The American Interest
Analysis by Walter Russell Mead & Staff
Dems Getting Cold Feet on Trillion Dollar Coin?

With the fiscal cliff fading into the past, attention is now turning to the next DC-generated crisis: the debt ceiling. This dispatch from left-leaning Washington Post blogger Greg Sargent on his  Plum Line blog suggests that the search for a Democrats-only solution to raise the ceiling in the Senate may be tough, and reading between the lines gives the impression that the Democrats may not be as united on this issue as it looks.

At the moment, two solutions have been proposed that would let the President ignore the debt limit without reaching a deal with the House of Representatives. Under the first scenario, Obama would declare that the debt ceiling violates the 14th Amendment, and proceed to ignore the ceiling entirely. Under the alternative proposal, Obama would order the treasury to mint a $1 trillion platinum coin, which would then be deposited in the government’s account; effectively allowing the government to continue to borrow money without technically borrowing.

But there are problems with both scenarios. The White House is worried that the 14th Amendment solution won’t fly legally, while Senate Dems are afraid the coin would be a political disaster. From Sargent:

The aide tells me, however, that top Senate Democrats see the 14th amendment option as far preferable politically to the coin. “Of the available options, the coin, on its face, is politically much worse than the others,” he said. “Whatever the legal arguments for and against it, the imagery will be difficult to combat. What better symbol of out-of-control government spending could you have than a trillion dollar coin?”

The state of play may be that the Democrats have one option that is illegal, and another that would be politically damaging. From that perspective, a letter from Democratic Senators to the White House telling the President they will back him in either course looks less like strong resolve and more like a bluff. Sargent doesn’t quite say it that way, but the next paragraph is interesting:

In a general sense, the decision by top Dems to signal unified support for a unilateral option, should the White House opt for one, is all about maintaining leverage. The idea is to counter the continued GOP claim that new revenues are off the table by signaling clearly that Dems are prepared to activate a fallback option — meaning that in the end, Republicans are not in control of the battle’s outcome.

Both parties at this stage have much to gain and little to lose by sounding tough and intransigent. Ignoring or circumventing the debt ceiling law will hurt Democrats politically; shutting the government down will likely hurt the GOP. Both sides do better with a compromise than either does by confrontation, but both sides want to get the best possible deal — and that means both sides gain from looking as if they are ready to go to extremes.

On the whole, we sympathize with those who don’t like the debt ceiling. The debt ceiling law is a bad one, and both parties have used it to make mischief when they were out of power. The debt ceiling is a gimmick, not a serious tool of fiscal management. It should be abolished—preferably as part of an agreement to fix the broken congressional budget process. That may be utopian; thinking institutionally, the debt ceiling law gives both parties in Congress leverage over the Executive branch, and laws that do that have a way of sticking around.

For now, though, the takeaway should be that in spite of all the talk about it from op-ed writers and bloggers, the idea of the trillion dollar coin gives serious politicians the hives.

 

Published on January 12, 2013 12:00 pm