If there were any doubt that leverage had shifted to Republicans in the debt-limit standoff, it was dispelled when Obama supporters urged the president to create $1 trillion out of thin air by minting a magic coin. Seriously.
On Saturday, the Treasury Department finally put a halt to the magic-coin insanity, declaring, “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.”
What is so sad is that, until Treasury issued that statement, supposedly serious people were advocating doing just that. On Friday, White House spokesman Jay Carney refused to rule out the idea (as he had previously ruled out resorting to the 14th Amendment to ignore the debt limit). In a letter to Obama last week, Senate Majority Leader Harry Reid, Majority Whip Dick Durbin, vice chairman of the Democratic Caucus Chuck Schumer and the incoming Budget Committee chairwoman, Patty Murray, urged the president “to take any lawful steps to ensure that America does not break its promises and trigger a global crisis — without congressional approval, if necessary.” Since the 14th Amendment was off the table, the only step he could take “without congressional approval” was minting a platinum coin.
In a town that specializes in stupid ideas, this one reached a new level of stupid. Think about it: If the president could really create a trillion dollars out of the ether simply by minting a single $1 trillion coin, why would we stop at one? We could mint 17 of these puppies and eliminate the national debt! Heck, we could mint 18 and have a trillion-dollar surplus!
Imagine all the problems in Washington that could have been solved with this one fiscal-policy innovation. There would be no need for more fights over whether we should cut spending or raise taxes. Just mint more trillion-dollar coins. Want another trillion-dollar stimulus spending bill? Mint a coin! Make Medicare and Social Security solvent without cutting benefits? More coins!
Like King Midas, Obama could have turned anything he wanted into gold . . . or platinum, at least.
This could have been the solution to the euro-zone crisis. No need for austerity measures, mes amis. Just mint a trillion-euro coin! Imagine for a moment how we would have responded if Greece had announced that, instead of cutting spending to reduce its debt, Athens was withdrawing from the euro and minting a trillion-drachma coin. (Okay, it would have to be a few hundred trillion drachmas to match our $1 trillion coin, but you get the picture.) We’d all laugh hysterically.
Well that’s what the world and — more importantly — the markets, would have done if Obama followed the advice of those pushing this insane idea.
The fact that so many Obama sympathizers were seriously advocating an idea that may have originated with an episode of “The Simpsons” shows that the GOP holds all the cards as the deadline to raise the debt limit approaches. Before Jan. 1, Obama was more than willing to risk a recession in order to get his way on tax hikes. He won the “fiscal cliff” showdown. Congratulations, Mr. President.
Now the tide has turned — and Democrats know it. Obama might have been willing to go over the cliff, but he cannot default. He needs Republicans to raise the debt limit, which is why the left is squirming for a way — any way — to extricate him from this conundrum. But there is no way out. For all Obama’s bluster about not negotiating on the debt limit, the fact is he is bluffing. He has to negotiate. He has to compromise. He has to make concessions. He has no choice.
If Republicans stick to their guns, come February, Obama will agree to deep spending cuts in exchange for a debt-limit increase. There is a reason why every significant debt-reduction bill in the past 27 years — starting with the Gramm-Rudman-Hollings Act in 1985 — was linked to a debt-limit increase: It’s the only thing that forces Washington to enact spending cuts. With a president in office who believes “we don’t have a spending problem,” it’s the only thing that can force them today.
If the magic-coin episode teaches Republicans anything, it’s that Democrats know the president is cornered. So if Republicans blow this opportunity — if they buy Obama’s bluff and capitulate as they did on the fiscal cliff — they’ll need more than a magic coin to save their political hides.