Written by CPEG’s Ron Baiman
Though Congressional Republicans have apparently backed off of their plan to immediately take the federal government hostage by temporarily extending the federal debt limit, the threat remains.
As many of you probably have heard by now a blogger with the screen name of Beowulf has come up with a unique and apparently perfectly legal method for the Treasury to do an end-run around (questionably legal) Congressional debt limit extortionism.1 Beowulf proposes to take advantage of a 1995 act that apparently gives the U.S. Mint the ability to assign any value to platinum coins that it mints and transfer these coins, or more to the point, their value, to a U.S. Treasury account at the Federal Reserve. The Treasury could then use these funds to pay its bills. Readers will recognize that this is effectively a form of “coin seigniorage,” that is a creation of money by fiat using platinum coins.2 Beowulf proposes that the Treasury mint a few platinum coins and value them at $ 1 trillion dollars each.3
American employers added 157,000 jobs in January compared with (revised) 196,000 jobs in December. The number of unemployed, 12.3 million, is little changed while the unemployment rate edged upward from 7.8 to 7.9%. The disappointing increase in numbers of new jobs was generally attributed to the loss of public sector jobs at the state level, a large proportion of jobs lost being public school teachers. This is the direct result of state budget deficits, which were hit by a double whammy. The first was loss of tax income due to the economic downturn, the second the loss of federal funds due the austerity economics and “fiscal cliff” panic ruling national politics.
This time last year, when the Bureau of Labor Statistics released the last of the 2011 jobs report, CPEG warned that the slight improvement in December 2011 was still so inadequate that it would take six years to reach 2007 levels of employment. Now the BLS has released numbers for December 2012, and we have a sense of déjà vu as we note that the average monthly employment growth in 2012 is the same as that in 2011—about 153,000 per month. December’s employment growth missed expectations—ADP’s showed 215,000 new jobs in December. The economy added 155,000 jobs, leaving the unemployment rate unmoved since September at 7.8%. One year later, we are now five years away, if we continue at this rate of reducing unemployment, from pre-recession level of unemployment.
The so-called “Fiscal Cliff” is Mostly Good, the Bad Part about it is that it would Reduce the Fiscal Deficit!
Why is it that just after an election where reducing the job deficit was universally acknowledged to be our absolute first priority, mainstream Washington has immediately pivoted to making reduction of the federal fiscal deficit its number one concern?
OK, this is (in part) a rhetorical question. We all know that the impeding “fiscal cliff” is driving this immediate concern, though the “fiscal cliff” itself is in large part a direct product of the misguided fiscal “deficit hysteria” that has gripped Washington.1 The question now is what to do about it.