[Marxism] Barack Obama, the first tea-party president

[Shane Mage]

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> http://www.nakedcapitalism.com/2011/07/marshall-auerback-barack-obama-the-nations-first-tea-party-president.html

"In 2007, investors had, in Minksy fashion, been conditioned by the  
Great Moderation, abundant liquidity, and the Greenspan put to believe  
nothing that bad could happen, and if it did, investors would be able  
to exit with their hides intact. Now, these reflexes have been  
reinforced by the Bernanke put and Geithner’s attentiveness to the  
needs and wishes of banks. The assumption is that even if the  
Congressional gridlock continues, Timmie will find a way to keep  
paying Treasuries, even if everyone else suffers.

The troubling bit is that the Administration has said it’s unwilling  
to consider any of the creative ways out of this mess suggested in op  
ed pages and in the blogosphere: use of the 14th Amendment, canceling  
Treasuries held by the Fed, or using other loopholes to have the Fed  
monetize the debt. But Geithner dissed those ideas. From Bloomberg:

There’s “no way to give Congress more time” on lifting the debt limit,  
Geithner said after meeting with Democratic lawmakers on Capitol Hill  
in Washington. He has repeatedly said U.S. borrowing authority will  
end on Aug. 2 without congressional action.

Geithner’s remarks suggested the Treasury Department is approaching  
the end of its efforts to shift federal cash flows to avert a breach  
of the mandated borrowing limit.

Normally, one might view this rigidity as a negotiating posture. But  
this Administration doesn’t do negotiations, it does concessions ..."

																		and

"...the President could, as we and others have suggested in the past,  
simply invoke the 14th amendment and refuse to enforce a statute that  
he believes violates the Constitution.

Professor Scott Fullwiler has suggested an even more creative way  
around the debt ceiling: Fullwiler notes that Fed is the monopoly  
supplier of reserve balances, but that the US Constitution bestows  
upon the US Treasury the authority to mint coins (particularly  
platinum coins). Future deficit spending by the federal government  
could thereby continue to be carried out by minting coins and  
depositing them in the Treasury’s account at the Fed (for more details  
see here).

Curiously, the President won’t pursue any of these options. Why?

If, for example, the President genuinely believes that the 14th  
Amendment does not give him the right to ignore the debt ceiling, he  
has been loath to give any reasoning for this publicly. He is, after  
all, a constitutional law professor. Much like the single payer option  
in health, the President refuses to even put it on the table, even as  
a negotiating posture. Is it caution, or does the President genuinely  
believe this guff about the deficit?

By the same token, the President might well dismiss Professor  
Fullwiler’s idea as nothing more than a “gimmick”. But if the  
alternative is the economic apocalypse regularly described by Treasury  
Secretary Geithner, then why not deploy this “gimmick” if the  
alternative is (in the words of Mr Geithner), “catastrophic damage  
across the American economy and across the global economy”?
As Bill Mitchell has pointed out:

[T]he whole edifice surrounding government spending and bond-issuance  
is also ‘just an accounting gimmick’. The mainstream make much of what  
they call the government budget constraint as if it is an a priori  
financial constraint when in fact it is just an accounting statement  
of the monetary operations surrounding government spending and  
taxation and debt-issuance.


Shane Mage

"scientific discovery is basically recognition of obvious realities
that self-interest or ideology have kept everybody from paying  
attention to"