Who do you have in mind as the "Climate Left"? The Sunrise Movement is not so helpful or cooperative, but it is good to have a "Climate Far Left" applying pressure from the outside. The people who have (thank god) gotten the attention of the Liberal Elite are the more insider groups, like Evergreen Action. And they seem to do a good job of cooperating, and even targeting permitting reform as an issue, no? What am I missing?
Who do you have in mind as the "Climate Left"? The Sunrise Movement is not so helpful or cooperative, but it is good to have a "Climate Far Left" applying pressure from the outside. The people who have (thank god) gotten the attention of the Liberal Elite are the more insider groups, like Evergreen Action. And they seem to do a good job of cooperating, and even targeting permitting reform as an issue, no? What am I missing?
The Democrats should have agreed to conditions on raising the debt limit but insisted on it being raised to $100t. Then they could say they kept the limit in place but wouldn’t have to worry about it.
This was tactically a minor loss for the Democrats (and inevitable, given that elections have consequences) and a strategic defeat for rational government. MY hits this precisely:
"By giving Republicans a policy win in this way rather than through the normal appropriations process, Biden has validated the debt ceiling hostage tactic. That meaningfully increases the odds of a future substantive disaster, either in terms of policy concessions or a breach."
This extortion and threat to the world economy will now happen whenever there is a Democratic President and the Republicans hold at least one house. Given the relative mildness of this most recent standoff, it is also highly unlikely that the Democrats will seek to eliminate the debt ceiling the next time they hold the White House and both houses of Congress. So we're stuck with this Russian roulette threat hanging over our heads.
Question: should the Democrats now play the same game? The next time they hold one or two houses of Congress and there's a Republican President, should we play the same extortionist game? My "good government" side screams "no!" but if we can get good things by so doing, why not? Why should we be the only ones who care enough never to see any threat to the economy? It's not like that moral behavior wins us any kudos.
Question: Can anyone identify what law prevents the government from spending, as authorized by Congress, once the debt limit has been reached? I understand that reaching the debt limit prevents further borrowing, but what law says that the government can only spend receipts from taxes, tariffs, borrowing, etc.? Is there a law that prevents "printing money?" If so, what is it? If there is no such law, is the need to borrow simply a norm that we assume must be respected?
The MMT (Modern Monetary Theory) crowd argue that borrowing is only one of several tools for offsetting the inflationary impact of spending. As I understand it, while MMT adherents accept that borrowing is often very wise, they also say borrowing is not always necessary. So, if spending can be shown to be at least reasonably non-inflationary, what would prevent spending without borrowing?
"Is there a law that prevents 'printing money?' If so, what is it?"
There is for bills: 31 U.S.C. § 5115(b) ("The amount of United States currency notes outstanding and in circulation — (1) may not be more than $300,000,000 . . . .")
There is technically not one for regular coins, but there is a statute restricting the denominations of coins: 31 U.S.C. § 5112(a) ("The Secretary of the Treasury may mint and issue only the following coins . . . ."). (There is, as an aside, a specific limit on the number of clad/silver/gold coins that can be minted: 31 U.S.C. § 5112(m)(2)(A).)
However, there is an exception to that latter statute for platinum coins: 31 U.S.C. § 5112(k) ("The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.").
31 U.S.C. § 5115(b) limits the quantity of outstanding "notes," but most government spending is done via electronic transfers and checks, not paper notes. Today, money is "printed" using computer keyboards. What law would prevent someone at a Treasury computer keyboard from just electronically transferring $1 Trillion for deposit in Treasury's account at the Federal Reserve ?
My *guess* is that electronic transfers can only be of actual amounts in the accounts of the US government. In any event, there's clearly something that prevents that otherwise law professors wouldn't be writing articles about how platinum coins can operate as loophole in the laws limiting the volume of physical currency the federal government can produce.
The fact that law professors don't write articles saying "just transfer some new money pulled from the ether" makes me think there might be some law blocking that path. If so, what is it? Or, is it simply that we're all stuck believing that such a law *must* exist? This would not be the first time that we've been surprised to discover that some commonly assumed norm is just that -- a norm, not a law.
Remember also that there are quite a few academics (i.e. MMTers) who regularly say that issuers of fiat currencies need not rely on borrowing or other revenues to support spending... (Although borrowing is often useful to mitigate inflationary impacts.) So, are the MMTers merely making a theoretical point that can't be tested due to some law? If so, what law? If such a law doesn't exist, why aren't law professors writing articles about this?
>The fact that law professors don't write articles saying "just transfer some new money pulled from the ether" makes me think there might be some law blocking that path.<
I spent some time with ChatGPT. It couldn't come up with anything very specific save this from Article 1:
" Regarding the key language from the Constitution on Congress's power to "coin money and regulate its value," here is the quote from Article I, Section 8, Clause 5 of the United States Constitution: 'The Congress shall have Power... To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.' "
My guess would be at least some of the conservatives on the Supreme Court wouldn't allow naked seigniorage on the part of the executive branch because they'd view it as an usurpation of Congress's authority to regulate and coin money. But who knows?
One practical concern, though, is how would the banking be handled? Like any entity that pays bills, the US Treasury uses banking services, mainly via its account with the Federal Reserve. So how does it goose its account balance to do as you suggest? Per my research the Federal Reserve is prohibited by law from providing overdraft protection. So Treasury still needs to come up with a work around to deposit the necessary funds. Hence the platinum coin.
The idea that anyone would use ChatGPT for research is somewhat bizarre... While LLM systems may produce text that appears "truthy," they are not designed to produce "truthful" results.
In any case, I am still wondering what prevents Treasury from simply transferring a trillion dollars to the Fed. Is it a law? If so, what law? Is it simply a side effect of the way we've set up the banking system? If so, how could we change the system to allow such a transfer? And, should we do so?
“Last but not least, a lot of oxen were gored in this deal from a progressive point of view, but IRA climate funding was not. This is the thing the Climate Left keeps not acknowledging — Democratic Party elites very deeply and sincerely care about their pet issue and try extremely hard to give them wins. Which is fine. ** But the favorite children of the coalition ought to repay the favor and try to be nice, helpful, and cooperative rather than pretending that they are leading a grassroots mass movement that needs to bring pressure to bear on a recalcitrant political system.**
Hard to see this as anything but an unqualified win for Biden, who the media were promising to hold equally responsible for default in the face of the House-passed bill:
1) The deal gives Republicans nothing they couldn't have gotten without threatening the default weapon. That means they paid all of the cost for threatening to use the weapon, in exchange for getting nothing for threatening to use the weapon.
2) Either they ratify the deal and lock in the L, which means they'll have to consider the debt default weapon quite a bit less effective for next time, or they pull the trigger on the weapon which Biden nullifies using half a dozen options at his disposal, thereby removing it forever. Republicans look like the maniacs who hit the end of the world button out of spite, and Biden looks like the calm hand on the tiller who averted a disaster of financial terrorism.
3) Both of those options are terrible for Republicans.
Winning a conflict is about limiting your opponent to only bad options. Biden did that to the Republicans and they weren't able to do it to him (Biden's bad options largely come to him through his own party, which seems pretty significant.) Another flawless victory for Diamond Joe.
I wish Biden would have done as good a job of negotiating last year with Manchin and Sinema. He seemed more pleasant as he worked with McCarthy than when dealing with members of his own party. I don’t understand how they didn’t get tax increases for those over $400k and/or a repeal of the Trump tax cuts through when they had a chance. It makes Democrats look like they love rich tax cheats, too.
Early thoughts on a nebulous budget agreement have questionable utility. The fun starts today as the small ankle biter coalitions on The Hill and at the WH stratigize to find leverage to muck things up and transform the final bill into 2024 campaign fodder.
Matts thought #1 expanded may have been a better read. It's difficult to " ignore everything about the circumstances of how this (budget agreement) came together". White House strategy and messaging were a massive slow moving disaster. McCarthy making a credable claim of victory on this one drives home the fact that Dr. Jill is no Edith Wilson.
It is worth noting that Democrats jammed 2 years of discretionary spending growth into last year’s omnibus so the ‘give’ here on nominal spending is basically nil.
I am genuinely impressed with Biden’s ability to get bipartisan legislation passed with minimal drama.
In terms of work requirements, even if you don’t agree, I think it’s useful to look at it from the perspective of the lower working class. Someone has diabetic neuropathy and join problems but they’re still working as a Walmart cashier, etc. They go to the doctor and it’s $40 (which they struggle to afford h and another $40 for their prescriptions (which they struggle to afford) and their cousin, who doesn’t work and is on Medicaid, pays $1.
#15. Taxes yes! Progressive, low deadweight loss taxes. [I don't believe anyone, not even a Chatbot trained on the corpus of Paul Ryan's statements, would claim that rich people will cut back their work and innovation because of a higher taxes.]
Social Security yes to the "retirement age" but not because of the money it will save, but because it undermines the idea age-based retirement.
Mecicaid? I thought we were still trying to get more States to expand Medicaid coverage.
Medicaid? I thought we were still trying to get states to expand Medicaid.
We all knew they should have raised the ceiling in the lake duck. There’s really no way to view this except that senior Dems and WH were wanting a bipartisan deal. So the ‘tactics’ of this are either worse or better than Matt describes depending on your view of the deal and politicians democratic responsibilities.
Now that it's over (fingers crossed) can Biden make this thing go away with a couple of test cases?
Sell a consol that pays $10,000 per year forever. Mint a $1 million platinum coin and deposit it with the Fed. Wait for people with colorable standing to sue (arrange the lawsuits if necessary, but I think conservatives will do it themselves) and see what the courts say.
I'm not sure if you're Biden you want to test these ideas beforehand. Absent the pressure of blowing up the economy, it seems probable the right wingers on the court would find it easier to form a united front to strike down the various workarounds. Which would leave the country without even a Hail Mary pass in the event of financial terrorism by MAGA.
I think the 14th Amendment will always be available as a Hail Mary, because if worse comes to worst and the debt ceiling does get breached, calling it unconstitutional and hoping the courts don't enforce a default will be less disastrous than immediately defaulting.
To minimize the GOP's leverage, ideally you want both a Hail Mary (a last resort that's never been tested) and a heterodox measure that the courts have already upheld. So I think testing the platinum coin in advance would reduce risk overall.
I'm not sure the consol is testable in court without an imminent debt ceiling breach. The platinum coin, however, I agree should be testable at any time, although depositing it in the Fed short of an imminent debt ceiling breach again might not be enough. The most guaranteed way to test the platinum coin is to mint several (they don't even need to be $1 million; could be $100K) and then pay some federal contractors' invoices with them. That should prompt an unambiguously justiciable question when one or more of the contractors refuses to accept the coin as legal tender.
I don't understand this. We do mint platinum coins and offer them for sale to the public (https://catalog.usmint.gov/coins/precious-metal-coins/platinum/). Is the idea that we would demand that the contractor take them as payment? Given how contractors are paid now (i.e., digits moving in electronic accounts), I'm sure said contractor would have a great case in court not because of any debt ceiling issues but because being forced to accept payment in some physical form is unjustifiably onerous.
Yes, the idea is that the contractors would be paid with the coins. A justiciable controversy would be created if the contractor rejected the payment as not being legal tender. As for your counter-theory, as far as I'm aware, the only cases finding that "being forced to accept payment in some physical form is unjustifiably onerous" involve situations where people tried to pay with pennies or other small change such that the recipient would have to manage huge physical volumes of coins I'm not aware of any authority that receiving, say, a single coin is "unjustifiably onerous" and I'd like to see it explained how that wouldn't just flat out kill the entire concept of "legal tender."
I think that one comes down to whether the failure to pay government employees would be "capable of repetition, but evading review," which is a tough standard to meet in most cases. I suspect that the judge would find the request for relief was mooted by the agreement and that it's not sufficiently certain to reoccur for the court to consider it, especially since the DOJ is resisting it. (Courts basically never involuntarily force government executives -- whether presidents, governors, or mayors -- to take on powers that the executive itself isn't claiming to have.)
Who do you have in mind as the "Climate Left"? The Sunrise Movement is not so helpful or cooperative, but it is good to have a "Climate Far Left" applying pressure from the outside. The people who have (thank god) gotten the attention of the Liberal Elite are the more insider groups, like Evergreen Action. And they seem to do a good job of cooperating, and even targeting permitting reform as an issue, no? What am I missing?
Who do you have in mind as the "Climate Left"? The Sunrise Movement is not so helpful or cooperative, but it is good to have a "Climate Far Left" applying pressure from the outside. The people who have (thank god) gotten the attention of the Liberal Elite are the more insider groups, like Evergreen Action. And they seem to do a good job of cooperating, and even targeting permitting reform as an issue, no? What am I missing?
The Democrats should have agreed to conditions on raising the debt limit but insisted on it being raised to $100t. Then they could say they kept the limit in place but wouldn’t have to worry about it.
Spot on post.
This was tactically a minor loss for the Democrats (and inevitable, given that elections have consequences) and a strategic defeat for rational government. MY hits this precisely:
"By giving Republicans a policy win in this way rather than through the normal appropriations process, Biden has validated the debt ceiling hostage tactic. That meaningfully increases the odds of a future substantive disaster, either in terms of policy concessions or a breach."
This extortion and threat to the world economy will now happen whenever there is a Democratic President and the Republicans hold at least one house. Given the relative mildness of this most recent standoff, it is also highly unlikely that the Democrats will seek to eliminate the debt ceiling the next time they hold the White House and both houses of Congress. So we're stuck with this Russian roulette threat hanging over our heads.
Question: should the Democrats now play the same game? The next time they hold one or two houses of Congress and there's a Republican President, should we play the same extortionist game? My "good government" side screams "no!" but if we can get good things by so doing, why not? Why should we be the only ones who care enough never to see any threat to the economy? It's not like that moral behavior wins us any kudos.
Question: Can anyone identify what law prevents the government from spending, as authorized by Congress, once the debt limit has been reached? I understand that reaching the debt limit prevents further borrowing, but what law says that the government can only spend receipts from taxes, tariffs, borrowing, etc.? Is there a law that prevents "printing money?" If so, what is it? If there is no such law, is the need to borrow simply a norm that we assume must be respected?
The MMT (Modern Monetary Theory) crowd argue that borrowing is only one of several tools for offsetting the inflationary impact of spending. As I understand it, while MMT adherents accept that borrowing is often very wise, they also say borrowing is not always necessary. So, if spending can be shown to be at least reasonably non-inflationary, what would prevent spending without borrowing?
"Is there a law that prevents 'printing money?' If so, what is it?"
There is for bills: 31 U.S.C. § 5115(b) ("The amount of United States currency notes outstanding and in circulation — (1) may not be more than $300,000,000 . . . .")
There is technically not one for regular coins, but there is a statute restricting the denominations of coins: 31 U.S.C. § 5112(a) ("The Secretary of the Treasury may mint and issue only the following coins . . . ."). (There is, as an aside, a specific limit on the number of clad/silver/gold coins that can be minted: 31 U.S.C. § 5112(m)(2)(A).)
However, there is an exception to that latter statute for platinum coins: 31 U.S.C. § 5112(k) ("The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.").
This is why Matt always talks about the "Trillion Dollar Coin" being made of platinum: https://en.wikipedia.org/wiki/Trillion-dollar_coin
31 U.S.C. § 5115(b) limits the quantity of outstanding "notes," but most government spending is done via electronic transfers and checks, not paper notes. Today, money is "printed" using computer keyboards. What law would prevent someone at a Treasury computer keyboard from just electronically transferring $1 Trillion for deposit in Treasury's account at the Federal Reserve ?
My *guess* is that electronic transfers can only be of actual amounts in the accounts of the US government. In any event, there's clearly something that prevents that otherwise law professors wouldn't be writing articles about how platinum coins can operate as loophole in the laws limiting the volume of physical currency the federal government can produce.
The fact that law professors don't write articles saying "just transfer some new money pulled from the ether" makes me think there might be some law blocking that path. If so, what is it? Or, is it simply that we're all stuck believing that such a law *must* exist? This would not be the first time that we've been surprised to discover that some commonly assumed norm is just that -- a norm, not a law.
Remember also that there are quite a few academics (i.e. MMTers) who regularly say that issuers of fiat currencies need not rely on borrowing or other revenues to support spending... (Although borrowing is often useful to mitigate inflationary impacts.) So, are the MMTers merely making a theoretical point that can't be tested due to some law? If so, what law? If such a law doesn't exist, why aren't law professors writing articles about this?
>The fact that law professors don't write articles saying "just transfer some new money pulled from the ether" makes me think there might be some law blocking that path.<
I spent some time with ChatGPT. It couldn't come up with anything very specific save this from Article 1:
" Regarding the key language from the Constitution on Congress's power to "coin money and regulate its value," here is the quote from Article I, Section 8, Clause 5 of the United States Constitution: 'The Congress shall have Power... To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.' "
My guess would be at least some of the conservatives on the Supreme Court wouldn't allow naked seigniorage on the part of the executive branch because they'd view it as an usurpation of Congress's authority to regulate and coin money. But who knows?
One practical concern, though, is how would the banking be handled? Like any entity that pays bills, the US Treasury uses banking services, mainly via its account with the Federal Reserve. So how does it goose its account balance to do as you suggest? Per my research the Federal Reserve is prohibited by law from providing overdraft protection. So Treasury still needs to come up with a work around to deposit the necessary funds. Hence the platinum coin.
The idea that anyone would use ChatGPT for research is somewhat bizarre... While LLM systems may produce text that appears "truthy," they are not designed to produce "truthful" results.
In any case, I am still wondering what prevents Treasury from simply transferring a trillion dollars to the Fed. Is it a law? If so, what law? Is it simply a side effect of the way we've set up the banking system? If so, how could we change the system to allow such a transfer? And, should we do so?
“Last but not least, a lot of oxen were gored in this deal from a progressive point of view, but IRA climate funding was not. This is the thing the Climate Left keeps not acknowledging — Democratic Party elites very deeply and sincerely care about their pet issue and try extremely hard to give them wins. Which is fine. ** But the favorite children of the coalition ought to repay the favor and try to be nice, helpful, and cooperative rather than pretending that they are leading a grassroots mass movement that needs to bring pressure to bear on a recalcitrant political system.**
So well said!
Very helpful! Thanks!!
Hard to see this as anything but an unqualified win for Biden, who the media were promising to hold equally responsible for default in the face of the House-passed bill:
1) The deal gives Republicans nothing they couldn't have gotten without threatening the default weapon. That means they paid all of the cost for threatening to use the weapon, in exchange for getting nothing for threatening to use the weapon.
2) Either they ratify the deal and lock in the L, which means they'll have to consider the debt default weapon quite a bit less effective for next time, or they pull the trigger on the weapon which Biden nullifies using half a dozen options at his disposal, thereby removing it forever. Republicans look like the maniacs who hit the end of the world button out of spite, and Biden looks like the calm hand on the tiller who averted a disaster of financial terrorism.
3) Both of those options are terrible for Republicans.
Winning a conflict is about limiting your opponent to only bad options. Biden did that to the Republicans and they weren't able to do it to him (Biden's bad options largely come to him through his own party, which seems pretty significant.) Another flawless victory for Diamond Joe.
Thanks very much, Matt. Especially appreciated the polite but firm corrective on IRA funding.
I wish Biden would have done as good a job of negotiating last year with Manchin and Sinema. He seemed more pleasant as he worked with McCarthy than when dealing with members of his own party. I don’t understand how they didn’t get tax increases for those over $400k and/or a repeal of the Trump tax cuts through when they had a chance. It makes Democrats look like they love rich tax cheats, too.
Early thoughts on a nebulous budget agreement have questionable utility. The fun starts today as the small ankle biter coalitions on The Hill and at the WH stratigize to find leverage to muck things up and transform the final bill into 2024 campaign fodder.
Matts thought #1 expanded may have been a better read. It's difficult to " ignore everything about the circumstances of how this (budget agreement) came together". White House strategy and messaging were a massive slow moving disaster. McCarthy making a credable claim of victory on this one drives home the fact that Dr. Jill is no Edith Wilson.
It is worth noting that Democrats jammed 2 years of discretionary spending growth into last year’s omnibus so the ‘give’ here on nominal spending is basically nil.
I am genuinely impressed with Biden’s ability to get bipartisan legislation passed with minimal drama.
In terms of work requirements, even if you don’t agree, I think it’s useful to look at it from the perspective of the lower working class. Someone has diabetic neuropathy and join problems but they’re still working as a Walmart cashier, etc. They go to the doctor and it’s $40 (which they struggle to afford h and another $40 for their prescriptions (which they struggle to afford) and their cousin, who doesn’t work and is on Medicaid, pays $1.
#15. Taxes yes! Progressive, low deadweight loss taxes. [I don't believe anyone, not even a Chatbot trained on the corpus of Paul Ryan's statements, would claim that rich people will cut back their work and innovation because of a higher taxes.]
Social Security yes to the "retirement age" but not because of the money it will save, but because it undermines the idea age-based retirement.
Mecicaid? I thought we were still trying to get more States to expand Medicaid coverage.
Medicaid? I thought we were still trying to get states to expand Medicaid.
We all knew they should have raised the ceiling in the lake duck. There’s really no way to view this except that senior Dems and WH were wanting a bipartisan deal. So the ‘tactics’ of this are either worse or better than Matt describes depending on your view of the deal and politicians democratic responsibilities.
Now that it's over (fingers crossed) can Biden make this thing go away with a couple of test cases?
Sell a consol that pays $10,000 per year forever. Mint a $1 million platinum coin and deposit it with the Fed. Wait for people with colorable standing to sue (arrange the lawsuits if necessary, but I think conservatives will do it themselves) and see what the courts say.
He should have done these things beforehand.
I'm not sure if you're Biden you want to test these ideas beforehand. Absent the pressure of blowing up the economy, it seems probable the right wingers on the court would find it easier to form a united front to strike down the various workarounds. Which would leave the country without even a Hail Mary pass in the event of financial terrorism by MAGA.
I think the 14th Amendment will always be available as a Hail Mary, because if worse comes to worst and the debt ceiling does get breached, calling it unconstitutional and hoping the courts don't enforce a default will be less disastrous than immediately defaulting.
To minimize the GOP's leverage, ideally you want both a Hail Mary (a last resort that's never been tested) and a heterodox measure that the courts have already upheld. So I think testing the platinum coin in advance would reduce risk overall.
I'm not sure the consol is testable in court without an imminent debt ceiling breach. The platinum coin, however, I agree should be testable at any time, although depositing it in the Fed short of an imminent debt ceiling breach again might not be enough. The most guaranteed way to test the platinum coin is to mint several (they don't even need to be $1 million; could be $100K) and then pay some federal contractors' invoices with them. That should prompt an unambiguously justiciable question when one or more of the contractors refuses to accept the coin as legal tender.
I don't understand this. We do mint platinum coins and offer them for sale to the public (https://catalog.usmint.gov/coins/precious-metal-coins/platinum/). Is the idea that we would demand that the contractor take them as payment? Given how contractors are paid now (i.e., digits moving in electronic accounts), I'm sure said contractor would have a great case in court not because of any debt ceiling issues but because being forced to accept payment in some physical form is unjustifiably onerous.
Yes, the idea is that the contractors would be paid with the coins. A justiciable controversy would be created if the contractor rejected the payment as not being legal tender. As for your counter-theory, as far as I'm aware, the only cases finding that "being forced to accept payment in some physical form is unjustifiably onerous" involve situations where people tried to pay with pennies or other small change such that the recipient would have to manage huge physical volumes of coins I'm not aware of any authority that receiving, say, a single coin is "unjustifiably onerous" and I'd like to see it explained how that wouldn't just flat out kill the entire concept of "legal tender."
Do you think this would be justiciable without an imminent default?
https://www.politico.com/news/2023/05/29/doj-biden-14th-amendment-debt-limit-lawsuit-00099163
I think that one comes down to whether the failure to pay government employees would be "capable of repetition, but evading review," which is a tough standard to meet in most cases. I suspect that the judge would find the request for relief was mooted by the agreement and that it's not sufficiently certain to reoccur for the court to consider it, especially since the DOJ is resisting it. (Courts basically never involuntarily force government executives -- whether presidents, governors, or mayors -- to take on powers that the executive itself isn't claiming to have.)
Great idea.
Thank you, counsel