Bernie Says: “. . . We're Tired of Bullying . . .”
May 15, 2011 - 6:44pm ET
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An Open Letter to Bernie
If you're really tired of the bullying then I think you need to stop believing in and start denying the basic premise the Republicans, the Blue Dogs, most Democrats and the Administration are all using to bully you and us into agreeing to spending cuts in key discretionary programs and entitlement programs, and also into not moving for more spending on jobs, better entitlement programs, including Medicare for All, and better discretionary programs we need to solve our many national problems. That premise is that the United States of America, the issuer of its own fiat currency, and the ultimate source of all US Dollars can run out of the money needed to continue to deficit spend and to pay its bills.
Of course, this can't happen Bernie, as long as the Congress doesn't constrain its own constitutional authority to spend by committing to legislation that limits its scope. Right now, Congress is doing that, however.
The requirement that Treasury issue debt before it deficit spends is mandated by Congress, and conflicts somewhat with previous Congressional appropriations creating spending authority. The debt ceiling is another mandate of Congress that conflicts with previously passed spending authority in a very direct way. Making the Federal Reserve Board of Governors an independent agency, rather than an agency under the Treasury Department, constrains the spending power of the Treasury beyond the limits provided by Congressional appropriations themselves.
These constraints, however, are political, not economic. If Congress removes even one of them, then the Federal Government can never run out of money already appropriated by Congress. Even with all three limitations, the Federal Government still cannot run out of money, if the Administration is willing to uphold the Constitution and exercise the full authority to coin money that Congress has granted to the Executive. Where the constitution comes in is that Section 4 of the 14th Amendment doesn't allow the US Government to default on any of its obligations. So, constitutionally, Congress should not be playing games with the full faith and credit of the United States.
Apart from that however, the Executive has sworn to uphold the Constitution, and the Treasury has authority, granted by Congress in the 1990s, to mint platinum jumbo coins with arbitrarily large face values. So, rather than run out of money when it reaches the debt limit the Government can mint however much it needs to implement Congressional appropriations without either taxing or borrowing. You can find a more detailed explanation of this coin seigniorage idea here and here. Without going into detail in this open letter, I'll just say that if the President uses coin seigniorage to meet the debt ceiling crisis, all the Republican's power to bully and hold the Government hostage will be gone outside of the context of the appropriations process itself. We would have “an end to bullying.”
So, if you really want to end it, please call the President's attention to this post and the links I've provided, and point out to him and anyone else who will listen, that he can make the bullying stop, anytime he wants to
Joseph M. Firestone, Ph.D.
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