Obama commits Unilateral Disarmament as a Debt Ceiling Negotiator

By William K. Black

President Obama is getting ready to negotiate (or if you believe him, not negotiate) an extension of the debt limit.  The Republicans control the House and are promising to follow Donald Trump’s suggestion that they use what he called the “nuclear weapon” to terrorize the U.S. economy and people in order to gain negotiating leverage over Obama.  That act of treachery was designed to produce two other acts of betrayal of the American people.  First, Trump’s urged the Republicans to use their “nuclear weapon” to force Obama to inflict austerity on our Nation and force us back into recession.  Second, Trump urged the Republicans to use their leverage to force Obama to gut the safety net.  It is somehow fitting that Trump’s advice to act in unprincipled manner was designed to produce policies that would enrich the wealthy and cause immense harm to the Nation.

Naturally, the Republican Party has decided to adopt Trump’s “nuclear weapon” strategy in its entirety.  A Party that takes its policy advice from Donald Trump – advice to use a “nuclear weapon” on our economy in order to extort policy changes that will enrich the 1% at the expense of the Nation – has become a self-parody and the enemy of the American people.

I wrote to warn about how to disarm Trump’s treacherous threat to use a nuclear weapon against America.

Like many readers, I have been a negotiator in important matters.  This was one of my functions as Litigation Director of a federal agency.  In my column I showed multiple ways in which Obama could eliminate permanently the ability of any Party to use the debt limit as a means of terror and extortion against America.  We can defuse Trump’s “nuclear weapon.”

Obama, however, has systematically thrown away the means to defuse the weapon.  He has unilaterally disarmed as he prepares to confront Speaker Boehner.  He has unilaterally refused to do his duty under the 14th amendment and he has unilaterally refused to use the platinum-clad coin to defuse Trump’s nuclear weapon.  Indeed, he has ginned up and put in the public record the absurd legal position that Treasury has no authority to issue such a platinum-clad coin and made the even more preposterous claim that the Federal Reserve would violate instructions from the Treasury to accept such a coin.  If Obama had wanted to use the platinum-clad coin or the 14th amendment the Treasury opinion would have been said the opposite, and the opinion could have been written without torturing the language of the statute.  By torturing the language of the statute to create a negative legal opinion Obama has cast doubt on the legal ability of future presidents who would have the courage to defuse Trump’s nuclear weapon to do so.  Obama’s actions either indicate that he does not know how to negotiate or wishes to be “forced” by the Republicans to make deep cuts to social programs and begin to unravel the safety net.

Even commentators like Ezra Klein who opposed defusing Trump’s “nuclear weapon” fear that Obama does not really intend to stand up to Republican demands to cut social programs and the safety net.  I have explained in prior articles how Obama has repeatedly attempted to inflict the “Grand Betrayal” on the Nation.  The Grand Betrayal is Trump’s destructive plan for the Nation.  Klein’s title shows his concern.  “On the debt ceiling, the White House tries to solve its credibility problem.”

It may prove impossible to save Obama from Obama, but it is critical that we continue to try to do so.  He has tried three times to commit the Grand Betrayal and failed.  The most recent attempt, in early January 2013 was blocked when Senate Majority Leader Reid threw Obama’s proposed terms of surrender into his fireplace.  Only continuous efforts by progressives can prevent the disaster of austerity and the betrayal of the safety net.

 

23 Responses to Obama commits Unilateral Disarmament as a Debt Ceiling Negotiator

  1. I too was very disappointed to see the President remove both the 14th amendment and the PCS options as leverage in the “discussions” with the Republicans on the debt ceiling. However, Obama is correct when he calls it absurd for Congress to not authorize borrowing to pay debts that we already owe. And that does not even include the point that interest rates on those loans are at an all-time low. However, there is another issue looming on the horizon. Both Boehner and Obama don’t want the blame for trashing the economy via not extending the debt limit. The Republicans will cave and Obama knows it. But the Republicans will go to the mat on the sequester.
    Once that argument begins Obama still has the PCS. Maybe I am just being an optimist, since the President has always shied away from the bold initiatives; but it would be more appropriate to wield that weapon to water down the sequester (you know he won’t just wash it all away) than over the debt ceiling.

    • Depends on how much you mint. If you mint a $60 T coin it defeats the debt ceiling and then allows you to remove all possible public support for the sequester and for a budget that cuts spending purely because concerns over the deficit/debt. The $60 T coin gives Obama the whip hand on everything if you assume he wants to what most Americans need. On the other hand if he wants to make the US safe for plutocracy, then he will never mint that $60 T coin or anything like it!

  2. I am convinced that the President will not actually be “negotiating with terrorists,” but already knows the deal that he is going to impose on the GOP to save it from shooting itself in the head. President Obama wants to be remembered as the president that had the courage to “fix the entitlement” pseudo-problem manufactured by the right, just as Bill Clinton wanted to burnish his legacy as the president that had the courage to “take on welfare” and “reform” it. Obama also wanted to be remembered as the president who attacked the issue of universal health care and he realized that he could not do so by selling the country out to the insurance industry and Big Pharma.

    The Overton window moved so far to the right after the election of Ronald Reagan that Democrats believe that they needed to “triangulate” (remember Dick Morris advising Clinton) and move to capture the center. The result was both Clinton and Obama, and the Democratic establishment revealing their true colors as moderate Republicans. There is no a longer a Democratic Party, since the establishment has decided to abandon the New Deal. Clinton and Obama are evidence of that shift. I feel completely vindicated in saying when Obama was campaigning for the nomination that he was a “snake in the grass.”

    The resulting disasters will provoke an reaction on the left similar to the Tea Party on the right, and US politics will become even more polarized and governance more dysfunctional. Clinton and Obama were both reverse “Manchurian candidates,” brainwashed by the right, probably without fully realizing it. Democratic voters have been duped twice now, and a great many are getting it. The die is cast. See Strauss & Howe, The Fourth Turning (1997), and Ravi Batra, The New Golden Age: The Coming Revolution against Political Corruption and Economic Chaos (2007). We are now in the midsts of the unravelling. It looks like things are running right about on schedule.

    • Robert Bostick

      I would add Thomas Frank’s excellent and thoroughly documented, “The Wrecking Crew.”

      I certainly hope there’s a reaction to the cynical subversion of progressive ideology by today’s “democrats”. However, I suspect it will only be a flicker given there are no robust national voices beyond the misinformed elected socialists and OWS psuedo-anarchists.

  3. You don’t even have to read or listen between the lines to hear Obama unilaterally conceding. He gave up Medicare again in his “no negotiating” press conference. We are left to ponder what a “modest” cut will look like. Last year, he thought an eligibility age of 67 was modest enough. I think we all know that the reason he doesn’t use his leverage is that he’s just a baffled and befuddled blue-dog when it comes to economics, and the presidential bubble-minders keep all potential trouble-makers away from any communication channel he will ever hear. Obama *wants* to cut the social programs he happily collaborates in demeaning as mere “entitlements”. He believes the garbage they tell him about running out of money. He wants to be an even better and more effective ender of things- he- thinks- of- as- welfare than his pal, Bill Clinton.

    I don’t know why we bother to talk about the guy. He’s not even a moderate Republican anymore. He’s just a Republican.

  4. I too was dismayed at how quickly and emphatically Obama scuttled the PCS and 14th Amendment options, but Obama has a long and distinguished history of taking firm positions only to “forget” or reverse himself later. I could cite more that a dozen examples, but everyone has seen and heard them. What I fear is that this time Obama will hold firm because he really believes the neo-liberal economic model is correct and because everyone advising him is telling him how nice his new clothes look. He can’t hear the few outside the bubble shouting that he should put something on.

  5. Thanks be the site isn’t totally surrendered to the magpies and their fascination with bright shinny things.

    As long as economic perceptions are held hostage to an ideology that thinks everything that came before it is invalid and worthless, the above noted example is what will happen, and there are no solutions which will alleviate the stupid. It’s the way of sparks having all the answers is there are no answers remaining for others to offer, not that they would be listened to anyway. When hubris controls power, only the abysm of total failure will loosen that grip on power. It is here TINA works its magic opening doors where there were none before.

    Something interesting found:
    http://www.guardian.co.uk/commentisfree/2013/jan/14/deepening-mess-words-polish-economist
    The British PM and his gofer, Cameron and Clegg are like Asterix and Luminix, starshine that is brilliant if the observer is kept in the dark. It is certainly what the Washington/Wall Street/The City/Tel Aviv axis of evil is counting on.

  6. Obama will cut entitlements and he will try to balance the budget. He and the Rs are in agreeement, and so what is going on now is cover for Obama so he can say something like, “they made me do it.” But he has said repeatedly that we have a deficit problem and that he will cut the safety net. That it is “unsustainable” but trust me, ‘I will do the right thing’. No need for anyone to deny it any longer.

    What is even more distressing is there is no one to oppose him, at least not enough. He can easily muster a majority with his Republican friends. And he controls a good deal of the MSM punditry to sanctify his message and explain it to us fools. Sometimes I wonder why he does this. He obviously blieves it all. But on the other hand is he such a fool as not to understand that public opinion will turn against him if the economy mysteriously slips into another recession, and what then of his legacy?

    Maybe he believes there will be another tech bubble or housing bubble to save the day. I mean it saved Clinton. He even ended his term with a surplus and we were projecting surpluses forevaah! Lightening does strike twice in the same place you know. So we should all just go with the knowlegde that fools run our government but sometimes the gods smile on them. It has worked so far.

  7. I think that the “state of play” is widely misunderstood.

    Exercising either the “coin” or the “14 the amendment” gambits is transparently not a real option. Both options would immediately wind up in court with the Fed declining to cooperate until the cases were resolved. It is not worth debating any more but surely nobody would disagree that both “options” would likely be struck down. The net effect would be that the administration had provoked a damaging constitutional crisis — and lost.

    What that means is that the whole debt ceiling debate is about how “clean” a debt ceiling raise the House will abide.

    The administration asserts (in effect) that it won’t sign anything but a clean bill with a long raise of the debt ceiling or a granting of unilateral presidential authority to raise the debt ceiling.

    The president not signing a (dirty) debt ceiling bill (if that’s what happened) could (I’d guess would) result in a government shut-down. And here is the catch: what if the “dirt” in the debt ceiling bill is something that can easily gain popular support? That is, suppose that the house majority tries something like “we’ll raise the debt ceiling but also insist, in the same bill, to raise the retirement age for people currently under 55″. Do you think the president can hold out on a veto of *that* and still have the blame for a government shut-down fall on the GOP?

    The only muscle the administration has in the debt ceiling fight is popular opinion. Both the coin and the 14th amendment options, though they may have been educational, are not real options. The administration hasn’t disarmed — it has stated that it recognizes the truth of an open secret (that it never had the coin or 14th amendment options in the first place, not really).

    • I have no idea how the fed ” refuses” to accept a coin minted by the treasury in accordance to the legislation. But stranger shit has happened. I also have no idea what court would have the ability to stop it other than the supremes and they will not get involved in a dispute between two other equal branches of government. But I would love to see them step in. There are at least two sane justices among the crowd on the right. And if they chose to rule for default…..

      The strategy of the Republicans could be to offer small increases and demand ” tribute” each time. Over time this will,cause the economy to tank. Obama could be forced to cut spending or to use another alternative. It is all hypothetical at this point. So it gets us nowhere divining the future.

      • I have no idea how the fed ” refuses” to accept a coin minted by the treasury in accordance to the legislation.

        They say: “Based on belief and information we do not think that this coin is legal tender,” and then if the administration disagrees, it hits the courts. The press release that Treasury already made asserts without qualification that that Fed would refuse the coin (not that Treasury disagrees — they also don’t think they have the authority the idea assumes they have).

        The strategy of the Republicans could be to offer small increases and demand ” tribute” each time. Over time this will,cause the economy to tank.

        Yes, my guess is also that they will nickle-and-dime us over the next couple of years or at least that that is their strategy given that they have a definite but slightly weak upper hand.

        Economy tank? Do you mean that the price of US labor can be driven down, US exports made more attractive, regulatory agencies subjected to further budgetary deprevation, etc? “Tank” from whose perspective?

        • Take spending out of the economy from a shut down and unemployment results. The economy could go into another recession. Not exactly a novel idea. And if Obama gets his wish for the grand betrayal, it will be worse.

          I suppose we just disagree about the magic coin. If Obama insisted, he would be forced to take it . I also rather suspect they just had him ‘ join the team’ for more cover. What we needed here was that audacity the Pres once wrote about. File it under, nothing ventured, nothing gained. But then it all fits into his strategy to cut spending to reduce the deficit. Nice try but sorry , that won’t work without another bubble like the tech or housing bubble. Got one of those in your pocket?

    • Your view on what the Fed can or can’t do is devoid of legal citations, or any support from legal precedents. Previously, in these comments I cited both my own arguments and beowulf’s latest formulation. I suggest you consult those especially the last, before opining about what the Fed is free to do with respect to crediting a platinum coin.

      Do notice, that the The Fed cannot even go to Court in relation to the coin, without getting an answer from claiming that the Chairman lacks standing due to 12 USC 246. The Court is unlikely to grant standing on this, however unless they 1) want to absolutely freeze the markets and the whole global financial system and/0r 2) want to rule on Humphrey’s Executor, a case that affirms the status of independent agencies as insubordinate to the unitary executive on very questionable constitutional grounds. This case is the last of the anti-New Deal decisions of the Supreme Court in the 1930s that still survives. And surprising it states a doctrine that Justice Scalia has previously expressed strong opposition to. The likelihood is that if this Court does recognize the Fed as having standing to sue the Treasury to block the coin, it will only do so if it wants to confront Humphrey’s Executor explicitly. Otherwise it will just deny standing leaving the Fed with no option but to obey the Secretary. On the other hand, if the Court does want to confront Humphrey’s Executor, which it has already cited for problems in previous fairly recent decisions, then it will only do so if it wants to modify that Humphrey significantly. This can only reduce the Fed’s independence since the liberals on the Court plus Scalia will make a majority in favor of the unitary Executive doctrine.

      In addition to the above, if the Fed doesn’t have standing on this question, then certainly no one else will be able to claim it barring both Houses of Congress, which, of course, we will not get with the Senate in Democratic hands. So, bottom line 1) you can either expect no one to get standing to sue over the platinum coin or 2) get the Fed to sue at the price of much of its independence in the final analysis. But I seriously doubt that 2) will occur, because the Court is hardly like to take up Humphrey’s Executor in the current context when to do so will paralyze the global markets and freeze the government for a considerable time. After all, it may even be the case (though i haven’t checked this) that the Justices own pay checks may be impacted by any delay in freeing up the Government from the shutdown that would certainly occur if the President used the coin as a last resort, and had no other current source of funds to prevent a shutdown.

      So, I would expect that the Court will decide not to get between the Congress and the President or the Fed and the President on this one, and will simply leave it to them to settle. If that happens we would have a platinum coin credited and the Executive would get out of the debt ceiling box, provided of course that he changes his mind about the PCS option.

      • I would just add that the Treasury statement on Saturday rejecting the TDC out of hand had no more citation or reason than Jonf’s.

      • Mark Robertson

        Mr. Firestone, I generally agree with your comments, but your naiveté above is glaring. You speak of precedents, legal citations, legal standing, etc. — as though the USA were governed by laws and logic. You live in a dream world. In reality the Fed and the US government do whatever they wish, regardless of laws and logic. For example, the US government can assassinate any citizen any time without charge or trial, or imprison any citizen any time for life, without charge or trial. This government disregard for rules and reason is especially pronounced when it comes to the ultimate power, which is the money power. Therefore your perorations regarding the PCS do not apply. Any legalese spouted by bankers, politicians, and the rich is camouflage for their unswerving campaign of theft. It is window dressing, designed to keep people like you guessing (as you do above). I repeat: the Fed and the US government do whatever they want to do, while they spout legal claptrap to justify their greed.

  8. Obama wants entitlement cuts. As Bill notes, entitlement cuts have already been part of both of Obama’s previous attempts at a grand bargain. The sequester already includes $11 billion in Medicare cuts. After the debt ceiling business is cleared, Obama’s previous offers and the already-scheduled cuts will form the framework in which further cuts are negotiated. It’s just a matter of how much. There is no endgame here in which there are no deep entitlement cuts.

    There are going to be more tax increases as well, although the Republican purport to vehemently oppose them. Obama and the Republicans will do some brinkmanship for a while, and then hey will trade more entitlement cuts for more tax increases.

    If we are lucky, we will only totter on the verge of recession afterward, with maybe 0.5% growth like Obama’s chum Cameron engineered in the UK, instead of plunging headlong into one.

    • “Obama wants entitlement cuts.”
      __

      Why? What do you base that on, specifically.

      Specifically.

      And, what do you mean by “entitlement cuts”? Should SS and Medicare be “Welfare Programs”? (“Need” based?)

    • I doubt that we can get lucky. If they end up with $4 T in projected deficit reduction over 10 years, that averages about $400 B per year in deficit reduction; which is more anti-stimulus per year than the stimulus from the ARRA. This amount seems certain to induce recession or worse, especially since the spending cuts will be focused in high multiplier areas. The worst part of this is that the silly Democrats will then be blamed for the economic failure in time for the 2014 and certainly the 2016 elections and then we will be saddled with terrible fiscal policies at least through 2021. By which time we will be even more of a banana republic than we are now.

      • Warren has a post up suggesting the total cuts could be equal to the deficit or 25B per week. I hope that is just tongue in cheek or we are in for a really serious recession. But we know these guys are wedded to the idea of a balanced budget. So do nothing and there you are, automatic balanced budget at least as they think.

  9. Thanks, Bill. Another great one! I advanced a similar argument myself yesterday here and posted a shorter version, kindly edited by Yves, at NC. In it, I briefly outlined the legal grounds for thinking that the Fed could not have refused to credit a platinum coin had the Mint deposited it for credit in the PEF. Just today beowulf was heard from again, and outlines these grounds more authoritatively and in more detail than I have.

    Philip Diehl, Clinton’s Director of the Mint who last week created a stir by supporting the legality has indicated in comments at the MR site, that he thinks the Fed is free to turn down a coin; but he gave no legal argument for this view, just saying that it was based on his experience. Beo’s new post, is a very gentle reply to Philip, after some gentle questioning in the comments of the earlier post.

  10. Beowulf, just replied to a question of Tom Hickey’s in this vein:

    The platinum coin is his strongest card. If he ordered Tsy to put it to the Fed, the Fed would be nuts to challenge it in court. Tsy would likely win under 12 USC 246 (statute at top), if it lost the DOJ would appeal it all the way to the Supreme Court on unitary executive argument. That’s been a burr in Scalia’s saddle for a quarter century (and is a pet cause of John Roberts as well), there’s no way the govt loses that argument with this Court. And with that, every independent agency goes back to where they belong, under the President’s thumb (I’m totally on Team Scalia on this issue). So best case scenario for Fed is letting Tsy win this battle in the first round, worst case scenario is winning first round and then losing the war in the Supreme Court.

    The problem here of course is only we Republicans believe in Eisenhower’s point that sometimes the way to solve an insoluble problem is to make it bigger. I don’t think it’d ever occur to a Democratic Administration that the first step to winning the debt ceiling war against the GOP House involves launching a preemptive strike against the Fed. And that’s why this WH is going to suffer losses politically that it could have easily avoided legally.

    I love the multiple ironies in this comment of beo’s. In view of this, if the Secretary writes an order to the Chairman demanding he obey the Secretary’s order on pain of dismissal if he takes this to Court on behalf of the Fed; I think the Chairman just credits the coin, since if he goes to Court and doesn’t get standing, he couldn’t even contest his own firing.