The Platnium Option

By Jason Colella, FPP Co-founder and Sr. Political Editor

We adverted a cliff, but now there is a problem of a ceiling. In a few months, Republicans will undoubtedly hold the world’s economy hostage with a Debt Ceiling Debate. They will threaten defaulting on the National Debt in order institute massive spending cuts that they so long for. However, many would argue that crisis can be adverted by at least two different options.

The first is widely known because of the Debt Ceiling Debacle of 2011 is simply invoking a little used and under looked portion of the 14th amendment. It states “the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion shall not be questioned.” This would be a wise option for the President because minimally it would raise the Debt Ceiling until the guaranteed court challenge to the invocation could be resolved.

But, a more interesting option has recently begun to pick up steam; I really like this one because it combines two of my favorite activities politics and numismatics (coin collecting). It has been dubbed the Platinum Option, and it is a great piece of monetary and macroeconomic policy. It was first posted to a blog over a year ago but has recently gained the respect of many famous economists most notably the Nobel Prize winning Paul Krugman. The idea is simple. In the 1990s, congress approved a bill to allow the mint to produce platinum coins. The catch is the legislation did not specify the face value of the currency to be minted (this was done to allow a wide array of collectible coins to be produced). This means that President Obama could order the minting of an extraordinarily high value coin. It is must often cited as one trillion dollars. The Treasury Department would then deposit this new coin in the US Government’s bank account at the Federal Reserve. As it would be legal US tender, the Feds would be forced to accept it and trade it for cash on hand. It is unlikely to fuel inflation, given that the economy is currently depressed.This would be one interesting and bizarre way to solve the debt ceiling debate.

Talking Points: Why the Fiscal Cliff Deal is A Big Step in the Right Direction

By: William Snyder, Managing Editor Fourth Party Politics

 

Earlier in the week one of my colleagues wrote an article about the fiscal cliff deal and how Congress always “fixes the tire” by means of plugging the hole instead of replacing the tire. He wrote that the fiscal cliff deal was one of Congresses many “crazy short term fixes that do absolutely nothing to solve the countries long term issues.” I must say I have to disagree.

In the real world you can’t always get what you want. Late last week it appeared that the country was well on its way to going over the fiscal cliff. With the Speaker’s failed Plan B strategy all talks between the two sides had stopped. Then enter Senate Minority Leader Mitch McConnell. Sunday night McConnell swallowed his pride and put in a phone call to one of his old senate colleagues, Vice President Joe Biden. Biden and Senate leaders reached a bipartisan compromise on the fiscal cliff that would allow tax rates to rise on income over $400,000 and delay steep automatic federal spending cuts for two months.

 

Once McConnell and Boehner reach out over the aisle the President and Congressional Democrats had no choice but to accept the deal. President Obama had an entirely new agenda that he could not risk compromising before the 113th Congress was even gaveled into session. When one party puts their entire neck out on the line like Speaker Boehner did by breaking ranks with the majority of his caucus, the other party must step up to the plate and accept. Progressives could not afford to walk away from the deal if they wanted to accomplished any of their major agenda items in the next term, like gun control and campaign finance.

 

Progressives got a good deal as it was:

• Taxes Raised on Incomes Over $450,000 (Signal Household $400,000)
• Capital Gains Tax Raised to 20%
• Estate Tax Raised to 40%
• Extended Unemployment Insurance Benefits
• Childcare Tax Credits 
• College Tax Credits 
• Limited Deductions
• Extends the Farm Bill
• ZERO cuts to Social Security/Medicare

The 112th Congress went down in history as being the most unproductive Congress in existence. They passed the fewest amount of legislation in over 100 years and had the lowest approval ratings since we've been keeping track of that kind of thing. So maybe we can look at this landmark compromise that ended the legislative session as a step in the right direction. Maybe we can give credit where credit is due to Republican Speaker John Boehner and Senate Minority Leader Mitch McConnell for brokering an unpopular deal with their own members. They broke ranks with many in their respective caucuses to do something for the greater good of their constituents. To end what will go down as the worst Congress on record with a bipartisan deal gives me hope for what the 113th Congress has in store.

Too many politically astute people forget that compromise is not a dirty word. You are never going to get all of what you want simply because that is not compromise; that is greed. My suggestion to my Democratic friends: if you don’t like messy compromise and dived government, elect more progressives to Congress in 2014.

Despite what you’ll hear from many progressives, this is a desirable compromise. By no means is it perfect, but what compromise is perfect?

Tired of Tire Fixing

BREAKING NEWS: The House has voted to save America from going over the fiscal cliff.

 

By: Jason Colella, Co-founder and Sr. Political Editor

The Provisions

1. Estate Tax is raised to 40% exempt is the first 5 million dollars
2. Capital gain tax is increased to 20%
3. Income tax is raised on people making over $400,000 to 39.6%
4. Extends long term unemployment benefits
5. 2% payroll tax cut lapses returning rate to 6.2%
6. Delays across the board spending cuts for two months
7. Permanently adjusts the Alterative Minimum Tax

For the first time in my life I have to say I agree with Congressmen Darrell Issa (R-CA49) -- well for the most part. Unlike him, I would vote for the bill. I agree with his fundamental point. The bill does save us from falling off the Fiscal cliff, but it does not do more and that is where I have my problem with it. I view this whole thing as a car with a flat tire. Congress always fixes the tire the same way. It never bothers to go to the store and get a new tire; instead, they just add a patch to the tire to the point where the entire tire is covered in patches. New leaks aren’t from new holes but are rather from faulty patches. The Fiscal Cliff was not caused by some rouge nail, but it was caused by a worn out patch -- the 2011 Debt Ceiling Debacle. They never go to the tire store because they can’t agree where to go. They are too bullheaded to fix problems; instead, they can only agree to postpone their decisions and even that takes an act of God. As Congressman Charles Rangel (D-NY15) said during debate “we created this monster,” he is absolutely right. Congress can’t agree it seems unless they are hanging upside down over a cliff with someone on the ledge slowly cutting the rope they are hanging by. This leads to these crazy short term fixes that do absolutely nothing to solve the countries long term issues. Can we please sit down and discuss long-term issues -- you know reform the tax code and figure out sensible cuts to spending. I don’t care if it hurts your reelection chances do what is right and needed for America. Fix our problems. Maybe you would even find voters appreciate true compromise, solutions and profound meaningful change.