Henry Blodget Writes a Post for Me: The ‘Trillion Dollar Coin’ Is No More Absurd Or Outrageous Than The Republican Threat To Put The U.S. Into Default

Thank You, Henry Blodget! I was just about to start writing a post about how the Trillion Dollar Coin is less absurd than a sitting senator calling for the U.S. to default on its debt,and found out you already wrote it!

“If the Republicans in Congress are really irresponsible and outrageous enough to hold the reputation and economy of the United States of America hostage just to win a few re-election points, then perhaps the appropriate response is for the Treasury to save the country by minting a “trillion-dollar coin.”

If you’re like most people, you’ll jump to the wrong conclusion when you hear about this “trillion-dollar coin.”

You’ll think that the “trillion dollar coin” is just another way for the government to print money out of thin air to pay for spending we can’t afford.

But that’s actually not what the “trillion-dollar coin” idea is.

The “trillion-dollar coin” is just a legal gimmick that responsible people in the U.S. government might use to enable the country to pay bills and honor commitments…without relying on a group of selfish, irresponsible people in Congress to first raise the debt ceiling.

Basically, the “trillion-dollar coin” would just allow the Treasury, which pays the country’s bills, to keep writing checks regardless of what Congress does with the debt ceiling.

Yes, we have a budget problem. Spending (red) is too high as a percent of GDP and tax revenue (blue) is too low.

And then the hundreds of millions of other reasonable, responsible people in the country can just go on about their business until the folks in Congress finally grow up enough to address our budget problem like adults.”

This is a great post – it goes into incredible detail about how out-and-out stupid it is to threaten a default and use the debt ceiling as a negotiating tool. It’s beyond foolish.

I do disagree with one part of this post.  We do have a budget problem, but Mr. Blodget has it backwards. Spending is too low, and tax revenue is too high. We need more deficit spending, we need more stimulus right now to get our economy moving. The Atlantic pointed out, Ben Bernanke is begging congress to spend more money AND lower taxes.  The IMF pointed out, we get a 40%-50% boost to our spending right now from fiscal multipliers. So, if there is any budget problem right now, it comes from taxes being too high, and not too low.

 

 

Comments

  1. Clonal Antibody says:

    Mike, Rodger Mitchell has a very nice take on this as well.

  2. Clonal Antibody says:

    Mike,
    Reading you post, ther is one more conundrum for you. Increaisng the income tax bracket rates can under some conditions reduce the overall taxes.

    What would you do, if your income tax bracket was 92% (what it was in 1956) and you had access to a 100% charitable deduction? what would you do if you ran a business and employed people? Would you give yourself a raise, or your employees, knowing full well that the Government will take 92% of that raise?

    • Clonal this is an issue I’ve wondered about…

      Wouldn’t the purpose of much higher taxes on the highest incomes not be to “take their money” but rather to nudge them to use it in useful ways, e.g. paying employees more, who then spend that. Ya know.. get the FLOW going :)

      • Clonal Antibody says:

        Exactly right! The Federal Government does not need their money, but rather needs the rich to “do the right thing”

        • Clonal Antibody says:

          However, the response curve is non linear. For the high tax brackets to work, they have to be “punitive.”

          • what do you mean by this?

            • Clonal Antibody says:

              I mean that if you plot the top tax bracket rates with charitable giving, you will find a non linear curve. In other words, the amount of charitable giving as a percentage of gross income is a non linear function of the tax bracket rate. I expect to see sharp increases in giving above certain threshold level tax brackets.

  3. Tim Ayles says: