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End the Austerity War Against the People: Mint the Platinum Coin!

letsgetitdone's picture

How can the President win a victory for the people in the coming hostage-taking over the budget? Here's a scenario!

1. Mint a platinum coin with face value big enough to cover pay-off of the national debt, and the gap between tax revenues and Government spending for many years to come. For example, $60 Trillion in face value would generate enough electronic credits in the Treasury General Account (TGA) at the Fed to last for about 20 years or through 2030. Result: $60 Trillion in the TGA, none of it spent, so no possibility of inflation.

2. Immediately pay off the $6.2 trillion owed by the Federal Government to the Federal Reserve Bank, the various Government Agency Trust funds, among them Social Security and debts to other Government Agencies. Result: Reduction of the national debt from $14.3 Trillion to $8.1 Trillion, all of it owed to the non-Government sector. None of the $60T spent in such a way that the money goes into circulation; so no possible inflation.

3. Pay off the non-Government sector debt, as it comes due using Proof Platinum Coin Seigniorage (PPCS) revenue when necessary. Result: Since the estimated cost is about $300 Billion paid off per month; we can expect another $1 Trillion to be paid off by the end of the year leaving a national debt of about $7.1 Trillion, with a bit less than $53 Trillion still left in the TGA. The $1 Trillion in debt "swapped" for non-governments sector cash reserves is very unlikely to cause inflation, since the debt instruments are probably more inflationary.

4. Use PPCS to pay for any 2011 spending not covered by taxes between now and the end of the year, estimated at about $600 Billion. Result: $52 Trillion left in the TGA. And since the 2011 deficit spending hasn't created full employment, no inflation will result from this action either.

5. Go into the negotiations on the budget with a position, saying

“there will be no spending cuts in this budget at all. In fact, I want a) a full payroll tax cut for employers and employees until full employment is reached; b) immediate lifting of the limit on number of weeks someone can get unemployment insurance; c) restoring food stamp program spending to its state before the recent cut; d) immediate revenue sharing for the States in the amount of $1,000 per person to enable State Governments to retain public service jobs; e) A Federal Job Guarantee program with a base wage of $8.00 per hour cost-of-living adjusted from the lowest cost of living SMSA in the nation upward, with full fringe benefits, and including Medicare enrollment for FJG workers; and f) an increase in SS payments by 50% effective immediately. Now, what is it you gentlemen want?”

Result: They will say that's ridiculous, and threaten to shut down the Government. The President can reply by pointing out that he has solved the austerity/solvency/debt/deficit problem, and there's no need to cut spending.

6. Make a major address to the American people telling them the situation and the history of Republican efforts to tank the economy, informing them of your proposal to head off the likely double-dip recession, end unemployment, and strengthen Social Security, point out that the Treasury General Account has $54 Trillion left in it, and that the national debt is being repaid at a rate of $200 - $300 Billion per month, will be 50% repaid by the end of 2011, and will be almost entirely repaid by 2014. So, there is no deficit, debt, or deficit reduction problem. There is plenty of money in the Federal till to do all the things you've proposed and provide jobs for all, and create plenty of sales to get business roaring.

Tell them the Republicans are standing in the way of jobs for everybody, and that they need to get on the phone to their representatives and demand that they make a deal with all the President's proposals in it. Result: Congressmen and Senators will get all kinds of mail, phone calls and other communications supporting the proposals and telling them to end the sufferings of the American people, or else. That will be even more likely to happen if the economy is continuing to get worse. However, the Republicans will probably still reject the President's proposals, call them profligate spending, and the tea party Reps. will probably threaten to shut the Government down, if their demands are not met.

7. The President can then call for a meeting with the leaders of both Houses to get the demands of the Republicans on the table, and see whether there can be a settlement. The Republicans will propose all kinds of harmful cuts in spending, no tax increases and will demand passage of the Bush Tax cuts on a permanent basis. Emboldened by the presence of $54 Trillion in the bank, the Democratic Leaders will demand passage of all of the President's proposals; but they will probably no longer demand expiration of the Bush Tax cuts, because they will probably recognize that there is no longer any visible money problem.

The President can end the meeting by saying that the Republican position on cutting spending is untenable because he has proven that the US has no revenue problem, and that there is no reason for austerity. At the same time, he can suggest to the Democrats, if they called for letting the Bush tax cuts expire, that there is no economic justification for doing that, and that the only justification is one of fostering greater economic equality; an important issue, but perhaps not one that ought to block a deal with a Republican House on the budget. Then he can ask the leaders to get back to their caucuses and propose a compromise that is likely to pass both Houses.

Result: The President will have leverage to propose a compromise to the country. The Democratic leaders will have no problem getting the full support of their caucuses for the deal. The Republican leaders will have problems with their tea party people; but they can point out that the proposed compromise doesn't violate Grover Norquist's pledge, and also that it will be very hard to oppose a compromise that will definitely produce full employment for everyone who wants to work, and that carries with it no visible debt problem.

8. The President should, at that point, immediately outline a compromise proposal to the nation including all of his demands, and also one Republican demand, namely a continuation of the Bush tax cuts. He can emphasize that he has ended the deficit/debt problem with its need for austerity for good. He must again ask the country to tell their Senators and Representatives to support him in his new compromise which gives the Republicans what they've wanted badly, and also gives to the people the programs that will finally create the good jobs needed to end unemployment.

He can also ask them to fulfill his special request, which is to tell their Representatives and Senators that if they vote against his compromise, the voter will vote against them if they are primaried in 2012, and will even vote against them if the other major party runs an acceptable candidate who supports the President's jobs proposals.

Result: the flood of messages coming into the Capitol will cause the Republicans to “cave” to the compromise proposed by the President. And the President will finally have stood up to the hostage-takers and arrived at a good deal for the people of the United States.

I can't conclude this scenario without noting, that the successful outcome of the coming budget hostage-taking will not be possible without changing the background of any negotiation that will accompany it. Specifically, to be successful, and resist the hostage-takers, the President must change the situation to remove the most obvious justifications for cutting spending.

The function of minting the high face value platinum coin, filling the Federal purse using PPCS, and beginning to pay off the national debt quickly, is to demonstrate dramatically that there is no US solvency problem, or any debt and/or deficit reduction problem.

Issuing the coin and getting the Fed to issue $60 T in credits to Treasury, will demonstrate exactly that, and blow any justification for austerity and spending cuts out of the water. The Republicans won't be able to spin that; and without a plausible claim that austerity is necessary, the drive to force austerity on America will evaporate. Within a few weeks we will have a new political discourse.

The main problem I see with this scenario is getting the President to use PPCS to shake up the austerian system, destroy its forward momentum, and bring forth a new progressive era. He has the power to do it; but he is so tied into his Hooverian austerity-mongering, that I don't think he will use PPCS even though it could well mean the difference between victory or defeat in 2012 for him. He'd rather cling to his neoliberal world view than to learn and to change the terms of the debate and the political paradigm that he is so comfortable with.

That's why I propose that we press for his resignation now! Before he comes up with any more horrible deals with the Republicans and the tea party. Face It! This man can no longer be our leader. His pragmatism is not the pragmatism of FDR and the great Democrats of the past. It is a corrupt short-run pragmatism. He does not deserve our support or our loyalty! What he needs to do is to heed Oliver Cromwell's old admonition to the long parliament:

“You have sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go!”

In other words, ask him to resign, immediately!

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Jessica Yogini's picture
Submitted by Jessica Yogini on

Give them a $60 trillion and they will put $59.999 trillion in their own pockets.
Or maybe they will put $62 trillion in their own pockets and use the $2 trillion "debt" they just created as an excuse to steal from our already paid for social security pensions. Like they did in 2008-2009.
The problem is not Obama and not monetary policy. The problem is the elite that both serve.

letsgetitdone's picture
Submitted by letsgetitdone on

but in human affairs there is always complex causation. There's no question that the spin about austerity and its face plausibility have diverted people from pressuring the elites about jobs. if the reasons for concern about it were totally gone, behavior would change in helpful ways. If it did no, then there would be a primary effort against Obama without question.

Cujo359's picture
Submitted by Cujo359 on

The reason this debt ceiling nonsense has become such a problem is that when politicians say it's a problem, people aren't told otherwise. The news business in this country won't dig into stories like this. So, identifying a possible solution is helpful, if only to take away an excuse.

letsgetitdone's picture
Submitted by letsgetitdone on

We have to keep ripping away the mask.

Jessica Yogini's picture
Submitted by Jessica Yogini on

I am glad that you are ripping away the mask. I agree with you that the sudden fervor for deficit reduction has distracted people considerably.
However, I think that the particular elite we have resonates with something spread through our entire culture. Finding out what that resonance is and healing it would make our job a lot easier.
On the most superficial level, even though Austerianism is a fallacy and a fallacy thoroughly promoted by the elite's multi-faceted propaganda apparatus (of which the visible mainstream media are the tip of the iceberg), it is a fallacy that makes sense to people, a fallacy that is easily accepted and difficult to overturn. Because it takes what is true for the individual household and assumes it to also be true for the national government.
To me the telling fact is that even though most people know or sense that huge amounts of money have been stolen by the finance sector in the past few years alone, among those who believe that sacrifice must be made, there has been surprisingly little clamor for that sacrifice to be made by the malefactors of great wealth. And much of what clamor there has been has been channeled into a Tea Party pushing for even less restraint on the thieves by their rivals within the elite. There must be something more than mere repetition of propaganda at work here.
There is a theory that claims that the economy does not drive social mood, but rather than social mood drives the economy. I think this is far too simple an understanding, but right at this moment, it happens to contain considerable truth.
Even though few (outside the predatory elite) really want a depression and most of us would certainly like to avoid being dragged down by it, I think there is an expectation that this will happen. There is also a fair amount of fire and brimstones, on both the right and the left, that sees the current suffering as the result of our sins. We disagree on the nature of those sins and on the left, we would rarely use that term. But the sense that America is a profligate abuser of the environment and the planet's resources also facilitates an acceptance of the unavoidability of the current disaster.

In other words, if we as a species were just a bit more mature, we would look at what is going on now and respond with such a powerful incredulity that it would stop this awful sickness in its tracks.

But why don't we and why won't we? I don't know. I feel like a physicist dealing with a black hole. I can sense its presence from how other things react, but I can not yet make out the nature of the black hole* itself.

But that will not stop me from hazarding a guess. Since the industrial revolution, we have unleashed productive forces from within ourselves that are capable of great abundance. But we have organized those forces from a mentality that was forged by the brutalizing, traumatizing scarcities of the past 10 millennia (at least). The result has been that our increasing productive capacities have also created new levels of scarcity and suffering. Now with the development of the Internet and other electronic communications, the contradiction between the vastness of our productive capacities and our miserly mentalities is turning what should be the dawn of a new paradise into a nightmare that is only beginning.
As humanity slowly woke into self-awareness and especially from the dawn of civilization, survival required a certain narrowness of concern. If we extended solidarity to our clan or tribe, we withheld it beyond the limits of the clan or tribe. It is precisely this former truth, this wisdom turned rotten, this sense that someone else must be outside the circle of light for us to be inside it that simply can not function with the powerful abundance that we developed in ourselves. To put it simply, we can now either all together lead lives of unimaginable wealth or we can be impoverished each alone.
Our dear elite, our charming masters of deceit and greed, are the orcs of our worse nature. The key I believe is not only to find the angels of our better nature, but also to come to terms with and integrate our inner Goldmann-Sachs. To heal that part of ourselves that Austerianism resonates with. I am not saying that this can replace political change, but that it will be necessary to make possible the kind of political change we really want.

(*To be clear, by the black hole, I mean whatever force it is that makes Austerianism so easily accepted. Because to me, elite propaganda and the common sense quality of Austerianism do not explain the grip of this mental illness.)

letsgetitdone's picture
Submitted by letsgetitdone on

I think this is the old protestant ethic coming back to haunt us. However, we escaped the very same attraction for austerity during the 1930s and I think we can do it again.

Jessica Yogini's picture
Submitted by Jessica Yogini on

I think that before humanity completes the transition that we are stuck at the start of/paying the price for trying to avoid, we will have to sort through not only the Protestant Ethic and its Confucian counterpart, etc., but also the place even deeper that they resonate with. But I don't know if this crisis will force us to go that deep.
The longer the current regime holds on, the deeper the change will have to go in order for us to reach anything stable enough to last a decade or three.
If Obama had been FDR II, then changing the dominant political party might have bought us 5-10 years. Now we are at the point where the legacy party system will have to be replaced. Probably not just in the US either.
But if they continue to hold on through Obama II or Bachmann/Romney I, then the crisis may run so deep that nothing short of replacing corporatist capitalism will provide even short-term relief.
Why does writing this remind me that I need a dental check-up?
Abolishing the finance-for-big-profit sector altogether and replacing it with a carefully supervised utility and doing something fairly similar with energy (globally for sure) might buy corporatism a good half century or so before changes as far-reaching as the Neolithic Revolution (the shift from gathering and hunting to settled agricultural civilization) kick in.
Not sure if any possibility for such deep reform but that still retains capitalism remains.

letsgetitdone's picture
Submitted by letsgetitdone on

what we need is to end corporate capitalism by getting rid of corporations? That would probaby end many of the evils of capitalism right there.

Joe's picture
Submitted by Joe on

another outstanding post. Your economic ideas are fantastic, and your political understanding is too.

Joe's picture
Submitted by Joe on

Joe - I'm finally done reading the last few of your posts on PPCS. Incredible work!

Based on what I've learned about PPCS, I had a thought, and I don't know if it was a crazy one or not. I wanted to run it by you.

It seems that if you had your way, the US Government wouldn't even bother issuing debt to finance deficit spending. The Gov would just use PPCS.

I'm wondering if the logic could be extended. Instead of just using PPCS to finance our deficits, why not use it to finance ALL spending? Why not completely do away with most federal taxes? (i.e. income taxes, payroll taxes, etc.)

I presume the reason for not doing this would be that inflation would certainly rise to a level well beyond typical inflation rates throughout our history.

Then again, isn't inflation just like a tax anyway?

For example, is there any difference between me giving the government $5000 in year X, or my net worth decreasing in purchasing power by $5000 in year X? No, I don't think there is a difference.

So why not let inflation be our tax system?

It would seem to have a whole bunch of excellent properties:

  1. It would be a tax on wealth
  2. It would be fairly applied to every person in every income bracket and every corporation
  3. It wouldn't care about offshore tax havens
  4. We could essentially do away with the IRS (making conservatives happy)

I'm probably forgetting other things.

But anyway, what do you think of this?

letsgetitdone's picture
Submitted by letsgetitdone on

Joe, there are three reasons to tax:

1) to establish the value of a fiat currency in the first place. See here: http://www.netrootsmass.net/fiscal-susta...

2) to control inflation by destroying net financial assets creating excessive aggregate demand.

and

3) to regulate the distribution of wealth so that there is greater economic equality.

Regulating inflation is important because many people live on fixed incomes or work in jobs whose remuneration doesn't fluctuate with rising prices. Also, many people have savings whose value would be wiped out by excessive inflation.

Regulating the distribution of wealth is also very important because extreme inequality undermines democracy.

Jessica Yogini's picture
Submitted by Jessica Yogini on

I suspect that we can print/create digitally money up to the amount of shortfall in demand created by capitalism (Say's Law or no Say's Law). Beyond that would be currency debasement with complex possible impacts.