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.

Photo: Getty
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Amber Rudd's ignorance isn't just a problem for the laws she writes

Politicians' lack of understanding leads to the wrong laws - and leaves real problems unchecked. 

Amber Rudd’s interview with Andrew Marr yesterday is not going to feature in her highlights reel, that is for certain. Her headline-grabbing howler was her suggesting was that to fight terror “the best people…who understand the necessary hashtags” would stop extremist material “ever being put up, not just taken down”, but the entire performance was riddled with poorly-briefed errors.

During one particularly mystifying exchange, Rudd claimed that she wasn’t asking for permission to “go into the Cloud”, when she is, in fact, asking for permission to go into the Cloud.

That lack of understanding makes itself felt in the misguided attempt to force tech companies to install a backdoor in encrypted communications. I outline some of the problems with that approach here, and Paul Goodman puts it well over at ConservativeHome, the problem with creating a backdoor is that “the security services would indeed be able to travel down it.  So, however, might others – the agencies serving the Chinese and Russian governments, for example, not to mention non-state hackers and criminals”.

But it’s not just in what the government does that makes ministers’ lack of understanding of tech issues a problem. As I’ve written before, there is a problem where hate speech is allowed to flourish freely on new media platforms. After-the-fact enforcement means that jihadist terrorism and white supremacist content can attract a large audience on YouTube and Facebook before it is taken down, while Twitter is notoriously sluggish about removing abuse and hosts a large number of extremists on its site. At time of writing, David Duke, the former head of the Ku Klux Klan, has free use of YouTube to post videos with titles such as “CNN interview on Bannon exposes Jewish bias”, “Will the white race survive?” and “Stop the genocide of European mankind”. It’s somewhat odd, to put it mildly, that WhatsApp is facing more heat for a service that is enjoyed by and protects millions of honest consumers while new media is allowed to be intensely relaxed about hosting hate speech.

Outside of the field of anti-terror, technological illiteracy means that old-fashioned exploitation becomes innovative “disruption” provided it is facilitated by an app. Government and opposition politicians simultaneously decry old businesses’ use of zero-hours contracts and abuse of self-employment status to secure the benefits of a full-time employee without having to bear the costs, while hailing and facilitating the same behaviour provided the company in question was founded after 2007.

As funny as Rudd’s ill-briefed turn on the BBC was, the consequences are anything but funny. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.