Post Mortem On The Trillion Dollar Coin (or, Krugman Jumps The Shark)

So the idiotic idea of the Trillion Dollar Coin—floated so as to get around the debt ceiling—is dead as Dillinger. The official White House announcement stated:

Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit.

Since we won’t know how this decision was made until a few years hence, when Obama officials start publishing their memoirs, the current best speculation of what probably happened comes from Bruce Krasting:

I think the line “Treasury nor the Fed”, is baloney. It was the Fed, in a message delivered by Bernanke, that caused Obama to back off on any consideration of the Coin. There might have been wiggle room in existing law to print a Coin, but there is nothing that says that the Fed had to take it. And Bernanke said, “No”. When Obama ditched the Coin, he did it because it was no longer an option. Bernanke took the option off the table. The WH statement makes it sound as it it was their decision, that’s just smoke and mirrors. [. . .] I think Bernanke got some calls from other Central Banks. They told him it would be a dangerous precedent for America to do this. If there are coins to be printed, it would be better if some other country (possibly Japan) do it first. After all, the dollar is still the #1 reserve currency. The foreign CBs have some say in this.

I pretty much agree with Bruce’s speculation, especially one key line of his: “There might have been wiggle room in existing law to print a Coin, but there is nothing that says that the Fed had to take it.”

Absolutely goddamned right.

OK, so here’s something interesting: It always happens that, when a foolish illusion is shattered, the people who believed in it most vocally look the most foolish. Ptolomey looks nowhere near as ridiculous as the Catholic Church, for having denied the Copernican Model.

Now that the Trillion Dollar Coin is dead, the power of its illusion is also very dead, and the people who most vocally advocated it look silliest of all.

Paul Krugman

Who tops the list? Poor Paul Krugman—he of Dr. Evil’s cat. It’s not that he wrote a casual blog post saying, in effect, “Hey it’s crazy, but why not?” Rather, he wrote a series of blog posts and a New York Times editorial, spouting the idea.

In a January 7 post on his Conscience of a Liberal blog, he wrote a post called “Be Ready To Mint That Coin”, which espoused this foolishness. Then he went on with the idea on subsequent days, culminating in a NYT editorial, “Coins Against The Crazies”

Even Krugman’s perennial fluffer, Brad DeLong, was smart enough not to endorse such a stupid idea. (And by the way, note to all megalomaniacs: When your sycophants aren’t behind you, you know you’re marching off a cliff.)

But the moment Krugman jumped the shark, as it were, was not when he published his various blog posts or his NYT editorial—it was when he got into a pissing contest with Jon Stewart.

On The Daily Show, Stewart made comedic mincemeat out of the Trillion Dollar Coin—his best shot: “I’m not an economist? But if we’re just gonna make shit up? I say we go bigger or go home. How about a 20 trillion dollar coin.”

In reaction to Stewart’s amusing rant, Krugman—unprovoked—wrote a blog post called “Lazy Jon Stewart”:

Oh, dear. Jon Stewart took on the platinum coin, and made a hash of it—he faceplanted, as Ryan Cooper says.

What went wrong? Jon Chait says that he flunked econ, but that’s just part of it. He also flunked law, politics, and just plain professional.

So, yeah, as Chait says, Stewart seems weirdly unaware that there’s more to fiscal policy than balancing the budget. But in this case he also seems unaware that the president can’t just decide unilaterally to spend 40 percent less; he’s constitutionally obliged to spend what the law tells him to spend. True, he’s also constitutionally prohibited from borrowing more if Congress says he can’t — which is a contradiction. But that’s the whole point of the discussion.

And it makes no sense at all to talk about any of this without the context of extortion and confrontation.

So according to Krugman, Stewart “faceplanted”. Uh-huh.

But what’s amazing is that last line of Krugman’s post: “[I]t makes no sense at all to talk about any of this [i.e. the Trillion Dollar Coin] without the context of extortion and confrontation.” It’s a line that’s practically a Joycean epiphany, insofar as Krugman’s views on democracy are concerned.

See, at heart, Krugman is a totalitarian. He is right that the political process in a democracy is absolutely about “extortion and confrontation”—but that is the very nature of the democratic process: Debate and compromise, deals and persuasion. But Krugman doesn’t believe in this democratic, messy process. He doesn’t believe in political “extortion and confrontation”—he believes in the diktats of the lofties such as himself, telling us proles what to do from the heights and safety of their ivory towers.

Krugman hates the democratic process because it won’t let him do what he wants. What does Krugman want? To have the government spend without limits, and thus best the Republicans. (I’m not sure even is he know whether he wants the government to spend its way out of this receission—or he wants the government to spend without limits because it goes against what Republicans want. To Krugman, if Republicans claimed the sky was blue, he would argue vehemently that it’s actually green.) So he latches on to any idea, no matter how absurd, that will circumvent the democratic process—because he doesn’t want to have to compete with Republicans who oppose the spend-spend-spend mantra of Keynesians like Krugman.

Now that the Trillion Dollar Coin is dead, Krugman looks most foolish of all. But has he finally jumped the shark? Has he finally burned the last of his credibility? I don’t know for sure. I think so. But then the K-ster Monster from Princeton Junction has a way of coming back from the dead. All the best B-movie monsters have that ability.