doesn’t change actual govt spending, so doing it this way doesn’t add to inflation, nor does it change the fact that govt deficit spending adds income and net financial assets to the other, non govt sectors. It’s just that the new financial assets will simply be new reserve balances at the Fed, rather than new Treasury securities (which are also simply accounts at the Fed).

What issuing these coins does do is remove the legal need for the debt ceiling to be raised, and also reduce the amount of outstanding Treasury securities, which is what is called govt debt. So while both reserves and Treasury securities are, functionally, govt liabilities and differ in name (and sometimes duration) only, the headline rhetoric does make that distinction. So technically, this process eliminates the ‘national debt’ and removes any (misguided) notion of solvency risk.
The idea just started to get serious traction the last few days as the debt stalemate has grown more intense and partisan. Yale constitutional law professor Jack Balkin floated it as an option in a CNN op-ed yesterday (July 28th).

Today the idea has gone mainstream. It is covered by NY Magazine, CNBC, and The Economist. Even Nobel economist Paul Krugman of the NY Times has weighed in. Annie Lowrey of Slate discusses it as one of several gimmicks the government could use to resolve the debt-ceiling debacle.

Who knows if the Obama administration uses this idea or any of the others being floated. Lowery dismissed the idea by saying:
Coin seigniorage feels like a late-night TV scam, and could raise some sticky questions about who controls the money supply and whether the country is simply monetizing its debt.
Krugman added:
These things [like coin seigniorage] sound ridiculous — but so is the behavior of Congressional Republicans. So why not fight back using legal tricks?
However, coin seigniorage is not a scam. It is legal and so what if some people call it a legal trick. As for sticky questions about who controls the money supply, simple, the same people who control it now: the Treasury and the Fed. As for monetizing the debt, that might be next week's hotly debated topic.

This plan looks like it might be Obama's ace in the hole, whether you like it or not. If it is minted, perhaps the new trillion dollar coin will be called the Obama Buck or the Barack Buck.

This scheme might put some jingle in the jeans of every President, who needs some extra scratch.
via The Atlantic Wire
Here is a timeline of the platinum coin seigniorage idea progressing through the blogosphere:

Beowulf / Fire Dog Lake [Jan. 3, 2011]
Coin Seigniorage and the Irrelevance of the Debt Limit --
If you think about it, it does seem odd that the US Government is the monopoly supplier of US dollars and yet our politicians go through life thinking the government will run out of money unless it can borrow more. Of course that’s not true, the coins in your pocket are legal tender and yet were not issued against debt. They’re minted by the US Government, backed only by the gilt-edged credit of the American people, no one is paid interest on it and they don’t add a penny to the statutory debt. What’s more, the use of coins as legal tender is scalable, they could replace the use of Tsy debt sales...
Joe Firestone / Corrente [Jan. 5, 2011]:
Will He Say He Has No Choice or Will He Use Seigniorage?

Joe Firestone / Corrente [Jan. 19, 2011]:
President Obama Should Use Coin Seigniorage Now!

Warren Mosler / Mosler Economics [Jan. 20, 2011]:
Joe Firestone post on sidestepping the debt ceiling issue with Coin Seigniorage

Christopher C. Currie / [Mar. 21, 2011]
A Trillion Dollar Coin Act of 2011

Joe Firestone / Corrente [April 5, 2011]:
Use Coin Seigniorage Now!

Joe Firestone / Corrente [May 18, 2011]
President Obama: Stop Breaking the Law; Use Coin Seigniorage

wigwam / Daily Kos [Jun 27, 2011]:
How to Knock Two-Trillion Dollars Off the National Debt, Ending the Debt-Limit Crisis

wigwam / FireDogLake [July 5, 2011]
The Jumbo-Coin Option

mahilena / Corrente [July 6, 2011]:
HOLDING Debt Ceiling Hostage? No more! - Obama Payoff Debt producing equal value coins!and/or render Ceiling unconstitutional

Cullen Roche / Pragmatic Capitalist [July 7, 2011]:
Let's End this Debt Ceiling Debate with a $1 OZ $1T Coin

Joe Firestone / FireDogLake [July 7, 2011]:
The Debt Ceiling Is Not Unconstitutional, Right Now!

ubetchaiam / FireDogLake [July 7, 2011]:
A response to Wigwam and call to action

Scott Fullwiler / Credit Writedowns [July 13, 2011]:
QE3, Treasury Style

Felix Salmon / Reuters [July 14, 2011]:
The damage already done by the debt ceiling debate

Matthew Yglesias / Think Progress [July 15, 2011]:
Monetizing The Debt

Joe Firestone / Naked Capitalism [July 18, 2011]:
Why Matt Yglesias and Felix Salmon are Wrong About A Legal Way to Circumvent the Debt Ceiling Impasse

Joe Firestone / New Economic Perspectives [July 18, 2011]:
Coin Seigniorage: A Legal Alternative and Maybe the President's Duty

Tom Hickey / Mike Norman Economics [July 18, 2011]
Coin Seignorage Breaks into Mainstream

Jack M. Balkin / Balkinization blog [July 18, 2011]:
Obama's Top Secret Plan to Solve the Debt Crisis

Prof. Scott Sumner / The Money Illusion [July 19, 2011]:
Is coin seignorage Obama’s magic bullet?

Joshua Holland  / Alternet [July 20, 2011]:
There's a Solution to the Debt Fight That Could Avert Catastrophe -- Why Is Everyone Ignoring It?

Darrell Delamaide  / MarketWatch [July 20, 2011]
Smoke and mirrors with the federal deficit

Mark Kleiman / [July 20, 2011]:
Phony problem, phony solution

wigwam / Fire Dog Lake [July 23, 2011]:
Mark Kleiman calls Coin Seigniorage a “phony solution” to a “phony problem”

Inventing The American Left — A 'Dog's Eye View [July 27, 2011]:
Proof Platinum Coin Seigniorage — The Ultimate Left Cure For #Debtpocalypse?

Jack M. Balkin / CNN Opinion [July 28, 2011]:
3 ways Obama could bypass Congress — Editor's note: Jack M. Balkin is Knight Professor of Constitutional Law at Yale Law School.... — 
Very soon, Congress will raise the debt ceiling....

Sovereign governments such as the United States can print new money. However, there's a statutory limit to the amount of paper currency that can be in circulation at any one time.

Ironically, there's no similar limit on the amount of coinage. A little-known statute gives the secretary of the Treasury the authority to issue platinum coins in any denomination. So some commentators have suggested that the Treasury create two $1 trillion coins, deposit them in its account in the Federal Reserve and write checks on the proceeds...
Balkin discussion:
Capt. Fogg / The Reaction:
Billion Dollar Coins and Exploding Options — oh my!

Logan Penza / The Moderate Voice:
(Platinum) Pennies From Heaven (UPDATED) --
Ironically, a quick look at the legislative history indicates that paragraph (k) was modified to specify platinum coins could be so issued in 2000, by a Republican Congress...
Jonathan Chait / The New Republic:
The Coin That Will Save The World --
Somehow, I've missed out on a discussion of the coolest (and apparently legitimate) way to avoid a debt ceiling crisis...
Erik Hayden / Atlantic Wire: A $1 Trillion Coin Seems Like a Nice Idea

Paul Krugman / NY Times: Lawyers, Coins, and Money
Balkin related:
Matthew Yglesias / ThinkProgress:
The Platinum Coin Option --
This would, I assume, lead to a downgrading of American sovereign debt.
J. Bradford DeLong / Grasping Reality with Both Hands:
The President's Obligation to Take Care That the Laws Be Faithfully Executed Requires Him to Start Minting Large Denomination Platinum Coins --
I would furthermore say that by the failure of President Obama to have taken this step last month he has already violated his oath of office. One of the laws he is required to faithfully execute requires that he prevent the debt of the United States from being questioned. Yet by his inaction the debt of the United States is, right now, being questioned--and is being increasingly questioned more and more as time passes.
Upyernoz / rubber hose: platinum, baby, platinum

Mike Norman Economics: The meme that will not die! [yes, indeed]
** Update:

It now looks like the Trillion Dollar Coin Idea was first mentioned by Ellen Hodgson Brown. Here is an interview from December 2008 with Thom Hartmann where she discusses the idea. Also, have seen indications it might be mentioned in her book entitled: Web of Debt (1st edition, published 2007).

Thom Hartmann /
Transcript: Ellen Hodgson Brown, 09 December 2008 --
[Brown]: The solution is that the government itself should be creating our money supply. And that's where most people think money comes from. If you ask anybody on the street, who makes our money, they think it's the government. In fact it all comes from private banks.

[Thom]: Except for coins.

[Brown]: Except for coins, which is just a token. It's just a remnant of what they put in the constitution, which is that Congress shall have the power to coin money.

[Thom]: Right.

[Brown]: In fact I read somebody's opinion, I think it was somebody from the Mint said that you could solve the whole problem by printing, or stamping, ten one-trillion-dollar coins, I mean today, that's what it would be, and then just pay off the debt with these ten trillion dollars worth of coins. Because there's no, it doesn't say in the Constitution what the face value of these coins would be...

The bankers' Federal Reserve Notes and the government's coins represent two separate money systems that have been competing for dominance throughout recorded history. At one time, the right to issue money was the sovereign right of the king; but that right got usurped by private moneylenders. Today the sovereigns are the people, and the coins that make up less than one one-thousandth of the money supply are all that are left of our sovereign money. Many nations have successfully issued their own money, at least for a time; but the bankers' debt-money has generally infiltrated the system and taken over in the end. These concepts are so foreign to what we have been taught that it can be hard to wrap our minds around them, but the facts have been substantiated by many reliable authorities...
Ellen Hodgson Brown / [Dec. 8, 2008]
Sustainable Government: Banking for a "New" New Deal --
Only about 3% of the U.S. money supply now consists of “hard” currency—coins (issued by the government) and dollar bills (issued by the private Federal Reserve and lent to the government). All of the rest exists merely on computer screens or in paper accounts, and this money is all created by banks when they make loans...

The Constitution says “Congress shall have the power to coin money,” and that is all it says about who has the power to create money. It does not say Congress can delegate to private banks the right to create 97% of the national money supply in the form of loans...
2nd Update:

Ellen Brown joins the current discussion regarding the trillion dollar coin. The Market Has Spoken: Austerity Is Bad for Business [Aug 7, 2011] --
Another alternative was suggested in my book Web of Debt in 2007: the government could simply mint some trillion dollar coins.  Congress has the Constitutional power to “coin money,”  and no limit is put on the value of the coins it creates, as was pointed out by a chairman of the House Coinage Subcommittee in the 1980s..
Associate professor of economics at Wartburg College, Scott Fullwiler provided more detailed analysis at the New Economic Perspectives blog: Coin Seignorage and Inflation [Aug 3, 2011] --
the coin seigniorage option for coping with the debt ceiling—whether now or in the future—is both a legal option, and also one that will not have any inflationary side effects.

The amount of coin seigniorage employed is highly significant for several issues, including the following: whether we will have any federal debt in the future as measured by the debt ceiling or the ratings agencies; whether wealthy individuals or foreign nations will continue to receive risk-free "welfare" payments in the form of interest from the federal government...

one issue that it is not relevant to is whether coin seigniorage itself causes inflation. It just doesn’t. 

Wednesday, July 27, 2011

Debt Limit: Promises versus Reality

Here is a nice visual that compares promises made versus the reality that is delivered. The same applies to the debt limit debate.

via Slope of Hope

Monday, July 18, 2011

Tuesday, July 12, 2011

National 7-Eleven Day is a Lame Scam

National 7-Eleven Day is a scam
So what happens on July 11th (7-11), when you take a young child to a 7-Eleven Store for their free Slurpee that they have been promised over and over all day long on the radio as part of National 7-Eleven Free Slurpee Day. Nothing. Sorry, no free Slurpee for you, they said at two different 7-Elevens. This was because they were out of cups. When we offered to provide our own cup, the manager said, "sorry, we can't let you use your own cup." Our two visits to 7-Eleven's were at around 4:30pm in the afternoon. There were other people who came in after us, who were also turned away.

This scam promotion was officially for the "Oh Thank Heaven™ – It’s 7-Eleven® Day" celebration - apparently a celebration of national incompetence on the part of 7-Eleven. It was a lame, poorly executed promotion that left more ill will than good feelings about 7-Eleven. Promise free Slurpees, but don't provide any cups. One manager said they were simply not sent enough cups. Huh? Other patrons across the country were also told the Slurpee machines were broken or that particular store was not part of the promotion.

What a mess and a colossal waste of time. 7-Eleven, next time you have a celebration please keep it to yourself.

Here was the official press release:
It’s that time of year when the sun is hot and the Slurpee® drinks are free-zing – emphasis on the FREE part. July 11, aka 7/11, is the day that 7-Eleven, Inc., the world’s premier convenience retailer, celebrates its birthday and says “thank you” to its customers with free Slurpee drinks at participating stores. This year’s 7-Eleven® Day marks the company’s 81st birthday. Customers can pour their favorite Slurpee flavor in colorful, 7.11-ounce “Birthday” cups throughout the day, while cup supplies last.
Here was the promotion by 7-Eleven on Twitter:
Happy Birthday to us! Now have a drink with us! At participating stores!
Here was a tweet by 7-Eleven of one false promise about #FREESlurpeeDay:
@CaptainPaul123 We celebrate from midnight to midnight on 7/11/11!
And here was 7-Eleven's standardized tweet for all of the many complaints they received:
We understand your frustration, so let us help you. Please call 1-800-255-0711.
One disgruntled customer was right: "Not really sure if I would consider that an apology."

The 800 number, 7-Eleven provided, takes you to an automated telephone labyrinth that eventually directs you back to their website. A ten minute run-around, and another huge waste of time, if you wanted to voice a complaint. Thank you again, 7-Eleven.

And please, the "Let us help you," what a pitiful statement from 7-Eleven. I did not see the word "Sorry" anywhere in all of their damage control. So the bottomline is that there was no apology from 7-Eleven for screwing up the promotion. Put that in your Slurpee and choke on it.

One tweeter called the Slurpee disaster a "crime against humanity." That sounds about right in the middle of a hot summer day.

Also, by the way, did you know that Slurpee's are full of toxic chemicals? Some useful knowledge that was learned while putting this story together. So, maybe it was good luck after all not to consume a poison Slurpee.

NBC in Dallas-Fort Worth, which is where the 7-Eleven corporate headquarters is located, reported on the national scope of the screw-up:
7-Eleven Ran Out of Free Slurpees During Birthday Promotion --
That often small printed phrase “While supplies last” never meant more than it did Monday night, as many people around the country went to 7-Eleven stores only to find they were out of the free Slurpees the 84-year-old convenience store chain was offering on its birthday Monday, July 11.

Many disgruntled customers went to Twitter to complain, and even posted videos on Youtube of frustrated convenience store employees telling customers they ran out of cups, and out of the free Slurpees advertised.   NBC 5 even reported on the news that the Dallas-based company was offering the freebee Monday...
Here is a round-up of some of the many complaints and photos tweeted from across the country on a very sour National 7-Eleven Day:

Sam Bassford nicely sums up some of the frustration on Twitter:
Walked in this heat to get a free @slurpee. Something I've been doing since I was 17. Get there and the machines are all broken. @7eleven

@slurpee @7eleven Huge disappointment. A broke college student looking forward to free something and I was so thirsty when I was there.


@7eleven Thank you for the number but I've been on hold for 10 mins. I'm sorry 7eleven you are a loss cause today.

How can Free Slurpee Time be over? They said it would last all day.

photos via Dave Rubin
Dave Rubin / @Rubinville [New York City]:
Gonna walk over to the Upper West Side @7eleven for a free Slurpee. If they tell me this offer is void in NYC I'm gonna hurt someone.

Screw you, @7eleven. @Gawker @DailyIntel @NYPost #NYC #slurpee ,

@HegedusEricC @RobGeorge The Post needs to get someone to UWS @7eleven now! They're turning away dozens of kids on free Slurpee day!

@btenem Wow @7eleven really blows.
Lauren / @Steph_Mal [NYC]:
@7Eleven I went to one of your locations on 23rd street in NY...somehow the slurpee machine was out of service...I don't think that was fair
Timothy Silvernail / @TFSilvernail [Massachusetts]:
Went to 711 for my free slurpee and the guy tells me sorry we're out of cups tough luck... way to go #seveneleven
David Gabbay / @GabbayMagic [Los Angeles, California]:
Free slurpee day was a fail #711lame
Kat Cooper / @katcooper [East Lansing, Michigan]:
So sad that I waited all day for my @7eleven free slurpee, only to be told there were no more cups. #fail.
Joe Blaskiewicz / @joeyblas30:
@7eleven So why is every store out of cups so early? I didn't find 1 store w/o a sign "out of cups"
dave belicose / @davebelicose [Red Bank, NJ]:
@7eleven I just went to get a free Slurpee and the store owner said they were sold out. How can you be sold out of something that's free?

@7eleven Slurpees aren't my favorite. I just expected to get a free one @7eleven as advertised. Seems like a scam to get publicity.
Rob / @TheBananaconda [Novi, Michigan]:
MF @7eleven in Novi stopped giving away free slurpees. INCREDIBLY disappointed.
No more Birthday Slurpees - Sorry
photo via etapetillo
etapetillo / @etapetillo [Boston, Mass.]:
@7eleven I stopped by 7-11 for #freeslurpeeday but they stopped handing them out! #disappointed
Tanner Bergman / @TannerBergman [Oklahoma]:
@7eleven how come today at the 7eleven store on NW Expressway & Independence in Oklahoma City they told me they didn't have free slurpees?
John Mercado / @JohnEMercado [Michigan]:
Disappointed that @7Eleven stopped giving away free slurpees. What is this madness?! I demand an answer!
Kathelin Buxton / @KJBuxton [Broomfield, Colorado]:
#FREESlurpeeDay #Fail. @7eleven ran out of free slurpee cups. Sad day :(
Casey Harris / @pastasauce [Corvallis, Oregon]:
Did anyone find a 7-Eleven on Free Slurpee Day that was actually participating (didn't "run out" of cups, mix, etc.)?
Ren Reese / @renreese!/renreese:
Can't wait for "We ran out of the free slurpee cups at 3 of our Richmond locations" day to come again next year! #7Eleven

@7eleven I'm going to need a year's worth of free slurpee coupons to make up for this
Hannah Taddeo / @HannahcTaddeo [NYC]:
Lame @7eleven. Walk 10 blocks to get a free slurpee and instead get a grumpy employee saying they are out of cups when they're clearly there

photo via Christopher Williams:
Christopher Williams /  @ischriswilliams [NYC]:
Wth! It's all a lie! "were out of cups" yeah...right. (@ 7-Eleven w/ 8 others) [pic]:

Don't go to @7eleven. #freeslurpies is a lie. They claimed they were out of cups. Hah.

If @TacoBell gives free tacos, and @DunkinDonuts free iced coffees, @7Eleven should hold up their promise of #freeslurpies #boycott7eleven
CareaBearaSara / @DDubsCareBear [Denver, CO]:
@7eleven my store was out of free slurpee's )= (@ 7-Eleven) 
Nichole337 Official / @Nichole337_Talk [Utah]:
Went to get a free slurpee from 7 Eleven to find a sign on the door saying... "SORRY We are out of free slurpee cups no more free slurpees"
garrick_s / @garrick_s [St. Louis, MO]:
"Free Slurpee Day" @7eleven on the day #STL tops 100ยบ, and guess what? Slurpee machines all over town were suddenly broken. #FAIL
Joe Moore / @wxjoe [Silver Spring, MD]
@7eleven no free slurpees at 7-11 #34193 in silver spring, md. They had the cups but the employees mumbled that they weren't free...
Georgie S. / @georgiexoxo251:
@7eleven there were no more free slurpee cups left when i got there! grrr! now i'm sad and slurpee-less :/
No More Free Slurpee's on National 7-Eleven Day

photo via Jordan Knapp
Jordan Knapp / @RealKnappster [California]:
OUT. RAGEOUS. This is a crime against humanity #SlurpeeDay #fail
"We're Out of Free Slurpee's" video:

Tuesday, July 5, 2011

The 14th Amendment vs. The Debt Ceiling

“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.”
— Section four, 14 Amendment, U.S. Constitution
Does the "debt ceiling" violate the Fourteenth Amendment, and therefore is unconstitutional? The debate will get more heated as the August deadline approaches to increase the ceiling. Perhaps the U.S. Supreme Court will need to make the final call. Here are both sides of the question, plus more of the "debt ceiling" debate.

Bruce Bartlett / The Fiscal Times:
The Debt Limit Option President Obama Can Use --
The vast majority of those commenting on raising the federal debt limit are certain that Congress will act in time to forestall a debt default, which would occur if the Treasury lacked sufficient cash to pay interest due that day or to redeem maturing securities. The smart money says that Congress could not possibly be so stupid as to permit a default and will raise the debt limit just in time. Americans would likely agree, however, that some members of Congress really are that stupid. But here’s the good news: An arcane provision in the U.S. Constitution gives the president the edge... 
Furthermore, it’s worth remembering that the debt limit is statutory law, which is trumped by the Constitution which has a little known provision that relates to this issue. Section 4 of the 14th Amendment says, “The validity of the public debt of the United States…shall not be questioned.” This could easily justify the sort of extraordinary presidential action to avoid default that I am suggesting.

Some will raise a concern that potential buyers of Treasury securities may be scared off by a fear that bonds sold over the debt limit may not be backed by the full faith and credit of the United States. However, given that the vast bulk of Treasury securities are 3-month bills that will turn over many, many times before this issue ever reaches the Supreme Court, it is doubtful than anyone will be concerned about that. And the Federal Reserve could assure investors that it will always be a buyer for such securities.

People smarter than I am tell me that the Treasury has an almost infinite ability to avoid a debt crisis. I hope they are right...
Trader's Crucible: Debt Ceiling Unconstitutional -- This idea has legs....
USA Today: Obama and the debt: A 14th amendment solution?
Care2: Debt Ceiling Fight Setting Up Constitutional Crisis
FireDogLake: Cornyn on 14th Amendment, Section 4: “That’s Crazy Talk”
Examiner: Could President Obama pursue a ‘nuclear option’ on the debt ceiling?
TheAtlanticWire: The Case Against Ignoring Congress on the Debt Ceiling
HuffingtonPost: Chuck Schumer: 14th Amendment Option 'Certainly Worth Exploring'
Michael McConnell /
The Debt Ceiling Is Certainly Not “Unconstitutional” --
As we approach the debt ceiling sometime in August, with no agreement seemingly in reach, there is wild talk in Washington to the effect that the debt ceiling violates Section Four of the Fourteenth Amendment. The theory is bunk.

Section Four reads: “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.” According to some wishful thinkers, because it would be unconstitutional to default on the public debt, the Treasury must have authority to borrow any additional funds necessary to pay principal and interest on the existing debt as they become due. This means President Obama can ignore the debt ceiling and issue more debt, for the purpose of paying off past loans, without getting approval from Congress. If true, this would take the pressure off the President to agree to spending reductions in exchange for an increase in the limit.

Legislative control over incurring new debt is a fundamental aspect of separation of powers, going back to Parliament’s curtailment of the royal prerogative of borrowing in the wake of the Glorious Revolution of 1688. Article I, Section 8, Clause 2 empowers Congress, and only Congress, “to borrow money on the credit of the United States.” Without congressional authorization, the President may no more borrow money than he could make new criminal laws, declare war, or enact a new spending program. The “debt ceiling” is simply the limit Congress has imposed on how much money the country may borrow. The executive branch cannot constitutionally borrow a dime in excess of this amount...
More debate about the debt ceiling.

David Brooks / New York Times:
The Mother of All No-Brainers \ The Republicans have changed American politics since they took control of the House of Representatives. They have put spending restraint and debt reduction at the top of the national agenda. They have sparked a discussion on entitlement reform. They have turned a bill to raise the debt limit into an opportunity to put the U.S. on a stable fiscal course...

First Read /  First Thoughts: The Hangover
Paul Waldman / TAPPED:   It's Not a Faction, It's the Party
Steve Benen / Washington Monthly:   What a ‘normal’ GOP might do
Democracy in America:   The great deal they cannot take
Wall Street Journal:   Deficit Talks Focus on Taxes
Rob Long / Ricochet Conversation Feed:   David Brooks and the No Brainer
BooMan / Booman Tribune:   Wanker of the Day: David Brooks
Andy Sullivan / Reuters:   Debt limit deal not out of reach
Don Boudreaux / Cafe Hayek:   Ye Olde Question for Mister Brooks


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