Krugman backs minting a $1trn platinum coin

The real funny story's the debt ceiling.

Paul Krugman, Nobel Laureate and New York Times columnist/blogger, has written that President Obama should be willing to mint a $1trn platinum coin in order to avoid having to compromise over the debt ceiling.

Krugman blogs:

He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous. The decision should be obvious…

It’s easy to make sententious remarks to the effect that we shouldn’t look for gimmicks, we should sit down like serious people and deal with our problems realistically. That may sound reasonable — if you’ve been living in a cave for the past four years. Given the realities of our political situation, and in particular the mixture of ruthlessness and craziness that now characterizes House Republicans, it’s just ridiculous — far more ridiculous than the notion of the coin.

Krugman is… half right. As Felix Salmon notes, it's no surprise that the people most in favour of the platinum coin option are largely economists. From an economic point of view, there really is no reason not to do it. Less informed commentators use basic knowledge of economic theory to warn that minting the coin is "printing money" which will lead to "massive inflation"; but since using the legal quirk to prevent a government shutdown wouldn't lead to an increase in the money supply, those fears are unfounded.

Instead, the problem is the political one. Salmon sums it up:

If you believe that the country is best run by grown-ups, you can’t believe in #mintthecoin, because it simply isn’t a grown-up strategy. If you believe that the House Republicans behave in crazy and illogical ways, then you can’t believe in #mintthecoin, because the threat of minting the coin doesn’t work against someone who’s crazy and illogical. And if you believe that the best way to approach the debt ceiling is to try and abolish it altogether, then you can’t believe in #mintthecoin, because the entire strategy is based on the idea of keeping the ceiling where it is, and then trying to circumvent it.

There are still some economic problems with the idea, which Salmon touches on. The chief ones are to do with the sheer uncertainty of minting the coin. Everyone thinks it is probably legal – but until and unless the Supreme Court affirms that, nobody can be certain it is. Which means that for an indeterminate period, the US economy would be like Schrödinger's Cat, in a superposition between default and creditworthiness. That's not desirable for anyone.

The real reason to carry on talking about minting the coin isn't, as Krugman argues, because it might mean that Obama actually mints it. But nor is it, as Salmon argues, because it might scare the Republicans into backing down. It is, instead, to come up with something Obama can "concede" on without actually having to concede on anything at all. Obama offers to change the law to ban minting the coin, in exchange for also changing the law to end the debt ceiling. It's the argument made by *Bloomberg*'s Josh Barro.

And make no mistake, the debt ceiling is ridiculous. Quite beyond its pernicious effects – it would prove beyond doubt that the American political system is broken, would almost certainly lead to the US defaulting on its international debt payments, and would definitely lead to crippling immediate defaults on *national* debt payments like tax refunds and federal salaries – it is a legal limit which makes no sense, politically or economically. The debt ceiling is a limit, set by congress, on how much the executive branch can borrow. But the executive branch's spending is also set by congress: when it authorises a bill, the president is not allowed to spend a penny over the amount specified, nor a penny under.

The debt ceiling could only ever have one of two effects: either it does nothing, because it is higher than the amount congress has ordered the executive branch to borrow; or it forces the President to break the law, either by ignoring the debt ceiling or by ignoring all of the other bills passed by congress instructing him to spend.

And we're laughing about the platinum coin?

A US platinum coin. Photograph: Wikimedia Commons

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

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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