The platinum coin is killed as America careens toward default

The platinum coin is dead, long live the debt ceiling.

On Saturday evening, the Washington Post's Ezra Klein dropped a bombshell: The platinum coin gambit – the plan to circumvent the American debt ceiling by minting a trillion-dollar coin and depositing it in the Federal Reserve – is dead. Klein writes:

That’s the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today. “Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” he said.

The Treasury's take on the law is one thing; but the Federal Reserve, as a quasi-independent body, is really what's put the kibosh on the whole plan. If it doesn't believe that using a platinum coin to circumvent the debt limit would be legal, that's it. The lynchpin of the plan was that the Treasury, after using powers granted to it through a loophole in a law intended to let it mint commemorative coins for collectors, would be able to deposit the coin in its account in the Fed. If the Fed won't take it, the plan's bust.

Joe Weisenthal, the most consistent advocate of the platinum coin, points out that it's hard to work out what point of law the Fed was actually trying to apply here:

It seems odd that the Fed would decide that there's some legal tender that it will recognize, and some legal tender that it wouldn't recognize.

Paul Krugman, who became a high-profile advocate of minting the coin last week, asks what the administration's plan is now, but also somewhat unfairly places the blame on Obama. Given the White House's comment to Buzzfeed focuses on the Fed, it seems like they weren't exactly behind the move to pre-emptively remove the bargaining chip from the table.

Regardless, the administration's position now is clear. The debt ceiling must be lifted, and they will offer no "concessions" to do so. With the platinum coin out of the equation – and with the so-called "constitutional option", where the President cites the 14th amendment's command that the validity of the public debt "shall not be questioned" and ignores the debt ceiling, ruled out by the White House last month – the Republicans can be under no illusions that if they fail to concede, America will definitely have a messy government shutdown, and will likely enter technical default on its public debt. The only question that they have to answer is whether they have an ounce of rationality left, or if they'll take the whole system down, themselves included.

Past experience suggests that the latter is worryingly possible. For one thing, conservative economists like John Cochrane have been minimising the effect of hitting the ceiling. Cochrane casts doubt on possibility of default by rightly pointing out that the Treasury has enough income to make debt repayments even if the ceiling is hit. But by ignoring the practical aspects of hitting the ceiling, he bypasses an important point. The treasury pays its bills with a vastly complex, automated system. It is not clear it has the technology to "prioritise" debt repayments, nor is it clear that to do so would be legal.

And even worse, those GOP members who do understand the likelihood of a default aren't too concerned. Politico's Jim Vandehei, Mike Allen and Jake Sherman write:

GOP officials said more than half of their members are prepared to allow default unless Obama agrees to dramatic cuts he has repeatedly said he opposes…

“For too long, the pitch was, we’ll deal with it next time,” said Rep. Jason Chaffetz, a conservative from Utah. He said GOP lawmakers are prepared to shut things down or even default if Obama doesn’t bend on spending. “No one wants to default, but we are not going to continue to give the president a limitless credit card.”

If the US did default on its debt – even just by paying a coupon a day late – the international knock-on effects would be massive, and unprecedented. Now that every option for preventing that has been taken off the table save for negotiating with the most radical congress ever, the financial community may start to take note.

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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Where are the moderate Tories condemning Zac Goldsmith’s campaign?

Conservative MPs are reluctant to criticise the London mayoral candidate’s dogwhistle rhetoric.

Very few Conservative politicians have criticised Zac Goldsmith’s campaign to be elected London mayor. And, amid repeated accusations of racial profiling, Islamophobic undertones, and patronising London’s Indian communities, there has been plenty to criticise.

Ever since describing his rival, Sadiq Khan, as having “radical politics” at the end of last year, Goldsmith’s campaign has come under fire for attempting to sound a dogwhistle to voters for whom racial politics – and divisions – are a priority.

You may feel it’s naïve of me to expect Tory MPs to join in the criticism. Presumably most Tory MPs want their party’s candidate to win the mayoralty. So it is unlikely that they would condemn his methods.

But I’d argue that, in this case, we can’t excuse dodged questions and studied silence as good clean tribalism. Granted, Conservatives only want to see their party make electoral gains. And that is understandable. But trickier to explain away is how willing all of the party’s MPs – many of whom are as moderate and “cotton-wool Tory” (in the words of one Labour adviser) as we once assumed Goldsmith was – are to ignore the campaign’s nastier side.

Why aren’t the Cameroons (or neo-Cameroons) who wish to further “detoxify” the party speaking out? There are plenty of them. There is more enthusiasm on the Tory benches for David Cameron than is generally assumed. Many of the 2015 intake are grateful to him; those in marginal seats in particular see him as the reason they won last year. And in spite of the grumbling nature of the 2010-ers, a number of them are keener than appears on Cameron. After all, plenty wouldn’t be in parliament without his A-list and open primaries (a time when the party was supposed to be opening up to candidates of different backgrounds, something Goldsmith’s rhetoric could threaten).

And we know it’s not just Labour whining about Goldsmith’s campaign. It makes Tories uncomfortable too. For example, the Conservative Group Leader at Watford Council Binita Mehta, former Conservative candidate Shazia Awan, and Tory peer and former minister Sayeeda Warsi have spoken out.

And it’s not just non-MPs who are riled by Goldsmith’s rhetoric. Behind the scenes, Conservative MPs have been muttering for weeks about feeling uncomfortable about the campaign.

“There has been a sense that this is a bad dogwhistle, and it’s a bit of a smear,” one Tory MP tells me. “I don’t think Sadiq Khan’s a bad man at all – I think his problem is, which happens to all politicians, is some of the platforms in the past and the people he shared them with, and maybe he didn’t know – I mean, the number of times David Cameron or Gordon Brown or Tony Blair were shown at some fundraising thing, or just visiting somewhere, shaking hands with somebody who turns out to be a crook; that’s the nature of mass politics.”

There is also a mixed view among London’s Tory MPs about the tone of Goldsmith’s campaign generally. Some, who were frustrated in the beginning by his “laidback, slightly disengaged” style, are simply pleased that he finally decided to play dirty with the more energetic Khan. Others saw his initial lighter touch as an asset, and lament that he is trying to emulate Boris Johnson by being outrageous – but, unlike the current London mayor, doesn’t have the personality to get away with it.

One Tory MP describes it as a “cold, Lynton Crosby calculation of the dogwhistle variety”, and reveals that, a couple of weeks ago, there was a sense among some that it was “too much” and had “gone too far and is counterproductive”.

But this sense has apparently dissipated. Since Labour’s antisemitism crisis unfolded last week, moderate Conservative MPs feel more comfortable keeping their mouths shut about Goldsmith’s campaign. This is because racism in Labour has been exposed, even if Khan is not involved. Ironic really, considering they were (rightly) so quick to condemn Ken Livingstone’s comments and call on Jeremy Corbyn and Labour MPs to speak out against such sentiments. It’s worth noting that Labour’s moderates have been significantly less reluctant than their Tory counterparts to call out such problems in their own party.

There is also the EU referendum to consider. Tory MPs see division and infighting ahead, and don’t want to war more than is necessary. One source close to a Tory MP tells me: “[Goldsmith’s campaign] is uncomfortable for all of us – it’s not even considered a Conservative campaign, it’s considered a Zac Goldsmith campaign. But [we can’t complain because] we have to concentrate on Europe.”

So it makes sense politically, in the short term, for Tory moderates to keep quiet. But I expect they know that they have shirked a moral duty to call out such nasty campaign methods. Their calls for Labour’s response to antisemitism, and David Cameron’s outrage about Jeremy Corbyn’s “friends” in Hamas and Hezbollah, are simply hollow attack lines if they can’t hold their own party to higher standards.

Anoosh Chakelian is deputy web editor at the New Statesman.