The Center of the Universe

St Croix, United States Virgin Islands

MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

What I think I would have done…

Posted by WARREN MOSLER on July 30th, 2011

Voting to not raise the debt ceiling to authorize the deficit spending to pay for bills already authorized by Congress, to the best of my knowledge, falls under the definition of subversive.

Representatives are well aware of the non subversive channels to work through to alter prior spending decisions.

Therefore, I would have had the Dems in the Senate put a clean debt limit extension up for a vote,
with the understanding that anyone who voted against this measure to allow the US Govt. to pay
for the expenses that it had already authorized would be considered subversive and treated accordingly.

That would mean risking being removed from the Senate as per the Constitution.

After it passed the Senate it would have gone to the House for a vote with the same understanding.

39 Responses to “What I think I would have done…”

  1. John Says:

    According to the Constitution, it takes a two-thirds vote of the Senate to expel a member, and that is the only way to remove someone from the Senate. The same holds for Representatives. Members are also not to be punished for any speech or debate in Congress.

    There are several tactics the President could take against the debt ceiling. For example, minting a few trillion-dollar platinum coins or holding that appropriations and spending laws passed subsequent to a debt ceiling law appeals the debt ceiling law would be possible. But requiring a particular vote from Congress is not one of them.

    Reply

    WARREN MOSLER Reply:

    I’d call for that vote for anyone voting against a clean bill to allow the tsy to pay authorized expenditures.

    Reply

  2. Gary Says:

    unfortunately Democrats are really unorganized. Since Republicans represent the ultra right wing – Democrats represent the rest – from moderately right, centrists, to moderately leftists. So there is littel unity among Democrats.

    Reply

    Rodger Malcolm Mitchell Reply:

    @Gary, I don’t believe there are any leftists. Obama is to the right of every president in history. The Democrats are the new Republicans. The Republicans are the new fascists.

    Rodger Malcolm Mitchell

    Reply

    Vincent Reply:

    @Rodger Malcolm Mitchell,

    Republicans the new fascists? I assume you’re either joking, or don’t know what fascism is.

    I totally agree with a clean vote for raising the debt limit to cover approved obligations. I think the issue put into that context will touch a nerve with most people

    Also, I think the idea of a payroll tax holiday needs to be pushed hard. I suspect a lot of those on the right would favor it over more of the so-called stimulus.

    Reply

    pebird Reply:

    @Vincent, Just an FYI, there is no need to specify “for approved obligations”. Debt is only issued in the first place to cover approved obligations.

  3. ESM Says:

    That’s the stupidest idea you’ve ever put forth here. And I am well aware of your proposal to institute a 30mph national speed limit.

    Reply

    WARREN MOSLER Reply:

    Let’s see if it grows on you like the 30mph option has…

    Reply

    JCD Reply:

    @WARREN MOSLER, The beauty of MMT is that it’s non partisan.

    This kind of post makes it way too easy for partisans to cast MMT as well left of center.

    This does not move the ball forward.

    Reply

    Unforgiven Reply:

    @JCD,

    I’ll concur that politics and economics make a disastrous mix.

    Something I’d do well to remember in my replies.

  4. Hoonose Says:

    Do I detect a smidge of mockery there?…

    Reply

  5. Rodger Malcolm Mitchell Says:

    Some Congresspeople don’t understand Monetary Sovereignty. They simply are ignorant. Some Congresspeople may understand Monetary Sovereignty, but don’t give a damn about the U.S. They just want power.

    What is the word that describes someone who intentionally hurts his nation for selfish reasons? The word is “traitor.”

    To my knowledge then, every single person in the executive and legislative branches either is ignorant or a traitor. Know any exceptions?

    Rodger Malcolm Mitchell

    Reply

    WARREN MOSLER Reply:

    comes back to calling it innocent fraud.

    that gives them the option of being either ignorant or subversive

    Reply

  6. anon Says:

    Coin frivolity:

    “I actually feel like this plan could, in addition to rescuing the economy, provide the spark our film industry requires. I could sit here for ten minutes and rattle off a half-dozen great film concepts based on this story.

    Bank caper: a dashing Clooney-esque figure assembles a team to steal the trillion dollar coin.

    Comedy: a bumbling assistant Treasury Secretary played by Jack Black accidentally picks up the trillion dollar coin and spends it on a Mountain Dew, sending the entire government into a mad scramble for the coin before the world economy collapses.

    Noir: Regular person somehow acquires the coin, and is slowly twisted.

    Action: Super-villain plots to destroy the coin and bring the economy to its knees, from which he stands to profit due to a nefariously brilliant hedge he has prepared. Maybe we’ll call him “Eric Cantor.”

    http://www.economist.com/blogs/freeexchange/2011/07/so-crazy-it-just-might-work

    Reply

    Ramanan Reply:

    @anon,

    “I actually feel like this plan could, in addition to rescuing the economy, provide the spark our film industry requires. I could sit here for ten minutes and rattle off a half-dozen great film concepts based on this story.”

    Ha ha.

    http://www.creditwritedowns.com/2011/07/trillion-dollar-coin.html

    suggests blog name changes as well: My suggestion

    “The Coin of the Universe”

    Good movie names … “One Coin Flew Over the Cuckoo’s Nest”, “Gone with the Coin”

    My suggestion “American Beauty”

    Reply

    anon Reply:

    @Ramanan,

    :)

    can’t think of any; this is serious business

    :)

    btw, nobody’s talked about full QE exit following “partial platinuum reverse QE” (sounds like a football play) – the Fed’s balance sheet now has coin instead of bonds, but the coin can’t be sold for the excess reserves that still remain

    Reply

    Ramanan Reply:

    @anon,

    can’t resist …

    Songs and albums can be remade …

    I Want to Hold Your Coin .. Beatles
    Like a Coin … Madonna
    Lets Talk About Coin .. Celine Dion
    Lucy in the Sky with Platinums .. Elton John/Beatles
    Born in the USA … Bruce Springsteen
    About a Coin .. Nirvana
    Coin Rhapsody .. Queen
    Coin, Coin, Coin .. ABBA
    Wicked Coin .. Chris Isaak
    Fly Me to the Coin … Tony Bennett

    WARREN MOSLER Reply:

    ‘the coin is as high as a elephant’s eye’ from ‘oh what a beautiful morning’ sung by Jimmy Durante

    anon Reply:

    well done

    now here’s a change; if you didn’t see it, you may find it interesting:

    http://mpettis.com/2011/07/current-account-dilemma/

    WARREN MOSLER Reply:

    don’t see any value in it

    Tom Hickey Reply:

    @anon,

    I thought it interesting that Pettis does not distinguish between currency sovereigns like the US, UK, Japan, etc., users of a currency that they do not issue like the EZ member countries, and countries that peg, like China.

    anon Reply:

    @Tom,

    Yes. Rather odd that he talks about Spain’s options as including devaluation.

    But an interesting overview.

    Await Ramanan’s thought du jour on this.

    WARREN MOSLER Reply:

    calculate the date when the coin’s intrinsic value will exceed the nominal value and be melted down

    Ramanan Reply:

    @anon,

    Thanks.

    Pettis is actually presenting Keynes’ argument that it is the surplus nations who ideally need to take up the burden of reversing imbalances (but he quotes Hobson’s earlier ideas whom I haven’t read).

    However, Pettis is I believe wrong on making statements like “If China buys huge amounts of dollars, the US must run a trade deficit.” The straightforward interpretation of this is that higher the amount of dollars PBC buys, the higher the trade deficit of the US will be which doesn’t make sense. The trade deficit is rather a decision of US individuals to purchase a Chinese product instead of a locally made product. The PBC then tries to purchase exporters’ dollar acquisitions. However, having said that, PBC’s policy of keeping the Chinese currency at a much depreciated level helps the exporters gain price competitiveness. But PBC’s purchase of dollars cannot be said to be causing the trade imbalance. Taken literally, Pettis’ argument can be used to prove the corollary that if PBC decides to purchase $x in one quarter, the trade imbalance will be $x, which is clearly inaccurate.

    But, China’s fiscal policy is intentionally kept at a tighter level so that demand is low and hence imports. So weaker forms of causality in his blog seem ok.

    About Germany – he is right about a few things. Germany wants to run trade surpluses but asking others in EZ to deflate will lead to less exports for Germany. Plus in the situation now, with everyone vulnerable, its dangerous for Germany itself because it will lead to huge capital losses.

    There is just one solution to the whole Euro Zone arrangement – formal a fiscal union which will give the European Union Government more taxing and spending powers which will transfer fiscal resources from Germany to Spain. Germans will be paying higher taxes but that is purely because of higher income levels in Germany. Of course there is also the solution of taking a bold step of unilaterally leaving the EZ .. IMO won’t work.

    The world will not come out of this muddle unless there is a concerted fiscal expansion combined with attempts to work out a solution to reduce imbalances. Its stuck in a prisoners’ dilemma kind of situation because there is no institution called a World Government as Francis Cripps observed in 1983.

    Oliver Reply:

    @anon,

    I stumbled across this in the interwebs and was wondering what you guys thought of it. It’s not necewssarily current, seing as it was written before the Euro was introduced, but the analysis seems somewhat familiar and the conclusion is somewhere along the lines of the Hobson>Keynes>Pettis argument.

    On a different note: the whole debt ceiling arrangement in the US seems to me the most krass, but by no means the only example of why politics and economics do not mix well. It reminded me of the reply by the President of the Swiss National Bank, Hildebrand, upon being asked by a journalist to make suggestions on how to improve the current system, to introduce an independent fiscal commission along side the Central bank that could set fiscal policy independently of the political process. It seemed pretty silly to me at first, because I intuitively considered fiscal policy and politics as inseparable and wondered under which economic paradigm and thus in who’s interest such an organization might enact policies. But on second thoughts, I do wonder whether there could not be an arrangement in which fiscal policy were divided into two parts. The (domestic?), distributional issues would remain with the legsilature and be solely subject to the political process, i.e. political proposals could be fought out within the limits of a full emploment budget, while the new fiscal agency, sharing the dual mandate, could act on an aggregate level, e.g. through a correction factor on overall tax rates, to set aggregate demand, in tandem with the central bank, thus reducing the reliance of independent policy on interest rates and the real estate lending channel. Not sure, where policy concerning the external sector would be placed in this triangle, but then it’s just a very quick shot anyway…

    WARREN MOSLER Reply:

    seems that’s what all the congressional committees pretty much do

    Tom Hickey Reply:

    @anon,

    “Independent” solutions are based on the premise that democracy doesn’t work. It doesn’t work because of corruption and poor institutional design. Those are the matters that need to be addressed, not setting up anti-democratic “independent” commissions that are unelected and unaccountable.

    WARREN MOSLER Reply:

    a work in progress with lots of big swinging pendulums

    MamMoTh Reply:

    @Ramanan,

    The Trillion Dollar Baby

    Coin Man

    Reply

    WARREN MOSLER Reply:

    the leading lady will be a platinum blonde

    The New Mismatics

    Reply

    WARREN MOSLER Reply:

    platinum finger

    Reply

  7. Walter Says:

    When at Aug,2 23:59 they will come to a deal they all will say ‘that’s how democracy works’ and the next day still no politician will come with a proposal to cancel the debt ceiling.

    Reply

    Walter Reply:

    @Walter,

    Oh yeah, and they shake hands and smile and call their banks to ask if all put options were sold in time.

    Reply

  8. Ivan Says:

    The democrats represent the center? Are you kidding? The Republicans are fascists? The President as a member of the Senate said that raising the debt ceiling was a failure of leadership. Countless times he’s referred to this country as broke. Criminalizing opposition to an increase in the debt ceiling is absurd. Removing the debt ceiling (as well as teaching them MMT) would be like putting kids in a candy store on “everything’s free day”.

    I understand MMT and clearly we are lacking aggregate demand and need a significant tax cut. That nobody is even discussing one at this point in the economic cycle is pathetic. However, I suggest everyone relax and find a way to make money from their idiocy until you’ve made enough money to truly buy enough influence to push through MMT.

    Reply

    WARREN MOSLER Reply:

    we all got short s and p’s 10 days ago and covered friday

    Reply

  9. Ivan Says:

    That would be nice. I got long 10′s…because Japan, here we come.

    Reply

  10. Jack Says:

    If anyone hadn’t figured out yet that MMT = tyranny, here is your proof. When trust programs become seen as entitlements because of accounting fraud, guess who ends up with control?

    Reply

    Ralph Gardner Reply:

    @Jack,
    I don’t think you can say MMT supports tyranny. It doesn’t say how the rules(laws) are made. A tyrant could made them or a popular vote could make them. If you mean’t something different could you explain?

    Reply

    WARREN MOSLER Reply:

    MMT doesn’t = anything in that sense. Maybe some proposals by those who understand MMT? Which specific proposals on this website = that???

    Reply

Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>