What's Next on the Debt Ceiling?

Random denomination. too. Via.

So Joe Biden, having sworn never to yield to McCarthy's blackmail and negotiate appropriations under the threat that the House could refuse to do its constitutional duty and pass a rise in the debt ceiling and allow the nation to default on its debt for the first time in our history ...

... has started negotiating appropriations under the threat that the House could refuse to pass a rise in the debt ceiling, and so forth. Have we got that right?

Possibly not. David Dayen at The American Prospect, who certainly knows more about these matters than I can even imagine, has come up with a more benign way of looking at it, anyway, based on the fact that McCarthy really did pass a rise in the debt ceiling, in his own peculiar way, even though it was in a bill the Senate and White House couldn't possibly agree to; that changed the situation, as Dayen said:

I do believe there was some inkling, at least within the White House, that McCarthy would never get that bill passed. It took a fairly superhuman effort for him to thread the needle of his caucus and find a majority, and then only when two Democrats missed the vote. You can’t fight something with nothing; if McCarthy couldn’t get consensus, at some point he’d have to acquiesce to a clean debt ceiling increase. That would have been humiliating and reasonably possible. It was worth going for from the Democrats’ perspective. 

I remember thinking that way myself, and it came agonizingly close to being true. But in the end it wasn't, and Democrats (and Mitch McConnell) had to turn to a different approach. What they're up to now is negotiating, but politely disagreeing on what they're negotiating about: the debt ceiling is "off the table", say Schumer and Biden; the debt ceiling is "off the table", says McConnell; "No it isn't," says Kevin, and it's a free country, so he has a right to his opinion. But the fact remains that when the solution comes, over the next couple of weeks, it will include a rise in the debt ceiling.

All the arguments we've been enjoying about novelty methods for making the debt ceiling go away, from the platinum coins to the "forever" consol bonds, brilliant as some of them may be in moot-court terms, are not happening, because the people with the power to put them into effect don't like them and are not persuadable by brilliance.

Incidentally, I have been completely wrong about the trillion-dollar coin concept:

the original trillion-dollar coin idea was simpler and possibly better (though it would have to be $10 or $20 trillion at this point); Treasury would just count the coin as an asset against liabilities and announce that the debt limit hadn't been reached.

— Yas You Like It (@Yastreblyansky) July 23, 2021

That was not the original idea, Matt's was. My idea was one I inadvertently made up myself, when I was trying to understand what the original idea was. The original idea was, as I now understand it, a variant of the Modern Monetary Theory fantasy of finding a way to remove the wall that separates a modern developed nation's treasury from its central banking system and going back to the days when governments could create their own currency instead of depending on an independent institution like the Federal Reserve or European Central Bank to do it for them.

The Department of the Treasury is no longer allowed to issue paper banknotes, but it does run the Mint to produce all the coins in circulation, including not just pennies, nickels, dimes and so on, but also higher-denomination coins of precious-metal bullion, up to $50, and by a quirk in a law of 1996, platinum coins in any domination whatever. Thus, there is no law preventing the Mint from producing trillion-dollar platinum coins. So when the government hits the debt ceiling and runs out of borrowing authority, it could print a trillion-dollar coin and sell it to the Fed; i.e., the Fed would hold the coin and credit Treasury's bank account with a trillion dollars, which would free it from the need to borrow—it could just cut checks up to the value of a trillion dollars, and when that ran out sell the Fed another coin, and so on. (Do you start to see why the Fed has consistently rejected the idea?)

My idea, in contrast, was that you would never in any sense spend the platinum coins, but rather use them as collateral—keep them in the Treasury and count them as assets, against the liabilities of the national debt, so that every trillion-dollar coin would diminish the book amount of the national debt by a trillion dollars. Until before you know it the book value of the national debt is well below the debt ceiling, and the Treasury has its borrowing authority back and can get back to issuing bonds.

This was because I understood the problem to be getting rid of the fucking debt ceiling. That would be all the platinum coins did, sitting on the books to say the debt ceiling didn't, for the purposes of the present administration. exist.

Whereas in the original idea I failed to understand, it wasn't the debt ceiling that was under attack, it was debt itself; the coins would be used to avoid borrowing, as a kind of actual currency, in the sense that it would circulate (if only in the one direction, from Treasury to Fed). What kind of currency is that, though? Wikipedia says,

Now, when many currencies are fiat money, the "promise to pay" consists of the promise to accept that currency to pay for taxes.

Who's going to pay their taxes in trillion-dollar platinum? Where would they get it? What is Treasury going to give the Fed if it wants to redeem the coins? What guarantees the "promise to pay" in this case? Why would you even want to get rid of debt, the engine of capital? No wonder I didn't understand it!

Anyhow, that whole thing is pretty much moot for now. The big immediate questions are what happens over the next two weeks to make the debt ceiling go away for the moment and, for Dayen, what happens to that stupid House bill. For one thing, why hasn't the Senate voted it down yet?

And he's got an interesting little suggestion on that, which he doesn't elaborate at all:

Having the House pass a bill with revenue in it (which cannot be initiated by the Senate) gives the Senate options to pass whatever the deal becomes and jam House Republicans, too.

I have an idea McCarthy may have been a little bit punked here. The negotiations are supposed to be between Biden and Kevin, but the next legislative job is with Schumer and McConnell in the Senate, and it might most likely consist of amending the bill Kevin has already given them. It might even (as I imagine it) consist of preparing a reconciliation bill (somebody please let me know if I have this wrong), meaning it only needs 51 senators to pass, and it might be something easier for most Democrats in the House to vote for than for Kevin's unregenerates. Either way, it might be something less acceptable to the unregenerates, Gaetz and Jordan, Boebert and Greene, and so on, than what they have been holding out for. Watch for it.