You should keep this in mind as you try to understand why Obama seems to be ignoring the life preserver of section 4 that people to his political left keep pointing to in ever more urgent terms. It is not that he doesn't see it. It is rather that he is deliberately rejecting it. For now.
You should also understand, however, that both Congress and the President have a constitutional duty to prevent the validity of the federal debt from being questioned. Obama is not simply making a constitutional argument; he is also playing a political game. He believes that Congress is acting irresponsibly and he is acting responsibly, and that time is on his side. Nevertheless, his constitutional duty is to prevent the validity of the federal debt from being questioned even if Congress is acting irresponsibility and even unconstitutionally. At some point, his underlying constitutional obligation to preserve the Republic must overcome his political desire to win. Certainly that point would be reached if the economy begins to melt down and Congress is politically paralyzed. Then he must act.
It's certainly not clear that the rejection is about timing, but as with most things in this concocted "crisis," I am not going to make any predictions. I am going to consider another idea floated by Balkin, an idea that does seem legal, that would at least keep the government solvent, that is every bit as absurd as Republicans threatening to burn down the economy while Democrats counter by attempting to burn down the Keynesian paradigm that for more than half a century has defined the Democratic Party's successful approach to economics, and that has absolutely no chance of happening. Its beauty is its very absurdity in the face of consequences that have been and are being deliberately and unnecessarily threatened and imposed. We didn't have to be here. And anyone paying attention saw this coming. So if we're playing games, let's at least offer a resolution that rises to the times.
A couple weeks back, Balkin imagined a conversation among President Obama's inner circle, as they explained their secret resolution to this concocted "crisis":
"Seigniorage. Sovereign governments like the United States can print their own money. We have a system of fiat currency and we've been off the gold standard for many years now. With fiat currency, you issue coins and simply assert that they have a certain value, which may have little to do with the value of the raw materials you use to make them. But as long as people believe that your money is worth something, the system works.
"The difference between the face value of the coin and the cost of the materials it takes to produce it is called seigniorage. So if you create a hundred dollar coin made mostly of copper and nickel, the seignorage is likely to be close to a hundred dollars. That's new monetary value pumped into the system."
What does this have to do with the debt ceiling? The answer is that the president can order the printing of money to satisfy government debts. Sort of. Because under federal law there is a limit to how much paper money value can be in circulation at one time. But there is no such limit to the amount of value of coins in circulation. Also sort of. Because under federal law, there are rules about the use of gold, silver, copper and other such valuable metals for the printing of coins. But the Secretary of the Treasury can order the printing of as much platinum coinage as he sees fit. Even trillions of dollars worth. Of course, there isn't enough platinum available to print that much money, but that presumes that there must be some relationship between the printed value and the actual value, and as previously noted, such a relationship isn't at all necessary.
So Balkin's whimsical idea is that the secretary orders the printing of a couple trillion dollar platinum coins.
Then, if the President gives the order, the Mint deposits the two coins in its account at the Federal Reserve. The coins are legal tender. We direct the Federal Reserve to move this money into the Treasury's accounts, and we are up around two trillion dollars.
And there no longer is a need to raise the debt ceiling, because suddenly there is more than enough cash on hand to meet all pending obligations. How would the Republicans react? Use whatever colorful terms you like for people losing their minds. But the Republicans already have lost their minds. They're threatening to burn down the economy if they don't get their way. Petulant children are more responsible. And because the Republicans have no credibility on deficits, their tantrum trying to tie deficits to the debt ceiling should not in any way be enabled. It should, in fact, be ignored. When responsible people are making responsible efforts to save the economy, Republicans do not belong at the table.
A more realistic concern would be the reaction of the markets. But the real question is whether the markets would be more destabilized by the country going into default or by the president demonstrating that as long as he's president, the United States will meet its financial obligations. That such a question is even worth considering is yet another measure of the absurdity and danger of this concocted debt ceiling "crisis." And how about the bond rating agencies? Given that they're already threatening to lower the U.S. rating unless there are budget cuts of four trillion dollars, which certainly would qualify as the kinds of cuts that Fed Chairman Ben Bernanke, the Congressional Budget Office, the Director of the CBO, the International Monetary Fund (pdf) and basic Keynesian common sense say would tank the already extremely weak recovery, perhaps it's time for the bond rating agencies to be removed from the conversation, anyway. They are as irresponsible as are the Republicans. And it raises the question of which would be more damaging to the value of U.S. bonds: a default, an economy imploding from draconian budget cuts during a deep recession, or a president demonstrating that as long as he's president, the United States will meet its financial obligations? That such a question is even worth considering is yet another measure of the absurdity and danger of this concocted debt ceiling "crisis." And the credit rating agencies have been so arbitrary to begin with that it's well past time for they themselves to be downgraded as irrelevancies.
Would the Republicans try to impeach the president for making such a move? Perhaps. Balkin suggests that their outrage be tested with the placing of Ronald Reagan's face on one of the trillion dollar coins, which certainly would add a much needed level of mockery to the response to their juvenile antics. But if the Republicans did attempt an impeachment, it would be about as successful as their last abuse of the procedure. And it would give the president and the Democrats a defining issue going into next year. Particularly if the president and the Democrats first announced that they had never intended to cut Social Security and Medicare and Medicaid, and that by floating the ideas, they were merely proving the depth of Republican irresponsibility, because even giving the Republicans so much of their own desired agenda was not enough to convince them to stop threatening to burn down the economy by not raising the debt ceiling. The president and the Democrats then could enter the 2012 campaign season as defenders of Social Security, Medicare and Medicaid, and as willing to go to any lengths to protect the full faith and credit of the United States against the dangerous extremism of a Republican Party that no longer should be entrusted to participate in the functions of government. That's a message that could resonate.
Of course, none of this will happen. It's pure fantasy. But what's disturbing about the fantasy is that it is no more nonsensical than what is not fantasy. The Republicans really are on the verge of burning down the economy. The president really has floated cuts to Social Security, Medicare and Medicaid, and he and Congressional Democrats really have joined Republicans in floating their own trillion dollar budget cuts that could tank an economy that is desperate for more stimulus. And the public rightfully is much more worried about its safety net than taxes. None of this had to be. And yet every step of it has been predictable, at least since the Bush tax cuts were extended— and touted by a Democratic president as a sort of stimulus. Read Naomi Klein. Something about this is eerily familiar. And the well-being of hundreds of millions if not billions hangs in the balance. And taken at face value, it all is as absurd as the idea of a trillion dollar coin.