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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Owen Smith is naïve if he thinks misogynist abuse in Labour started with Jeremy Corbyn

“We didn’t have this sort of abuse before Jeremy Corbyn became the leader.”

Owen Smith, the MP challenging Jeremy Corbyn in the Labour leadership contest, has told BBC News that the party’s nastier side is a result of its leader.

He said:

“I think Jeremy should take a little more responsibility for what’s going on in the Labour party. After all, we didn’t have this sort of abuse and intolerance, misogyny, antisemitism in the Labour party before Jeremy Corbyn became the leader.

“It’s now become something that is being talked about on television, on radio, and in newspapers. And Angela is right, it has been effectively licenced within the last nine months.

“We’re the Labour party. We’ve got to be about fairness, and tolerance, and equality. It’s in our DNA. So for us to be reduced to this infighting is awful. Now, I understand why people feel passionately about the future of our party – I feel passionately about that. I feel we’re in danger of splitting and being destroyed.

“But we can’t tolerate it. And it isn’t good enough for Jeremy simply to say he has threats too. Well, I’ve had death threats, I’ve had threats too, but I’m telling him, it’s got to be stamped out. We’ve got to have zero tolerance of this in the Labour party.”

While Smith’s conclusion is correct, his analysis is worryingly wrong.

Whether it is out of incompetence or an unwillingness to see the extent of the situation, Corbyn has done very little to stamp out abuse in his party, which has thus been allowed to escalate. It is fair enough of Smith to criticise him for his failure to stem the flow and punish the perpetrators.

It is also reasonable to condemn Corbyn's inability to stop allies like Chancellor John McDonnell and Unite leader Len McCluskey using violent language (“lynch mob”, “fucking useless”, etc) about their opponents, which feeds into the aggressive atmosphere. Though, as I’ve written before, Labour politicians on all sides have a duty to watch their words.

But it’s when we see how Smith came to the point of urging Corbyn to take more responsibility that we should worry. Smith confidently argues that there wasn’t “this sort of abuse and intolerance, misogyny, antisemitism” in the party before Corbyn was voted in. (I assume when he says “this sort”, he means online, death threats, letters, and abuse at protests. The sort that has been high-profile recently).

This is naïve. Anyone involved in Labour politics – or anything close to it – for longer than Corbyn’s leadership could tell Smith that misogyny and antisemitism have been around for a pretty long time. Perhaps because Smith isn’t the prime target, he hasn’t been paying close enough attention. Sexism wasn’t just invented nine months ago, and we shouldn’t let the belief set in that it did – then it simply becomes a useful tool for Corbyn’s detractors to bash him with, rather than a longstanding, structural problem to solve.

Smith's lament that “it’s now become something that is being talked about” is also jarring. Isnt it a good thing that such abuse is now being called out so publicly, and closely scrutinised by the media?

In my eyes, this is a bit like the argument that Corbyn has lost Labour’s heartlands. No, he hasn’t. They have been slowly slipping away for years – and we all noticed when Labour took a beating in the last general election (way before Corbyn had anything to do with the Labour leadership). As with the abuse, Corbyn hasn’t done much to address this, and his inaction has therefore exacerbated it. But if we tell ourselves that it started with him, then we’re grasping for a very, very simple solution (remove Corbyn = automatic win in the North, and immediate erasure of misogyny and antisemitism) to a problem we have catastrophically failed to analyse.

Anoosh Chakelian is deputy web editor at the New Statesman.