There is a lot of talk about minting platinum coins. And an increasing amount of talk about the Treasury issuing IOUs (Krugman calls them Moral Obligation Coupons). Jonathan Chait gives a good overview of these ideas. He notes that the coin option solves the debt ceiling issue forever, but it will surely cause the Republicans to react in an even crazier way. (I’m not sure we would notice—they’re already negligibly close to the asymptote.) The IOUs only solve the problem temporarily, but they have advantages like not seeming like such an outrageous thing as the coin and putting pressure on the Republicans from the business community.
I haven’t written at all about these potential solutions to the Debt Ceiling crisis because I can’t get beyond the fact that this is a non-issue and should be treated as such. Obama’s initial plan that he laid out in early December at the Business Roundtable is what we should be doing. We don’t negotiate with terrorist and they are a hell of a lot more rational than the Republican Party. Why are we negotiating with the House Republicans? Unfortunately, since those fine words at the Roundtable, Obama has shown that he is still 50 shades of weakness.
Noam Scheiber provides more evidence of this in The New Republic, writing, “It suggested that even if Obama plays his cards exceedingly well in the run-up to the debt-limit showdown, he could still come away with a worse deal than he deserves because of his willingness to make concessions in the closing moments.” He explains how the White House got a worse Fiscal Cliff deal by screwing Harry Reid. Read the article for the whole story—it is really interesting. Scheiber sums up:
Whatever the case, allowing your adversary to decide who he’s going to negotiate with is a terrible precedent to set. The evidence suggests that McConnell got a better deal from Biden than he could have gotten from Reid. But even if you disagree, McConnell himself clearly believed this to be true. The lesson he surely took from the White House’s sidelining of Reid is that Republicans will be rewarded with concessions if they hold out in the run-up to a deadline. With that in mind, McConnell will almost certainly repeat the exercise during the next round.
And that leads us to today where the Republicans have every reason in the world to think that Obama will blink. And that leads either to an economic catastrophe or Obama taking a bad deal. Well, bad for the American people. Based on the last four years, I would say that Obama is itching to cut Social Security and Medicare. That would cement him legacy as a Very Serious Person. And you know the definition of a VSP: someone who does no good at all by inflicting large amounts of pain on the poor. You know: a dick.
But whether Obama is a dick or just an incompetent (or both), it is all the same in the end. Right now, the American economy is on the verge of a decent recovery. This stuff—the Republican hostage taking and Obama’s anemic response to it—really does hurt us.
Update (10 January 2013 11:39 am)
Ezra Klein says we shouldn’t go with the platinum coin option. I agree:
