The President has all the leverage in the debate, yet has failed to use it. It’s anybody’s guess as to why. It is wrong that the President and the Democrats are holding the nation hostage by demanding tax increases and it is wrong that the Republicans are holding the nation hostage by demanding spending cuts. The “Full Faith and Credit” of the United States is not something that should be played with for political gain. Congress already has a mechanism for debating spending – its called the budget process. If I were an advisor to the President, my advice would be the following:
Give Congress a deadline for a bill that eliminates the debt ceiling entirely (this leftover relic of the Gold Standard should not be available to use as leverage for political gain)
If that deadline is not met, instruct the Treasury to mint a coin with a face value equal to whatever spending requirements our nation has for the next 12 months and to place it on deposit with Federal Reserve
If the President did this he would accomplish a lot, even if there were no bill to eliminate the debt ceiling. He would demonstrate the stupidity of the debt ceiling and demonstrate how our current monetary system actually works (i.e. the government is not revenue constrained). It would force congress to actually spend time on something other than meaningless debt ceiling talks and force them to use the already established mechanism for debating taxes and spending. Finally, it would demonstrate to the world that the US can and will always pay its dollar-denominated obligations and that there is no possibility of a default (outside of political foolishness).
Will the above actually happen? Nope, but if congress actually worked for your best interest, it would. Fat Chance.
Scott Dauenhauer, CFP, MSFP, AIF
P.S. Yes, I know Martin Sheen is not the President of the United States