What Would You Have the President Do? Part I, Necessary First Moves

There were varying reactions to the President’s recent speech at Knox College this week. My reaction was that the speech was deeply dishonest in light of the President’s previous policies, actions, and results, and I intended to do a critique, but Michael Hudson and Yves Smith beat me to it. In a fine post at Naked Capitalism, entitled “Michael Hudson Shreds Obama’s Orwellian Speech On Middle Class Prosperity,” Michael Hudson, with occasional added comments from Yves, deconstructs the speech paragraph by paragraph, and sometimes line-by-line, pointing out disingenuous assertions and outright dishonesty. In her introduction Yves remarks on the context:

The worst is that Obama apparently plans a series of Big Lie speeches on his “vision for rebuilding an economy that puts the middle class — and those fighting to join it – front and center.” That’s at best an afterthought, since he’s given the economy over to an at best indifferent and at worst predatory elite that have no interest in giving it back.

The reaction to the post was vigorous with most of the discussion supporting and amplifying the views presented. However, there was one comment which said:

Have you mentioned the fact that he’s right on every issue mentioned?

Would you rather have a FDR, or Truman or Johnson as our president? These men, while great, are not that much different from the current President.

What would u have him do? Enact single-payer health care, small class sizes and the best teachers imaginable, a minimum wage at $21.00 an hour and an average wage at $40 (where it should be), and a lower private debt burden across the board with a wave of one of his “Hope and Change” wands?

I am proud to have voted for this man. He can’t do it alone. And going after him while offering no positive alternatives yourself to me is the height of contemptibility.

Of course, that persistent rationalization offered by the world’s Obamabots is my cue. What I want him to do falls into two major categories. First, there are necessary first moves he can probably get done which will facilitate passing all the other policies I propose. Second, there are the policies that will restore prosperity to poor and middle class over time. In this post I’ll cover the necessary first moves. In Parts ll and III I’ll offer and briefly describe the substantive policies I want him to implement.

Get rid of the filibuster

He can start by convening Congressional Democrats: House and Senate, and telling them that the middle class and American Democracy are simultaneously threatened and that he can’t save the situation and ensure a Democratic victory in 2014, unless, as a first step, the Democrats in the Senate agree to get rid of the filibuster entirely, and immediately, and accept majority rule in the Senate on all matters not explicitly mentioned in the Constitution.

Of course, the House Democrats have nothing formally to say about what the Senate does. But their presence is important for impressing upon the Senators the importance to the national party of doing this, and then going on offense against the Republicans, so that the Democrats can retain control of the Senate and enable them to once again get something to run on, so they can get a majority in the House. In saying this, I’m not saying that returning Democrats to power will get us to Democracy. Far from it. But I do think that it will slow the evolution toward plutocratic fascism, and create opportunities for enacting new and helpful policies provided the right Democrats are elected. I know, I know. That’s an awfully big qualification. But people certainly can work for that result.

And naturally, it would be much better if we could have a Green Party majority in the House in 2014, or a Democratic/Green party majority coalition than just electing a Democratic majority. But getting that outcome would be an even taller order, and is more unlikely to happen if we see a Democratic Party turn toward a Green New Deal.

Use High Value Platinum Coin Seigniorage (HVPCS) to Change the Political Environment and Remove Any Possible Rationale for Federal Government Austerity

Next, I would have the President use HVPCS. Under authority provided by Congress in 1996, the Treasury can have the US Mint issue platinum coins with face values specified by the Secretary. So, for example, the Mint should issue a $60 Trillion coin; deposit it at the Fed, where the reserves credited to the Mint’s account for this legal tender would eventually wind up in the Treasury General Account (TGA).

The immediate promise of HVPCS for America, of course, is the end of austerity politics, periodic debt ceiling crises, fiscal cliffs, sequesters, and budget crises. HVPCS directly ends debt ceiling crises, because the debt is no longer relevant except as a constantly shrinking obligation that will be paid off as it falls due.

As for fiscal cliffs, sequesters, and budget crises, their justification is primarily in the false claim that the US is running out of money, and must slow the growth of the national debt enough to allow the debt-to-GDP ratio to shrink, so that we can’t afford to implement the deficit spending that may be necessary to create full employment, pass Medicare for All, and do other things that a majority of the population supports heavily, but does not insist upon in the face of supposed budget problems. But it’s hard to make a credible claim that “we’re running out of money” when we 1) have between $50 Trillion and $60 Trillion in the TGA, and 2) when the President has just demonstrated that the Federal Government can create reserves to fill the public purse at will.

I’ve discussed the technicalities, history, economic, legal, and political aspects of HVPCS, and the many objections to it, in my recent e-book, and will leave the details for you to read there. But it’s very important to emphasize the essential role of the President in getting over the initial hysterical reaction that would ensue if he uses HVPCS. After using it and getting immediate credit for the face value of the platinum coin from the Federal Reserve, he must then make a crisis speech informing the country about the action he’s taken to fill the public purse and why he found it necessary to do that and change the American of debt repayment and deficit spending.

Following that crisis speech he must go on tour, carrying his message to the people and emphasizing the new freedom of the Government to pay down and eventually pay off the public debt, while, at the same time being able to “pay for” any deficit spending Congress might choose to enact for a long time to come. He needs to explain that using HVPCS is fiscal responsibility since it ends the Government’s borrowing back its own currency and eliminates any possible justification for “austerity” as long as we have less than a full employment economy. He also needs to emphasize that HVPCS will not cause any more inflation than present policies and why he thinks that is true.

In conveying this message, repetition and mobilization of all Administration resources is essential. He must not give any ground to austerians and Republicans who, while constantly complaining about the public debt, will hate the HVPCS solution to the problem. In other words he must not compromise on this at all, but must implement HVPCS, make filling the public purse a fait accompli, and then go on with the more positive politics of using the policy space created by a full TGA to decrease inequality in the US and create the greater prosperity for the middle class and the poor that he says he wants.

Remember, there would be no fiscal cliffs, sequesters, or budget crises, without the claim that there is a Government Budget Constraint (GBC). Once we dispel that claim with HVPCS, these things will be gone with the wind, and the policy space will be there for the President and others in Congress to propose a range of policies to restore middle class prosperity without the inevitable objections that such policies will either increase the debt, or lead to higher taxes.

The House won’t want to pass these policies. But House members who want to vote against them won’t be able to plead Federal Government poverty, or “fiscal responsibility,” not with between $50 Trillion and $60 Trillion in the Treasury’s bank account at the time of the new policy proposals. So, when they employ obstructionism without any perceived good reason for it, they will open the way for Democrats to retain the Senate and regain the House, which, without the filibuster, will cut the legs off obstructionism, and make it possible to pass the policies I want the President to propose, anyway. Again, Parts II and III of this series will offer and briefly discuss each of my proposals.

37 Responses to What Would You Have the President Do? Part I, Necessary First Moves

  1. charles fasola

    The HVPCS is not happening. Not today, not tomorrow, not in the foreseeable future. The only way it has even the slightest of chances of becoming reality is if, and the if is such a damned big if considering the lack of motivation and knowledge possessed by the vast majority of poor and working class amerikans (sorry the middle-class is another fantasy believed in by the masses and their respected talking heads), a huge grassroots, bottom up, political movement directed at removing the lap dogs of the .01% who are our current, so-called, representatives, from office. Then electing representatives who understand and possess the will to govern for the benefit of the commons. Who would dedicate themselves to enacting meaningful campaign finance reform. Who would work tirelessly to overturn all of the recent supreme court decisions that are destroying any semblance of democracy in this nation. Tell me, Joe, do you see that occurring any time soon? The items mentioned above are also just a very small tip of a Jupiter sized iceberg. I could add changing all of the ludicrous laws and impediments to allowing the U.S. Treasury to act as a true monetary sovereign; and so many more items which would need to become reality. Sorry, Joe, the Koch’s and the Peterson’s of the nation make the calls. HVPCS does not exist in their reality. Which means for now and for a long while to come HVPCS is a pipe dream.

    • Sunflowerbio

      I’m not as pessimistic as you are about HVPCS because the House Republicans are going to hold Obamacare hostage to the debt ceiling along about October. If Obama wants to save his signature program from defunding, he is going to have to toss a big bone to the Republicans or bite the bullet himself and call their bluff. With enough encouragement form the public and his party, he just might bite; otherwise the Democrats will remain a minority in the House and may well lose the Senate in 2014. Elections do have a way of clearing the head, sometimes, if the stakes are high enough.

      • Joe Firestone

        Don’t know if I’m as optimistic as that. I think he’ll just kill Democratic chances in 2014 with a morally corrupt compromise that he will claim was forced on him because TINA.

        • Sunflowerbio

          That would be the big bone. I would put the chances of Obama biting the bullet at no better than 20%, probably more likely about 5%, but still above zero.t

    • Charles Fasola: I could add changing all of the ludicrous laws and impediments to allowing the U.S. Treasury to act as a true monetary sovereign.

      There’s only one such ludicrous law which has any conceivable effect: The debt ceiling law. Other than that law, there is absolutely nothing preventing the US Congress from spending whatever & whenever it damn well pleases, “acting as a real monetary sovereign”. The other formal pretend- obstacles are entirely illusions created by the smoke and mirrors they embody – that is the upshot of the MMT analysis of monetary operations.

      The debt ceiling was something passed by the US Congress itself which pretends to be constrained by it and only used as a partisan tactic. So it is is the most illusory constraint of all. It is just another way of saying Congress will spend what Congress decides to spend. It is as if Congress is playing a game of Simon Says with itself – only spending “if under the debt ceiling” = “only spending when Simon Says”. And everybody pretends – and eventually believes! – that there is some real “Simon” out there, who tells Congress what it can and can’t do!

      The incorrect idea that we do not have an “MMT system” ALREADY, that the US Treasury cannot “act as a true monetary sovereign” RIGHT NOW is the true impediment. Not these meaningless laws.

      • Joe Firestone

        “The incorrect idea that we do not have an “MMT system” ALREADY, that the US Treasury cannot “act as a true monetary sovereign” RIGHT NOW is the true impediment. Not these meaningless laws.”

        Well, that’s right, Cal. But, that said, what’s the way around the true impediment. It’s too show people that the idea is false. That’s really what HVPCS is about. It’s a demonstration that the Government is not constrained by money; but only Congressional Appropriations.

        • Of course we agree, Joe. But there are far too many who don’t get it out there, far more than there were say in 1980 even – and even “in here” at MMT sites, and that’s who my comments are usually directed to.

    • reserveporto

      Haven’t you noticed that the “Big Next Debt Ceiling Fight” keeps being put off? At this point, I don’t think there will even BE a “Big Next Debt Ceiling Fight”. It isn’t all that hard to just move entries around on the various balance sheets of the plethora of gov’t agencies and make items that are added to the number that is conventionally called “The National Debt” instead be added to numbers that are not conventionally added in. The numbers are where they are purely by convention, the federal gov’t cannot be insolvent unless it chooses to be.

      At a recent House hearing with Bernanke, a representative asked if Treasury was “cooking the books” because it all-of-a-sudden seems to have more money than everyone thought it had. Bernanke basically avoided the question, but the answer is no, the Treasury is not “cooking the books”, they don’t need to, they are empowered by Congress to control the recipe. Selling T-bills is a choice, not a necessity. Congress chooses to sell T-bills because they and their constituents like getting interest income. It was actually a rather interesting hearing, many of the Congresspeople seemed more informed and less useless than daily media reports might indicate.

    • Gary Goodman

      There’s nothing wrong — and it IS constitutional — with Congress having created a federal “bank” that functions as a part of the Treasury, so Govt can essentially “borrow from itself” (which is therefore null) and in which the Fed pays back 100% of it’s net profits to the Treasury.

      Properly understood, the Tsy IS functionally acting as a monetary sovereign … Congress just BELIEVES it’s not, believes it’s constrained by “gold standard” thinking, by “bond vigilantes” and whatnot. Treasury can now issue UNLIMITED (debt) Bonds, doesn’t owe gold or sheep or anything to anyone upon demand, and the CB can issue UNLIMITED debt instruments of it’s own to buy the Tsy Bonds, those being FRNs aka U$Ds.

      Congress has this self-imposed constraint that says that the Fed is prohibited from purchasing T-Bonds at closed Tsy Auctions. Tsy is mandated by Congress to offer this “national debt” for sale to a handful of designated (by the Fed as being suitable) Private Banks,, including foreign banks from Canada, Germany, Japan or Korea, etc., as well as Wall St. All Congress would have to do is amend ONE measly law.

      That would be way easier than the Fin Mod Act or the Comm Futures Mod Act that helped fuel the Collapse and more asset speculation, or many other bigger laws.

      Then the Fed would pay interest on Reserves to set the base “overnight” interest they want (monetary policy), which is NOT considered “government spending”, whereas when Tsy pays interest, people freak out at the size of that payment (even though the payment is ultimately issued by the Fed). Mostly it would be CUTTING OUT THE MIDDLEMAN Primary Dealer banks.

      Uncle Sam doesn’t NEED to sell T-Bills, at least not to acquire money.
      Big Net Savers DO need to buy T-Bills, for a safe place to store their money.

  2. Joe Firestone

    Charles, I’ll get to the question of whether I expect the President to do the things I’m proposing in Part III. But for now, please note, I’m just trying to answer the question posed by the Obamabot at NC: “What would you have him do?” That question is important to people interested in evaluating Obama’s performance. Any such evaluation depends on the benchmark you use. So, this series is about benchmarking, and about communicating to people that there is an alternative to Obama’s frame of self-congratulation mixed with crocodile tears.

  3. Joe, get moving and get your e-book out in pamphlet so we can start passing it around. The discussion about debt, deficit, austerity and sovereign currency has never been livelier or had as many willing participants.
    ‘If we do not seize this unique moment in history to convey and reform our understanding and practices, we will all live to regret it

    • Sunflowerbio

      I’ll second that Joe. If this were a pamphlet, I would buy enough copies to put one in every doctor’s waiting room in town. Perhaps you could call it “Common Sense II” with a subtitle.

      • Joe Firestone

        Got a question, why is it not a pamphlet now. Is it the price? is it the length. It’s a short book.

        • Sunflowerbio

          Shorter, I think, and it should be free or at cost of printing. Something you could read while waiting in the doctor’s office or on your lunch break. Reference the longer version, but hit the highlights.

  4. The structure of the monetary system that provides privileges for banks is the biggest problem IMO. We need to modify the monetary system so the fed conducts monetary policy directly with the public not just the banks who block stimulus or channel it to whatever activities they choose.

  5. I would have the President appear on TV and announce “It makes no difference who the President is. Now get off your ass and get rid of this government before there is nothing left of the nation.”

  6. The crucial and ctitical distinction between kapitalizm and socialism is Who can print the money (directly).
    Once the government prints HVPCS there is no more of excuse of USA not being a socialist country.
    One example is Nazi Germany. A fascist country that printed money in order to apply Keynes’s teachings was led by National socialist party. What a contradiction, you would say; fascist and socialist at the same time. The trick is in having internal socialist policies while external was fascist. But the distinction was direct printing of money by state as socialist internal policy. HVPCS would mark the turn to socializm.
    FDR evaded the name socialist by opening developement banks under state ownership – indirect money printing which in the end had the same effect as direct money printing but somewhat sllower implementation.

    • reserveporto

      Galbraith quote is enjoyable, “In capitalism, man exploits man. In communism, just the opposite is true.”

    • Gary Goodman

      If I believe what I’ve read, Germany borrowed the idea from America’s temporary Colonial Congress when they were preparing to fight the Am Rev. Despite counterfeiting by the Brits, it survived long enough to win the war.

      Only Govt can “print” or ISSUE payments, free and clear.
      Banks create LOANS on balance sheets. They don’t ISSUE payments.

      Both activities expand “money in circulation”, with the banks’ creation of deposits & loan obligations being temporary money, and with govt spending being spending into existence permanently … unless the idiots tax it away.

  7. NOT DICTATE; ABDICATE!

  8. I think the following policies would have a chance of passing the House:

    – payroll tax cut for incomes under $100k
    – double the EITC
    – federal income tax cut for incomes under $100k

  9. I agree with the NC commentator in a sense, O-bomber is just one man. Politicians can only be as good as we make them, it is far more important for the people of the country to be educated and active in forcing change.

    As the great FDR said to the labor leaders: “I agree with you, I want to do it, now make me do it.”

    Any president can be made to do it.. but it’s not clear to me Obama is there on the first two points.

  10. Gregory Long

    If the biggest impact of the HVPCS is to simply publicize that the monetary system we already have means the Federal Government is not revenue constrained, then a very public push for the HVPCS could be effective enough even if it never passes. For example, Representative Jerry Nadler has endorsed the HVPCS. If he offers a series of resolutions calling for the HVPCS, that could provide enough publicity even if all the resolutions are rejected by Obama.

  11. Pingback: What Would You Have the President Do? Part II, Getting to Full Employment | New Economic Perspectives

  12. Pingback: What Would You Have the President Do? Part III, Doing Some Economic and Social Justice | New Economic Perspectives

  13. John Hobgood

    Joe, how about the Prez directing the Treasury to issue nothing longer than a 3 mo T-Bill?

    • Joe Firestone

      That would be good, John, but it would not erase “teh debt” as a politcal issue. HVPCS $60 T does that!

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  15. –the President has just demonstrated that the Federal Government can create reserves to fill the public purse at will–

    By endorsing HVPCS would it not be simply making an accounting entry and create non-existent cash in the public purse?

  16. Only issue with ending the filibuster is we have the flip side, that Republicans would also have simply majority rule. Which could be extra scary to you since there is a general anti social spending wave sweeping through. That’s the mainstream, and of course there are more fringe people like Rand Paul who’s growing in political popularity, so ending the filibuster could be a bit dangerous?
    Unless you are assuming the death of the GOP, but trying to be a realist and not a theorist…that seems unliekly and ending the filibuster seems potentially dangerous. Which has been why whenever a party says “OK we’re ending this filibiuster thing!” a small group of senators always steps in to uphold it.

    The JG idea is an intriguing one though. Im trying to read more about it and ponder but its at least a very intriguing idea and with great potential

  17. Concerning HVPCS, there’s two points to be had- one, any congressman can pressure him into using it by simply filibustering any debt ceiling raise; whether it’s the GOP calling his bluff, or democrats. Second, there’s the issue of inflation- not actual inflation, but perceived. While you’ve made the case clear on how the coin is neither intrinsically inflationary nor necessarily so beyond full employment level spending, the notion excessive spending would cause inflation could be just as damaging to deficit spending as “we have no money”; in fact, it already is.