Fixing the debt ceiling with a trillion dollar platinum coin

Make a silly demand, get a silly concession.

It's always interesting seeing an idea whose time has come, and today's seems to be the "platinum coin option" for the US.

America will, in two months, hit the debt ceiling. Again. The federal government will be denied, by law, the money it has been ordered to spend, by law. The three options facing it, in conventional wisdom, are a total government shut-down, a default on its loans, or the raising of the ceiling.

Since the first two are, frankly, unthinkable, the last is the only thing the administration can do. The Republicans know this, and are prepared to leverage their image as an unhinged party which would metaphorically kill the hostages to gain policy concessions.

But there is actually a fourth option. It's leveraging a quirk in the laws of the nation, but it is, by any reading of those laws, entirely legal. United States law says:

31 USC § 5112 (k) The Secretary [of the Treasury] may mint and issue platinum bullion coins and proof 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.

That is: at any time, the Treasury Secretary – Tim Geithner – can mint platinum coins in any denomination.

The other important aspect is how government spending is actually accounted for. The Treasury has a "bank account" at the Federal Reserve. When it pays someone, it's the Fed which hands the money over. When it needs money to put in that bank, it sells bonds at auction.

The debt ceiling is, in that simple version of the story, basically a ban on the Treasury selling any more bonds. As a result, it's bank account will run dry, and all hell will break loose.

But if Geithner mints a trillion dollar platinum coin, he can just waltz over to the Fed, deposit that, and the government's ability to spend is restored.

The plan sounds too good to be true, but it's really not. Joe Weisenthal has a bumper post debunking the biggest myths about it, but the trick to understanding it is to think of it as a legal, not monetary, trick. In terms of the real economy – outside of strange intragovernmental transfers designed to get around bizarre anachronistic limits – nothing has changed. The state is still taking money in through borrowing and taxing, and still putting money out through spending. It's just some of the borrowing is transferred from the Treasury, which does it under the authority it has to raise the national debt, to the Federal Reserve, which does it under the authority it has to borrow against assets it holds. Like, for instance, a trillion dollar coin.

This plan has been knocking around for years, now. It was first suggested during the last showdown, in 2011, by Pragmatic Capitalist's Cullen Roche. Weisenthal jumped on board, and then slowly so did others.

But in the last couple of days, there has been a White House petition calling for the President to do it, discussions in Congress, Paul Krugman mulling over the idea and a Huffington Post front page on it.

But the best argument has been Josh Barro's in Bloomberg. Barrow takes the legal quirks of the situation, and applies them to a political analysis. After all, although the President has the power to do it, doesn't mean it wouldn't be extremely politically damaging to actually go ahead with it. Barro's solution:

Hitting the debt ceiling isn't an option. It's no way to run the country, and Republicans know that. So, a debt-ceiling increase shouldn't count as a "concession," and it's nutty for Obama to have to give substantive policy ground to get one.

Monetizing deficits through direct presidential control of the currency, in lieu of borrowing, is also no way to run a country. It's silly, and it's perfectly legal. Agreeing not to do so is therefore the ideal "concession" for Obama to offer in return for Republicans agreeing to end the threat of a debt-default crisis.

Make a silly demand, get a silly concession. Perfect!

A non-platinum, single dollar coin. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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As long as Jeremy Corbyn's Labour opponents are divided, he will rule

The leader's foes have yet to agree on when and how a challenge should take place.

Labour MPs began plotting to remove Jeremy Corbyn as leader before he even held the position. They have not stopped since. From the outset, most regarded him as electorally and morally defective. Nothing has caused them to relinquish this view.

A week before the first major elections of this parliament, Labour found itself conducting a debate normally confined to far-right internet forums: was Hitler a Zionist? For some MPs, the distress lay in how unsurprised they were by all this. Since Corbyn’s election last September, the party has become a mainstream venue for hitherto fringe discussions.

Many MPs believe that Labour will be incapable of rebuilding its standing among the Jewish community as long as Corbyn remains leader. In the 1930s, Jewish support for the party was as high as 80 per cent. “They handed you your . . . membership just after your circumcision,” quipped the father in the 1976 television play Bar Mitzvah Boy. By the time of the last general election, a poll found that support had fallen to a mere 22 per cent. It now stands at just 8.5 per cent.

Corbyn’s critics cite his typical rejection of anti-Semitism and "all forms of racism" (as if unable to condemn the former in isolation), his defence of a tweet sent by his brother, Piers (“Zionists can’t cope with anyone supporting rights for Palestine”), and his description of Hamas and Hezbollah as “friends”. The Lab­our leader dismissed the latter remark as a diplomatic nicety but such courtesy was not displayed when he addressed Labour Friends of Israel and failed to mention the country’s name. When challenged on his record of combating anti-Semitism, Corbyn frequently invokes his parents’ presence at the Battle of Cable Street, a reference that does not provide the reassurance intended. The Jewish community does not doubt that Labour has stood with it in the past. It questions whether it is prepared to stand with it in the present.

MPs say that Labour’s inept response to anti-Semitism has strengthened the moral case for challenging Corbyn. One shadow cabinet minister spoke of how the fear of “enormous reputational damage” had pushed him to the brink of resignation. As the New Statesman went to press, Corbyn’s first electoral test was looming. Every forecast showed the party on course to become the first opposition to lose council seats in a non-general-election year since 1985. Yet Corbyn appeared to insist on 3 May that this would not happen, gifting his opponents a benchmark by which to judge him.

Sadiq Khan was projected to become the party’s first successful London mayoral candidate since 2004. But having distanced himself from Corbyn throughout the race, he intends to deny him any credit if he wins. Regardless of the results on 5 May, there will be no challenge to the Labour leader before the EU referendum on 23 June. Many of the party’s most Corbyn-phobic MPs are also among its most Europhile. No cause, they stress, should distract from the defence of the UK’s 43-year EU membership.

Whether Corbyn should be challenged in the four weeks between the referendum and the summer recess is a matter of dispute among even his most committed opponents. Some contend that MPs have nothing to lose from trying and should be prepared to “grind him down” through multiple attempts, if necessary. Others fear that he would be empowered by winning a larger mandate than he did last September and argue that he must be given “longer to fail”. Still more hope that Corbyn will instigate a midterm handover to the shadow chancellor, John McDonnell, his closest ally, whom they regard as a beatable opponent.

Those who are familiar with members’ thinking describe many as “anxious” and in need of “reassurance” but determined that Corbyn receives adequate time to “set out his stall”. One shadow cabinet minister spoke of being “caught between Scylla and Charybdis” – that is, “a Labour Party membership which is ardently Corbynista and a British electorate which is ardently anti-Corbynista”. In their most pessimistic moments, some MPs gloomily wonder which group will deselect them first. The possibility that a new Conservative leader could trigger an early general election is cited by some as cause for haste and by others as the only means by which Corbynism can be definitively discredited.

The enduring debate over whether the Labour leader would automatically make the ballot if challenged (the party’s rules are ambiguous) is dismissed by most as irrelevant. Shadow cabinet members believe that Corbyn would achieve the requisite nominations. Momentum, the Labour leader’s praetorian guard, has privately instructed its members to be prepared to lobby MPs for this purpose.

There is no agreement on who should face Corbyn if his removal is attempted. The veteran MP Margaret Hodge has been touted as a “stalking horse” to lead the charge before making way for a figure such as the former paratrooper Dan Jarvis or the shadow business secretary, Angela Eagle. But in the view of a large number of shadow cabinet members, no challenge will materialise. They cite the high bar for putative leaders – the endorsement of 20 per cent of Labour MPs and MEPs – and the likelihood of failure. Many have long regarded mass front-bench resignations and trade union support as ­essential preconditions for a successful challenge, conditions they believe will not be met less than a year after Corbyn’s victory.

When Tony Blair resigned as Labour leader in 2007, he had already agreed not to fight the next general election and faced a pre-eminent rival in Gordon Brown. Neither situation exists today. The last Labour leader to be constitutionally deposed was J R Clynes in 1922 – when MPs, not members, were sovereign. Politics past and present militate against Corbyn’s opponents. There is but one man who can remove the leader: himself.

George Eaton is political editor of the New Statesman.

This article first appeared in the 06 April 2016 issue of the New Statesman, The longest hatred