The possibility that Republicans will continually use the debt limit to threaten economic havoc has prompted some creative thinking about solutions, the most popular of them being the minting of platinum coins. The Treasury secretary is legally permitted to mint platinum coins of any level he wishes. So, if Congress refuses to raise the debt ceiling, Treasury could avoid catastrophe by creating a trillion dollars' worth of platinum coins — or perhaps a single trillion-dollar coin — deposit it in the Federal Reserve, and, boom, problem solved.
As the debt limit has loomed, the platinum-coin solution has gained more notice. (The Wall Street Journal has a short news story today, and Paul Krugman and Josh Barro have endorsed the idea.) There turns out to be no serious economic or legal argument against the platinum coins. (It may run against the intent of the law, which was to facilitate sales to coin buffs. But, then, using the debt ceiling to threaten the full faith of the U.S. Treasury also runs counter to the spirit of the law.) The main drawback is that it’s hilarious. Though I say that if you can save the world economy and provide The Daily Show with weeks' worth of write-your-own-punch-lines, that’s win-win.
Anyway, the notion has gained enough intellectual currency (currency!) to start raising alarm bells among would-be hostage takers in the GOP Congress. Republican member Greg Walden has introduced a bill banning the Treasury Department from using large denomination coins to save the economy from crazed Republicans. Walden calls the platinum-coin solution “absurd” and “laughable,” but his statement is a useful insight into the fatuousness of the sort of economic thinking that is actually taken seriously in American politics. Walden uses the hoary tactic of analogizing the U.S. government to a small business:
My wife and I have owned and operated a small business since 1986. When it came time to pay the bills, we couldn’t just mint a coin to create more money out of thin air. We sat down and figured out how to balance the books. That’s what Washington needs to do as well.
See, here’s the thing. The United States government is not like a small business. Small businesses routinely go out of business. That is something we’d rather avoid as a country.
But let us try to take Walden’s small business analogy seriously. Suppose the problem is that we’re a business whose expenses are outstripping our income. We propose some measures to correct it — say, cutting expenses when possible and also working some longer hours. But we have a business partner who listens to a lot of Rush Limbaugh and has some different ideas. He says increasing revenue by working longer hours — even a single longer minute when we have customers waiting in line at closing time — is totally off the table. He says the answer is to cut our employees’ pay and ban them from taking bathroom breaks. And he also informs us that, unless we approve the savings ideas he wants, with none of the savings ideas we want, he’ll refuse to pay vendors who have already delivered things to us, thereby ruining our credit rating forever.
That would be terrible! You would probably stop thinking about optimal ways to run your business and start looking for back-door solutions to prevent your crazy business partner from permanently ruining your credit rating. Then he would probably start getting really angry about it. That’s where we are right now.