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.

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How tribunal fees silenced low-paid workers: “it was more than I earned in a month”

The government was forced to scrap them after losing a Supreme Court case.

How much of a barrier were employment tribunal fees to low-paid workers? Ask Elaine Janes. “Bringing up six children, I didn’t have £20 spare. Every penny was spent on my children – £250 to me would have been a lot of money. My priorities would have been keeping a roof over my head.”

That fee – £250 – is what the government has been charging a woman who wants to challenge their employer, as Janes did, to pay them the same as men of a similar skills category. As for the £950 to pay for the actual hearing? “That’s probably more than I earned a month.”

Janes did go to a tribunal, but only because she was supported by Unison, her trade union. She has won her claim, although the final compensation is still being worked out. But it’s not just about the money. “It’s about justice, really,” she says. “I think everybody should be paid equally. I don’t see why a man who is doing the equivalent job to what I was doing should earn two to three times more than I was.” She believes that by setting a fee of £950, the government “wouldn’t have even begun to understand” how much it disempowered low-paid workers.

She has a point. The Taylor Review on working practices noted the sharp decline in tribunal cases after fees were introduced in 2013, and that the claimant could pay £1,200 upfront in fees, only to have their case dismissed on a technical point of their employment status. “We believe that this is unfair,” the report said. It added: "There can be no doubt that the introduction of fees has resulted in a significant reduction in the number of cases brought."

Now, the government has been forced to concede. On Wednesday, the Supreme Court ruled in favour of Unison’s argument that the government acted unlawfully in introducing the fees. The judges said fees were set so high, they had “a deterrent effect upon discrimination claims” and put off more genuine cases than the flimsy claims the government was trying to deter.

Shortly after the judgement, the Ministry of Justice said it would stop charging employment tribunal fees immediately and refund those who had paid. This bill could amount to £27m, according to Unison estimates. 

As for Janes, she hopes low-paid workers will feel more confident to challenge unfair work practices. “For people in the future it is good news,” she says. “It gives everybody the chance to make that claim.” 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.