Better Than the Coin
Now here's an op-ed in today's Times by Edward Kleinbard, who seems to know a great deal about all this dashed monetary piffle (pardon me, I've been reading some Wodehouse), and he avers that rather that mint a trillion-dollar coin that would quickly become fodder for stand-up comics across the world, what the Obama administration should do to put the R's on ice vis a vis the debt limit is issue, get this, scrip:
[Obama] should threaten to issue scrip — “registered warrants” — to existing claims holders (other than those who own actual government debt) in lieu of money. Recipients of these I.O.U.’s could include federal employees, defense contractors, MBeginning in July of that year, California addressed its budget crisis by issuing 450,000 registered warrants, totaling $2.6 billion, to individual and business claimants, including recipients of aid programs, recipients of tax refunds and government contractors. Those holders who needed immediate cash were usually able to sell their registered warrants to banks at face value, though some institutions limited such purchases.
The scrip would not violate the debt ceiling because it wouldn’t constitute a new borrowing of money backed by the credit of the United States. It would merely be a formal acknowledgment of a pre-existing monetary claim against the United States that the Treasury was not currently able to pay. The president could therefore establish a scrip program by executive order without piling a constitutional crisis on top of a fiscal one.
Kleinbard goes on to explain that the state of California did just this in 2009 and all went fairly swimmingly:
Beginning in July of that year, California addressed its budget crisis by issuing 450,000 registered warrants, totaling $2.6 billion, to individual and business claimants, including recipients of aid programs, recipients of tax refunds and government contractors. Those holders who needed immediate cash were usually able to sell their registered warrants to banks at face value, though some institutions limited such purchases.
Whether as a result of public shaming, pressure from banks or a newfound sense of responsibility, the Legislature quickly worked out a budget deal and the scrip was then redeemed for cash.
Throughout the ordeal, California continued to pay its public debt service in cash and on schedule and never lost an investment-grade credit rating.
Now I'm sure there are counter-arguments to this in policy terms with which I am not familiar, and perhaps they're good ones. But this much I am certain of. In political terms, this strikes me as far more sellable to the public than the coin. It just sounds more serious. It has recent precedent. True, the wingers will say, "well, California, that's wacko-land," but non-winger Americans have a fine opinion of California, so I doubt that one will fly. The idea likely won't be popular in Appalachia, where if anyone still remembers what scrip means in that context, they'll instantly dislike the idea, but they dislike Obama anyhow, so so what.
So I commend this column highly. But I still bet at the end of the day, at the very last minute, the Republicans (enough of them that is) will go el foldo. Check out what the Financial Services Roundtable guy told Greg Sargent yesterday:
“We are in favor of raising [the debt limit], and we will be encouraging policy makers to increase it,” Scott Talbott, the senior vice president for public policy for the Financial Services Roundtable, told me today. He added that the group was gearing up to communicate the demand for action to Congress, an effort that could include sending letters to every member. “We will communicate with the entire Congress,” he said.
The chief executive of the FSR is none other than Tim Pawlenty, and the group gives more money to Republicans than to Democrats, Sargent notes, so it's an outfit that will have influence on Republicans members. So my nose still tells me, as Greg's does his, that we'll see a kind of a replay of Jan. 1 when the clock strikes midnight. The question, of course, is what Obama will have offered up on cuts and entitlements. But in political terms I bet he walks away with the win.