CPEG’s Ron Baiman: President Obama, Please Take Debt Extension off the Table and Refocus Debate on Jobs

Dear President Obama:

Like many Americans I’m nauseated by the current John Boehner/Tea Party willingness to take the entire country hostage and directly harm the lives of millions of people affected by the government shut-down, in an effort to sabotage health care provision for millions of other people who are finally able to get health insurance through the Affordable Care Act, and I applaud your refusal to “negotiate” with Boehner and the 30-40 Tea Party Republican Congressman hostage takers.

(Note to John Beohner: if you have become so attached to power that that you cannot risk your job for the good of the country you need to resign.)

But I have two additional action recommendations that I would like you to consider:

First, to drive home the point about how utterly irresponsible the Beohner/Tea Party actions are and to reframe the economic policy debate, I propose that you lay out your own (tongue in cheek) “negotiating” strategy by stating that you will refuse to sign a bill funding government operations or raising the debt limit until the full Senate (pre-sequestration) budget is approved by the House, or even better, until both the House and Senate approve an approximately $ 1 trillion a year federal jobs program to be funded by a Financial Transactions Tax. This would allow you to make the point that the most important issue facing our nation is the “good jobs deficit”, certainly not the prospect of finally having – like all other advanced countries – a national health care system, but also not the federal budget deficit which cannot be reduced in the short run or the long run without harming the economy or blowing up private debt, if the trade deficit is not reduced.

Second, I am greatly concerned that Boehner and the hostage takers will continue to inflict mass suffering on all of us under the delusion that they will be able to force your hand when the debt ceiling limit comes due on Oct. 17. I therefore urge you in the strongest of terms to take this off the table now. I know that you have stated that you will not “negotiate” over the debt ceiling but I urge you act on this now so as to make it a fait accompli with no possibility of any kind of negotiated “compromise” and therefore no possible ransom for keeping the government shut until Oct. 17.

My understanding is that there are two options for taking the debt ceiling off the table. Under existing legislation you can authorize the U.S. Mint to produce a number of high value (say $1 trillion) coins and deposit these in U.S. government accounts thereby employing coin seigniorage to eliminate the need for further U.S. government borrowing. This would be similar to the Federal Reserve’s ongoing creation of trillions of dollars to reduce private financial debt. Alternatively, you can ignore the non-extension of the debt and continue to borrow to pay for already authorized U.S, government spending citing your constitutional obligation to pay for all bills incurred by the U.S. government.

My preference is for coin seigniorage, as if this is challenged by the Republicans (as it probably would be) in court and struck down (though as noted in the citation above, I don’t think it’s any more “illegal” that using the debt ceiling for hostage taking purposes) you would still be able to revert to the second broader option and keep the government funded longer. Also, contrary to my understanding of your statement at today’s press conference, once these dollars were created there would be no possible way to “revoke” them. Thus unlike the Treasury Bills, or other instruments of government borrowing that would be issued under the second option, there would no reason for creditors to feel uncertain about the legal soundness of dollars created through coin seigniorage. Just as the Federal Reserve has employed previously unused and untested authority to create trillions of dollars to bail out private finance, you should use your authority to “bail out” the federal government in order to fulfill a constitutional mandate to pay U.S. government debt and avoid a national and global economic calamity.

Thank you for your interest in my recommendations. Remember, a crisis can also be a political opportunity. In this case an opportunity to refocus the national debate back to good jobs (as it was before you were elected but somehow receded in importance as vested interests pumped up “deficit hysteria”) and to highlight just how irresponsible the actions of the Republican Congress really are.


Ron Baiman
Chicago Political Economy Group

Image: FreeDigitalPhotos.net

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