Update WH shuts down coinage. Josh Marshall and I are on the same page about why.
Second update Yes, indeed. Someone at 1600 Penn has read Schelling (or Thyucidides):
“This now puts all the pressure back where we believe it belongs: on the Republicans,” a senior administration official told the Huffington Post. “There are no magic coins. There is no way to get out of this. We feel fine about the politics of it. We think we are in a stronger position if Republicans realize there is no out.” [emphasis added]
Ryan Cooper makes a calm exposition of the case for the Coin, or, rather, for the coinage opt)ion. He advances the ball by describing in detail how the process would work, and I agree with him that minting million-dollar coins in quantity sounds less goofy than issuing a single trillion-dollar Coin.
But while I think Cooper is right technically, I think he, along with the rest of the pro-Coin team and all of the anti-Coiners, gets the politics precisely backwards.
Cooper is right to say that, if the coinage option were to be used, it would be desirable to prepare the public – and in particular the collection of hysterical economic illiterates that composes the political press corps – to understand how it works and why it’s not a threat to anything save the hostage-takers in the Republican Party.
[And yes, I'm still waiting for the anti-Coiners to explain what the President's lawful courses of action are when the legal command of appropriations legislation to spend money runs into the legal prohibition to borrow the funds necessary to pay the bills.]
But like most of the discourse around the Coin, Cooper’s essay assumes that having a coinage option would strengthen the President’s bargaining position by making the Republican threat empty. That seems to be the consensus, reflected in the fact that Blue pundits mostly like the Coin while Red pundits all despise it.
But I would argue just the opposite.
In my view – and I think this is the view of the White House, though no one has told me so – the debt ceiling problem is a problem mostly for the Congressional Republicans. Their plutocratic paymasters won’t let them wreck the national credit, or even make a convincing gesture at doing so; some GOP Senators and Representatives (not including McConnell or Boehner) are even patriotic or honorable enough to think that the nation’s bills ought to be paid on time.
But the partial success of their previous extortion attempt gave the Grover Norquist wing of the party a taste of blood, and they’re going to be outraged if their leadership fails to at least hold a gun to the hostage’s head. Some of their membership, and a substantial part of their voting base, actually hates the Federal government so much that default would seem to them like a feature rather than a bug, on the way to a government small enough to drown in a bathtub.
Without the coinage option, and faced with the combination of their own unpopularity and the President’s popularity, Boehner and McConnell are stuck making a humiliating, and party-splitting, climb-down.
But putting the coinage option publicly on the table takes the pressure off them. They can just sit there and let the government hit the debt ceiling, in the calm confidence that no actual harm will be done and that Wall Street won’t get mad at them. Then, when the President takes an obviously extraordinary and only accidentally lawful series of steps to avoid hitting the wall, they can satisfy their constituents’ blood-lust by impeaching him for doing so, in the calm confidence that much of the aforementioned collection of hysterical economic illiterates will even-handedly report that some people think the President should be impeached, while of course Democrats disagree.
Thus putting the coinage option on the table converts a hard defeat for the Congressional Republicans into an easy political win. They don’t get their way on spending – at least via the debt ceiling – but that was a pipe-dream anyway. But they get up off the mat politically, and maybe that helps them get their way on spending via the sequester/continuing resolution process.
So, even though I think (tentatively) that the President would be legally bound to use coinage if necessary to avoid default, it seems to me that the White House is right to shrug off both coinage and the Fourteenth Amendment.
As Tom Schelling points out in The Strategy of Conflict, in a strategic situation having more options can be a disadvantage. In the game of “Chicken” – where two cars drive head-first toward each other, and the loser is the one who swerves first – the winning move is to throw your steering wheel out the window, showing the other driver that you have no ability to swerve, rendering the question of your willingness to do so moot. Then the other guy has to be the Chicken unless he wants to die.
The Coin advocates have been eagerly trying to hand the President a steering wheel. He’s been right to ignore them.
Footnote Cooper also glancingly endorses the “scrip” option, which I think is much worse than coinage. Issuing rather than making timely payment in cash is still, technically, default. And like any other option that involves actually paying some of the government’s creditors but not others, it would require the President to assume huge discretionary powers nowhere granted to him by law.