Friday, July 29, 2011

Dates to know, and the logic of the debt ceiling crisis

April 15th, 2011: Department of Defense and Full-Year Continuing Appropriations Act

February 4th, 2010: Resolution to Increase the Statutory Limit on the Public Debt

Don't tell me you respect the Constitutional authority of Congress and the Constitutional limits on the presidency if you think that the president can violate a more recent act of Congress in order to fulfill an older act of Congress.

There are two other options, of course. The tax code is older than the debt ceiling and we can always default on our debts to give more room for growth in current debts.

The second option is unconstitutional as a result of the 14th amendment to the Constitution.

The first option I suppose you could make a case for. The president could take it upon himself to levy taxes without the consent of the governed. Historically, though, the American people have frowned on this. And history aside, the raising of revenue has to originate in the House. One can consider a piece of legislation trumped or rendered moot by more recent leigslation, but you can't invent new legislation - i.e. - levy new taxes.

Justice John Marshall Harlan II presciently warned that “the Constitution is not a panacea for every blot upon the public welfare,” and we do have a quandary here. Congress, in passing laws it absolutely has the authority to pass, has attempted to repeal the laws of arithmetic (which while it may or may not have the Constitutional authority to repeal it certainly doesn't have the ability to repeal). The president's job is to execute Congress's laws, but he can't execute one without violating another. So the task of execution becomes a task of reconciliation of conflicting legislation - he can't execute the laws if he doesn't make some attempt at reconciling them. And the constitutional and logical option seems to me to be (1.) not raise taxation without represenative assent - Article 1 Section 8 rules this unconstitutional, (2.) not default on public debts - Amendment 14 rules this unconstitutional, and (3.) recognize more recent legislation as the will of the Congress over older legislation which they for all intents and purposes have revised.

I personally see no Constitutional, logical, or chronological reason for violating (1.) or (2.) or for flipping (3.) around.

UPDATE: The other option is asset sales. This is good, but there are limits to it, of course. The appropriations bills include money to do things like, say, operate federal parks, lands and buildings. It's unclear to me how you're not violating those laws with a lot of asset sales. Certainly we could do some and probably should do some. I'm guessing that won't close the gap.

UPDATE 2: Brad DeLong links this post, but let me make something clear - I don't like the idea of asset sales and I don't think it's a solution - but I can see the legal/Constitutional argument that we ought not violate the laws of Congress until we exhaust that option. It's still obviously a non-starter. Once you start getting rid of too many assets, again you're running into Congressional legislation ordering you to make use of those assets (i.e. - you can't sell off park land if Congress directs you to staff and run the park you're trying to sell!). I do like Brad's idea, which is something that's been floating around: mint and sell a 10-lb., $100 billion platinum coin. The president has the unambiguous authority to do this.

UPDATE 3: It's in my author description, but this is probably a good post to emphasize that these are my own views and absolutely not those of my employer. I'm leaving in a couple weeks, but still oughta be clear about that.


  1. Hell, why not mint silver and gold coins? Kennedy tried (well I think he actually signed the executive order to do so but the silver-backed dollars never got "printed")and was shot, I believe, two weeks later.

  2. I imagine the idea is more bang for the buck with platinum.

    I think anyone that's pro-minting-platinum is going to be pro-minting gold and silver.

    I'm also not sure how they count platinum in reserves and foreign exchange - so it may make more sense to hold the gold as reserves and put the platinum into circulation - I don't know.

  3. Hmm, I wonder how much platinum the federal government actually owns. Also, I have always thought it was a neat little trick for the federal government and Fed to hold gold reserves when their actions directly and indirectly drive its price up. Very clever.

    The big question to consider is that if the government hypothetically started circulating coins composed of precious metal, would they then accept said coins as payment for taxes?

    That would mean competing currencies and clearly we can't have that....


    Here, the original proponents of the theory lay out the logic.

    Apparently, treasury has been granted specific authority to mint platinum coins in any denomination which is not the case for silver and gold.

    So hypothetically, they could mint a trillion dollar coin the size of a quarter. Not something i'd walk around with in my pocket. (as if i could buy anything with it.

  5. And even if you did feel comfortable walking around with it in your pocket, who can break a trillion?

    Mint platinum - hell, sell platinum. But the answer is clear. The debt ceiling is trumped by the appropriation law and it's not clear why anyone after 1868 would even pass a debt ceiling.

  6. Ever since I heard about the idea, I have this vision of Geithner dropping coins into the West Wing coke machine, retreiving an sprite, and then frantically searching his pants pockets.

  7. The FED should be able to declare some of the treasury bonds it holds void, or perhaps to lend those treasury bonds to the treasury without any restrictions. That would buy $1 T or so of wiggle room.

    We don't have enough precious metals to make more than a couple months of wiggle room. As an aside, the fiscal year ends in two months, and without congressional action, we'll be back in the same position at that time - having no budget and probably not even enough GOP members of congress willing to pass a continuing resolution lest they cross Lord Voldemort. For Pelosi and Obama, finding 50 or so GOP lawmakers who put nation above party is probably the best way to go for the next 15 months.

  8. Here's a thought, putting on my tinfoil hat:

    Maybe somebody WANTS valuable public assets, such as national parkland, sold off? (Particularly if it can then be used for purposes other than parkland)?

  9. "The debt ceiling is trumped by the appropriation law and it's not clear why anyone after 1868 would even pass a debt ceiling."



    You mean to tell me you don't know why the debt ceiling exists? Hint: does Congress still vote for every bond issue?

    You're also not following the actual plan to sell a $1T (1 oz) coin to the Fed. It's not about selling $1T in bullion or even in minted Pt, it's about selling a token.

    I might add another date to your list (though not entirely fitting): Oct 2010. Why didn't a Democratic Party controlled Congress pass a new budget, with a debt ceiling increase then? Might it have to do with mitigating mid-term election losses? Might this whole thing be the result of not just Republican politicking?

  10. Of course it's not just a Republican politicking thing. It's a politician politicking thing.

  11. I prefer commenters not to comment anonymously, btu if you're just going to accuse me of stuff like that I'd ESPECIALLY prefer you identify yourself. Nothing cures the flinging of baseless accusations like some degree of accountability.

  12. Whatever the reason for the debt ceiling, it has no superiority to subsequently passed laws. It has also created an incoherent situation where the president must break the law.

    Obama should shove this through without using the coin option, in my opinion, and use the incoherence argument, and not the "newer legislation" option. That way this stunt will never be attempted again.


    Krugman raises the issue of platinum coin minting. The MMT people are going to go through the roof.

  13. "The second option is unconstitutional as a result of the 14th amendment to the Constitution."

    WRONG! But thanks for playing!

    "Justice John Marshall Harlan II presciently warned that 'the Constitution is not a panacea for every blot upon the public welfare,' and we do have a quandary here."

    Well, at least you read Prof. Tribe's articles.

  14. Anonymous,

    Well, more to the point, the House has passed at least three separate budget resolutions and the Senate, well, none, in 2011. The Senate has basically refused to pass such and then hunker down in conference and hammer out the differences between the two. Essentially the Senate has said as a body we're not going to go through the normal processes associated with working out the budget - instead they've said we're going to do something else. Why they've done that I have no idea, I guess they figured they could play political chicken with the matter and that eventually what they didn't like about the House proposal would fall by the wayside.

  15. Anonymous,

    The first of those was the Paul Ryan plan of, hmm, March or April of this year. The Democrats balked at it.

  16. Gary -
    "The Senate" isn't a person that can make decisions. The body hasn't produced a bill because no bill can pass. The Democrats have a majority but not a filibuster-proof one. Nothing has changed about the process (oh - except for this new constant filibuster threat that essentially requires a supermajority to pass anything... THAT has been a change).

    The House passed a plan that the Senate didn't pass. Well, the president submitted a plan that the House didn't pass. Does that mean the House is dysfunctional? Of course not.

    What's amazing to me is that you are just inhaling talking points from a political party - and yet you still persist in this illusion that you're above politics.

  17. Daniel,

    Yes, yes, yes, we all know that the Senate isn't an individual person - honestly, you sound like an Austrian economist in making your point.

    Anyway, the Senate is run by the Democrats, just as the Republicans run the House. The Democrats decided to sit on their hands in the Senate and not pass a budget resolution of their own (they have a 53-47 advantage). This isn't a "talking point" it is a matter of indisputable fact. So why didn't the Senate pass a budget resolution that would thence be sent to conference committee? There are a bunch of different theories regarding that - the most logical one is that many in the Senate (particularly Conrad and Reid apparently) didn't want to talk about the stuff found in the various House budget resolutions - what they did instead was try to change the forum of the issue to the general public and the President - and that shit fucking blew up in their faces. They could have easily diffused much of this stuff in a conference committee, but they decided not to do that.

    The President's plan doesn't matter; his has as much force as a plan I would come up with.

    The only person inhaling talking points is you.

    "Nothing has changed about the process (oh - except for this new constant filibuster threat that essentially requires a supermajority to pass anything... THAT has been a change)."

    Except all the things that have passed the Senate this year (which has been a great deal actually).

  18. A matter of indisputable fact is that a 53-47 advantage is in no way shape or form "running" the Senate.

    You can run the House with 51% of the seats. You cannot run the Senate with 51% of the seats. This is Congress 101 Gary.

    It has nothing whatsoever to do with what Harry Reid was afraid to talk about. If the rules of the Senate weret he same as the rules of the House you would have the Senate producing bills at the same pace as the House.

  19. Daniel,

    I have the world's smallest violin currently playing for the Senate Democrats.

  20. "You cannot run the Senate with 51% of the seats. This is Congress 101 Gary."

    Trent Lott ably did so for years, BTW Basically you're making excuses for rather poor leadership on Reid's part. Honestly, look at his presence (or non-presence I should say) in the "Gang of Six" effort - he just sits there inert waiting for something to happen - or waiting for Obama to rescue him. In the real world, when shit doesn't get done, it is the fault of the people; just like chefs never blame their equipment and get away with it, politicians should never blame "the process" for their inability to get something done as basic as a budget resolution.

  21. Nobody's asking you to feel sorry for them. I'm just asking you not to make shit up just to make Republican freshman look good.

    re: "Trent Lott ably did so for years, BTW Basically you're making excuses for rather poor leadership on Reid's part."

    Yes, because while its use was on the rise under Lott the filibuster was not operating as a de facto supermajority requirement at that time".

    This can't really be lost on you, Gary. You can't really not understand this.

    A chef's equipment is under his control. A chefs inferiors are under his control. There is nothing in a chef's kitchen that is not under his control to a reasonable extent.

    Harry Reid cannot make Republicans vote for what he wants them to vote for. For all intents and purposes the Senate does not have simple majority rules - certainly not on major legislation. That means that Harry Reid doesn't have a majority. Neither does McConnell. That's why nothing gets done - because the Republicans have the House, neither party has a majority in the Senate in any real sense, and President Obama of course can't write legislation himself.

  22. Apparently you've never worked in a kitchen, otherwise you wouldn't make that remark (and kitchen staff would laugh at you for making it). I have and your comment is rather ludicrous. From time to time sous chefs will say something like this: "I screwed up X because of Y pan." The response from everyone around them is always "a good chef never blames his equipment." I have heard this many times in my life. So now I am kind of laughing at you.

    I'm not trying to make Republican freshmen "look good" - though a partisan Democrat would think so I would assume.

    As far as difficulties regarding the procedures in the Senate are concerned; that is the general refrain of a partisan no matter who is in control - I hear it out of Republicans and I hear it out of Democrats (depending on which part controls the Senate) and I find both sides unconvincing. They are able to pass stuff all the time without those rules getting in the way (witness all the national security legislation that passed this year as an example), so it falls on deaf ears with me.

  23. Gary read my comment. I never said people don't make the excuse, and I'm agreeing with your reaction. What are you laughing at me for exactly?

    re: "I'm not trying to make Republican freshmen "look good" - though a partisan Democrat would think so I would assume."

    A partisan Democrat would probably think that, but that seems irrelevant to a discussion between you and me.

    re: "that is the general refrain of a partisan no matter who is in control - I hear it out of Republicans and I hear it out of Democrats"

    Over the last decade or so the Republicans are increasingly right when they say that! The fact that partisans are aware of objective facts doesn't mean the fact isn't a fact. Partisan Republicans say the sky is blue too, as I understand it. You gonna second guess that next?

    The national security legislation isn't something they fundamentally disagree with each other on. In other words - there is a bipartisan supermajority in favor of the national security legislatino, so it passes. Why are you struggling to much with this concept, Gary?

  24. Daniel,

    Because your comment was funny, Mr. Blueblood.

    Yes, a partisan Democrat would probably say that ... hmmm.

    The Senate has no more problem getting stuff done than it ever did in the past as a result of rules; the rules really aren't the issue - the issue is disagreement over the budget and the inability of the Senate leadership to get some agreement going.

    No, on the national security issues you have a dominant group of legislators who corral together those who might object to particular provisions - they do it a number of ways. There is a lot of potential dissent on the subject that doesn't happen because it is not allowed to happen. Why they aren't equally effective when it comes to economic matters I dunno (I wish they were equally ineffective myself - we need a real debate on the PATRIOT Act, FISA, etc.), but there is no reason to think that couldn't be the case. It isn't rules that are getting in the way, it is the inability of Reid and Conrad to be effective spokesmen for their position.


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