Debt Ceiling Blather

We got by the "fiscal cliff" without too much damage, though I think the agreement between the administration and the Republicans is damaging enough under the circumstances. The recovery is not yet self sustaining and any reduction in aggregate demand will not help. Right now we need more, not less government spending.

But cheer up - things could be worse. (As the old joke says, "so I cheered up and sure enough, things got worse!") Some Republicans are gearing up for another drive toward the cliff of default, the debt limit.

Let's be clear. The debt limit has nothing to do with controlling spending. That is done by Congressional action on taxes and appropriations. When the Treasury borrows, it only does so to pay the nation's bills already authorized by Congress. The debt limit makes no sense, and should be abolished.

Here are some thoughts by eminent economists the last time this reached crisis proportions. I share those thoughts.

But there is a new idea: the platinum coin. The Treasury would mint one or more platinum coins in very large denominations and deposit them with the Fed. It would then draw on those deposits to pay its bills. Paul Krugman explains the scheme.

Sound crazy? No more crazy than Congress telling the administration how much money to spend and what to spend it on; how much tax to raise and how to raise it, and then erect a barrier to actually paying the resulting bills. Now THAT's crazy!

It also violates a key provision of the Fourteenth Amendment to the Constitution, included with the precise reason of preventing Congressmen representing states of the former Confederacy from preventing the federal government from repaying loans that financed the Civil War. Now it is mainly the descendants of those former Confederates who are pushing the debt ceiling ploy.

I prefer the Constitutional route of telling these economic terrorists to go fly a kite. End this debt ceiling nonsense forever. My second choice is the platinum coin route.  The problem I see with that is, the Treasury's authority to strike platinum coins can be removed by legislative action.

Constitutional amendments are harder.

Just do it!