New MSM Trillion Dollar Coin Wave Misses the Big Story: Drum and Yglesias

In my last two posts [1] I've been reviewing the new wave of mainstream posts and commentary on Platinum Coin Seigniorage (PCS) by way of providing background for making the case that the MSM are missing “the big story” about PCS. Thus far I've reviewed recent posts by Pethokoukis, [2] Wiesenthal, [3] and Carney, [4] and an MSNBC cable segment by Chris Hayes. [5] All four have looked at PCS in terms of the Trillion Dollar Coin (TDC) and its possible impact on the impending debt ceiling shakedown. None have viewed it from a broader point of view. Let's now look at the commentaries by Kevin Drum [6] and two from Matthew Yglesias here [7] and here. [8]

Kevin Drum

Drum presents his view of the theories that “. . . have been floating around. . . “ since last year's debt ceiling crisis including: the constitutional 14th amendment option; the platinum coin, the priority of legislation (that Congress has approved deficit spending since passing the latest debt ceiling implying approval of an increase in the ceiling); and the “you and whose army” theory that even if the President breaches the debt ceiling, no one could do anything about it because they would have no standing to sue. Here's what he says about the coin:

There's an obscure statute that authorizes the Treasury to mint platinum coins "in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time." Jack Balkin [9] suggests that the secretary of the Treasury could simply mint a $1 trillion platinum coin, deposit it at the Federal Reserve, and then write checks on it. I don't buy this one either. It's just too outré. It's the kind of thing that sounds cute to a blogger tapping away on his laptop, but there's no way an actual president would ever try anything so obviously childish.

A bit unfair, I'd say. Labeling using “outré,” followed an ad hominem using “a blogger” to discredit a serious proposal without arguing against it. Apart from the fact that being "a blogger" says nothing about the quality of one's argument in the first place, as long as Drum wants to appeal to authority rather than to reason, as a good "progressive" from Mother Jones should; Jack Balkin's not just “a blogger tapping away.” He's a Professor at Yale Law School; and the originator of the PCS idea, beowulf (Carlos Mucha), [10] is an Attorney. In addition, the most frequent blogging advocate for the PCS idea, namely me, is a Ph.D. in political science and a former university professor, before pursuing a long career in Washington, primarily as a researcher and consultant. Seems to me all three of us are further away from being just “bloggers” than Kevin Drum himself, who seems to me to be the one just “tapping away on his laptop.”

As for outré, one person's “outré,” is another person's solid new idea, it's not an argument against that idea. Drum got some pushback from readers about his treatment of PCS, and he then posted an update on it:

Several people have pushed back on my dismissal of the platinum coin ploy. I'm not a lawyer, but my sense is that this is so wildly contrary to the intent of the law, which was to allow the Treasury to issue commemorative and bullion coins, that a court probably would intervene if the president tried to pull this off. The other ploys are at at least minimally plausible, but this one is banana republic territory.

Drum can't resist the labeling without justification, can he? The Banana Republic Law is the debt ceiling law, and its use to extort concessions from a safety net that more than 2/3 of the American people want proves it. On the other hand, according to a Yale Law professor and many others who have looked at it, PCS is authorized by legislation passed late in 1995. [11] Any challenge to it on grounds of intent is highly dubious for two reasons.

First, the Courts generally don't try to interpret laws based on theories about Congressional intent. The Justices aren't collective psychologists who are expert at divining the intent of the Congress. They are expert, however, at interpreting what the text of a law says, and so that is what they stick to almost all the time. A challenge to PCS based on intent isn't something any Court is likely to take up.

Second, Drum gives the “you and whose army” theory with a fair amount of conviction, saying it is the strongest theory of all. But that theory applies in spades to PCS, if we consider that the possibility of using it is written into the law, and the only one with standing to challenge it is the Congress itself, which won't, because the Democrats have a majority in the Senate, and won't challenge the President. Again, the PCS option is stronger than the constitutional option from this point of view; because as long as the PCS and consol options are legal, the debt ceiling legislation isn't unconstitutional.

In another update, Kevin Drum agrees with the idea that the best option is to shut the Government down in chunks because the Republicans “would cave before long.” I suspect they would, but I think this option would still result in real damage to real people; while the PCS option avoid that damage. Perhaps Kevin, doesn't see this because he thinks a TDC wouldn't make any difference in the political situation in the longer run. However, if he thinks that, it may be because he, like the other mainstream bloggers, hasn't given any thought to variations of PCS that might change the political situation and move it in a new direction entirely. Drum is another MSM blogger who's supposed to be “progressive.” If that's true then why isn't he discussing how the PCS authority can be used to further broader progressive aims, rather than simply solve the debt ceiling crisis?

Matthew Yglesias

In his post on 12/06 Yglesias just refers to the TDC idea and to one his posts on it in 2011.

But resetting into a no concessions mindset, the White House has a lot of tools. Not only can he argue that the 14th Amendment obviates the debt ceiling [12] (which I would if I were him) or have the Mint create a couple of $1 trillion platinum coins [13] (which is weird, but on a sounder legal basis) he can use his control over the executive branch to make the lapse of borrowing authority as painful to Republicans as possible.

He says he prefers a 14th Amendment challenge to it; but then calls it both “weird” and on a sounder legal basis, which makes one wonder why it's “weird”? Why do many MSM bloggers seem to feel obligated to characterize PCS in negative terms, even as they grant that it is a legal option? Do they need to do this to keep their credentials as among the Very Serious People (VSP)?

In his post on 12/07, he says:

Why did Congress draft a statute that doesn't specify what denominations the platinum coin may be? I have no idea. But it's a gaping loophole in the basic monetary framework of the United States, and pretty clearly allows Secretary Geithner to at least temporarily evade the debt ceiling by financing the government through seigniorage. The administration officials to whom I've raised this point generally respond by chuckling. Kevin Drum offers what amounts to an incredulous stare argument [6] that this is undoable, "no way an actual president would ever try anything so obviously childish . . . so wildly contrary to the intent of the law . . . banana republic territory."

Maybe so. But such is the stuff of which great leaders are made. And there is precedent for it. In 1933, Franklin Roosevelt essentially broke the back of the Great Depression by taking the United States off the gold standard. As a matter of substantive policy that was much more radical than evading the debt ceiling. And as a procedural matter it was tricky. Did Roosevelt have the authority to do that?

Sort of! He issued Executive Order 6102 [14] under the terms of the World War I Trading With the Enemy Act. Is that what congress intended? Clearly not. FDR's Depression-era gold policy had nothing whatsoever to do with World War I or any other war. But it was on the books.

So Yglesias's attitude toward PCS is different from the other bloggers. He recognizes that it's legal and that a great President will use any law on the books that will help him do what's necessary at a particular time. And about PCS specifically, he says later:

I don't think it would be a good idea for the government to be routinely financed by coin gimmicks, but it's a much better option than the alternative of default or endless debt ceiling crises. Putting the platinum coin on the table is a good way of clarifying that whatever House Republicans say or do, default is not an option and no concessions will be made so they ought to save face and embrace the McConnell Principle. [15]

So, Matthew Yglesias wants to have the President tell Congress that whatever the Republicans do, he has the coin alternative to use to avoid the debt ceiling, and then rather than use it, negotiate something like the McConnell principle to avoid debt ceiling controversies in the future. But, why does he propose this? There are so many other alternatives, and this is such a trivial think to get in return for the PCS power, which is after all, the Ace of Trumps in this game.

-- The President could tell Congress that he has the coin alternative and insist that they repeal the debt ceiling legislation entirely or he will use it.

-- Or he could tell them nothing, and just use the coin power to mint a coin sufficiently large to buy all the Fed debt and to redeem all the Intra-governmental debts creating accounts at the Fed for the Trust funds. That would lower the debt subject to the limit to something like $9.5 T, making the debt ceiling issue a dead letter for at least a few years.

-- Or he could do something really radical like mint a $60 T coin, [16] and immediately start repaying the intra-governmental and Fed debts and all the other debt instruments, while leaving nearly $44 T still available to cover future deficit spending for 15 – 20 years.

Why wouldn't real progressives such as Matthew Yglesias claims to be, favor an alternative like that, since it changes the political context by removing the memes of “we're running out of money,” “SS and Medicare are fiscally unsustainable,” and “our grandchildren will bear the horrible burden of our enormous national debt,” from the political debate?

It's a puzzle isn't it?

Looking at the posts of Pethokoukis, Wiesenthal, Carney, Drum, and Yglesias, we're seeing certain common elements. None goes beyond discussion of PCS in the low trillions, and generally there's a focus on the TDC meme and its relationship to the debt ceiling.

Also, none is concerned with how the existence of PCS is related to the option of challenging the debt ceiling legislation by using the 14th Amendment. Chris Hayes's cable segment follows the same pattern.

An emerging recommendation from some of these posts is for the President to use the TDC option as a threat in the background of his negotiations with the Republicans and then settle with them on some arrangement that makes it much more difficult for debt ceiling crises to occur in the future. This is a very conservative and unimaginative approach to the present situation, and there's not a lot of difference of opinion among the MSM commentators. TDC is "weird" or "outre." It's probably legal. But it's bizarre. Use it as a threat to defuse the present situation. But, once there's a deal with the Republicans then put it back on the shelf, and go on with politics as before. Is that all we want to get out of the legislative authority for the Treasury to create seigniorage revenues by using the Fed's authority to create reserves in unlimited quantity?

The next one will discuss the Bradford and Plumer posts!

(Cross-posted from New Economic Perspectives [17].)