Quotulatiousness

January 22, 2013

British army facing next wave of cuts

Filed under: Britain, Government, Military — Tags: , — Nicholas @ 10:14

The British army has to reduce down to a slim 82,000 troops by 2015, and the cuts coming down later this year are part of the 2010 Strategic Defence and Security Review (SDSR):

Up to 50 brigadiers and other senior officers are expected to be axed as part of a sweeping round of army redundancies that will result in up to 5,300 troops leaving the forces over the next year.

In what is thought to be the biggest tranche of redundancies faced by the army since the early 1990s, infantry battalions are likely to be worst hit as the military reorganises itself for the post-Afghanistan era.

Special forces units will be spared any losses, but officials made clear that this round of job cuts would take “a large slice out of the army in one go”.

Separately, the Ministry of Defence (MoD) also admitted more medical staff from the army, Royal Navy and RAF staff were likely to face redundancy later this year.

Some of the details from the SDSR were discussed in 2010. I also posted that I suspected SDSR actually stood for “Slashing Damage to Strategic Resources“

January 21, 2013

Reason.tv: It’s not what he said, but how he said it

Filed under: Government, Politics, USA — Tags: , — Nicholas @ 08:50

“And those of us who manage the public’s dollars will be held to account, to spend wisely, reform bad habits, and do our business in the light of day, because only then can we restore the vital trust between a people and their government.”

Reason TV looks back at Obama’s 2009 inaugural address to see how well his rhetoric compares to his first four years in office.

Produced by Meredith Bragg.

January 20, 2013

Corporate welfare — it’s the American way

Filed under: Business, Government, USA — Tags: , , , , — Nicholas @ 12:08

Sheldon Richman on the amazingly inefficient US tax code and some of the ways it got that way:

When Congress and President Obama came up with their beyond-the-last-minute deal to put off addressing the coming fiscal crisis, The Wall Street Journal turned the spotlight on a little-noticed, yet too typical aspect of Washington’s machinations: “The bill’s seedier underside is the $40 billion or so in tax payoffs to every crony capitalist and special pleader with a lobbyist worth his million-dollar salary. Congress and the White House want everyone to ignore this corporate-welfare blowout,” the Journal reported.

So a bill that was represented as the first steps toward fiscal responsibility (try not to laugh too hard) contained billions of dollars in corporate welfare. And it was a bipartisan affair.

[. . .]

Manipulating the tax code to benefit particular interests has obvious appeal for politicians — it’s a source of power and influence — and a code that did not permit such manipulation would be much less attractive to them. Outright cash subsidies from the taxpayers, while not unheard of, smacks too much of cronyism and is more likely to alienate taxpayers. But complicated exceptions written into the tax laws can be presented as creative governance on behalf of the public interest. But it is cronyism as offensive as outright subsidies.

[. . .]

Corporate welfare is not primarily about lowering taxes. That would be a worthwhile goal, of course, and could be achieved simply by slashing tax rates and simplifying the code. But when taxes are lowered selectively by writing complicated exceptions into the law, the goal is to bestow privileges on cronies, not to reduce the burden of government on all. Corporate welfare, among its many sins, violates equal protection under the law.

January 19, 2013

Which is preferable: pirates or bandits?

Filed under: Government, History — Tags: , , — Nicholas @ 10:56

Tim Harford gives a history lesson while answering the question of which is better:

Consider two different types of bandit, suggested Olson: the roving bandit, who wanders around pillaging wherever he can; and the stationary bandit, who builds a castle and settles down to exploit a particular area. At first glance, one might think that a stationary bandit is the greater curse, because he’s always around. But not so: roving bandits are more dangerous because they have no reason to hold back. A roving bandit will take everything and leave you dead. The stationary bandit wants to come back and take more next week, and so will ensure you have the resources to keep going about your business.

Because you have everything to fear from the roving bandit, you are likely to take your own steps to avoid him — to hide, to place locks and alarms on everything, or to hire a group of seven samurai to protect you. Meanwhile, anticipating your counter-measures, the roving bandit will also spend resources on his counter-counter-measures. The cost of such arms races can be vast.

[. . .]

Besley and his colleagues reckon that costs of between $900m and $3.6bn were incurred in 2010 as a result either of pirate attacks, or efforts to deter or evade such attacks. Meanwhile the pirates took home just $120m over the same period. Now that $120m does seem to have had some beneficial effects on the pirates’ home ports, according to Anja Shortland, an economist at Brunel University. But piracy is an expensive way to get $120m into the hands of anybody.

There are signs that Somali piracy is on the wane, at least for now. But Somalia remains the poster child for a failed state. And a good working definition of a failed state is one that lacks a decent, long-lived stationary bandit. After all, once a stationary bandit feels secure in his tenure (“long live the king!”) he may do more than show restraint in his plunder: he may begin to invest in the prosperity of the region he dominates, building bridges, establishing a police force and drawing up laws. To maintain his power base he will have to hand out favours and ensure that prosperity is reasonably widespread.

January 17, 2013

Ibbitson: First Nations must prioritize political agenda to achieve anything

Filed under: Cancon, Government, Politics — Tags: , , , , , — Nicholas @ 11:18

In the Globe and Mail John Ibbitson lays out the possible and impossible goals and explains why it’s crucial for First Nations to work on the possible goals while there’s still momentum:

In that sense, it might be helpful to look at the disparate demands of the various factions claiming to represent native Canadians living on reserve, in an effort to separate the “deliverables” from the “non-deliverables.”

One key demand is that the Harper government withdraw a raft of legislation, including budget bills that have been passed, that native leaders claim weaken environmental protections and otherwise impair the lives and rights of their people.

Rescinding the budget bills, C-45 and C-38, is 100-per-cent non-deliverable. The Harper government is not going to repeal its budget. No government of any stripe ever would.

But other bills have not been passed. The First Nations Transparency Act, which would require band leaders to publicly report their income, is before the Senate. Native leaders consider its provision onerous and unfair. The Safe Drinking Water for First Nations Act aims to improve drinking water safety on reserves, but lacks sufficient funding in the eyes for first nations leaders. It’s still before the Commons. And there are other bills as well.

First Nations leaders would be wise to identify which legislation the Harper government might be convinced to amend, and press for those amendments.

The Assembly of First Nations, in its lists of demands, emphasizes the need for an inquiry into missing and murdered aboriginal women. This is eminently deliverable; native leaders should push hard for it.

Mr. Harper has agreed to take personal charge of negotiations around treaty and land claims. He is known to be personally frustrated with what he sees as an obstructionist bureaucracy at Aboriginal and Northern Affairs. A new and expedited process for resolving claims is deliverable, provided first nations leaders agree in return that resource development is vital to Canada’s and first nations’ economic future.

Any agenda item that requires amending the constitution is completely non-deliverable: after Charlottetown and Meech Lake, Canadians are highly averse to any constitutional tinkering. This limits some aspects of First Nations’ concern, but other areas can and should be addressed. (As pointed out in the article above, revenue sharing from natural resources is a provincial matter, so beating up the feds on that topic is a waste of time and effort.)

Another major factor holding back any chances of meaningful change are the divisions within the Assembly of First Nations (AFN) and opposition to the AFN’s leadership from outside the AFN itself. For details, see Terry Glavin’s most recent article in the Ottawa Citizen.

January 16, 2013

Prosecutorial abuse and the Swartz case

Filed under: Government, Law, USA — Tags: , , , , — Nicholas @ 13:05

Writing in the Guardian, Glenn Greenwald calls for reform in the way prosecutors are immune from any consequences of their misdeeds:

To begin with, there has been a serious injustice in the Swartz case, and that alone compels accountability. Prosecutors are vested with the extraordinary power to investigate, prosecute, bankrupt, and use the power of the state to imprison people for decades. They have the corresponding obligation to exercise judgment and restraint in how that power is used. When they fail to do so, lives are ruined — or ended.

The US has become a society in which political and financial elites systematically evade accountability for their bad acts, no matter how destructive. Those who torture, illegally eavesdrop, commit systemic financial fraud, even launder money for designated terrorists and drug dealers are all protected from criminal liability, while those who are powerless — or especially, as in Swartz’s case, those who challenge power — are mercilessly punished for trivial transgressions. All one has to do to see that this is true is to contrast the incredible leniency given by Ortiz’s office to large companies and executives accused of serious crimes with the indescribably excessive pursuit of Swartz.

This immunity for people with power needs to stop. The power of prosecutors is particularly potent, and abuse of that power is consequently devastating. Prosecutorial abuse is widespread in the US, and it’s vital that a strong message be sent that it is not acceptable. Swartz’s family strongly believes — with convincing rationale — that the abuse of this power by Ortiz and Heymann played a key role in the death of their 26-year-old son. It would be unconscionable to decide that this should be simply forgotten.

[. . .]

In most of what I’ve written and spoken about over the past several years, this is probably the overarching point: the abuse of state power, the systematic violation of civil liberties, is about creating a Climate of Fear, one that is geared toward entrenching the power and position of elites by intimidating the rest of society from meaningful challenges and dissent. There is a particular overzealousness when it comes to internet activism because the internet is one of the few weapons — perhaps the only one — that can be effectively harnessed to galvanize movements and challenge the prevailing order. That’s why so much effort is devoted to destroying the ability to use it anonymously — the Surveillance State — and why there is so much effort to punishing as virtual Terrorists anyone like Swartz who uses it for political activism or dissent.

The law and prosecutorial power should not be abused to crush and destroy those who commit the “crime” of engaging in activism and dissent against the acts of elites. Nobody contests the propriety of charging Swartz with some crime for what he did. Civil disobedience is supposed to have consequences. The issue is that he was punished completely out of proportion to what he did, for ends that have nothing to do with the proper administration of justice. That has consequences far beyond his case, and simply cannot be tolerated.

Update: Radley Balko‘s latest column is also on the topic of the public prosecutor.

The death of Internet activist Aaron Swartz has generated a lot of discussion about the power of prosecutors — particularly federal prosecutors. This is a good thing. The conversation is long overdue. But the discussion needs to go well beyond on Swartz and the Computer Fraud and Abuse Act.

Prosecutors have enormous power. Even investigations that don’t result in any charges can ruin lives, ruin reputations, and drive their targets into bankruptcy. It has become an overtly political position — in general, but particularly at the federal level. If a prosecutor wants to ruin your life, he or she can. Even if you’ve done nothing wrong, there isn’t a whole lot you can do about it.

There are a number of factors that got us here, and it’s worth looking at them in turn.

When Kafka met Sandy

Filed under: Bureaucracy, Government, USA — Tags: , , , , , — Nicholas @ 09:53

In the Wall Street Journal, Roger Kimball talks about the experience of trying to put your life back together after a major storm damages your home:

Like many people whose houses were badly damaged by Hurricane Sandy, my family and I have been living in a rented house since the storm. Unlike some whose houses were totalled, we could have repaired things and been home toasting our tootsies by our own fireplace by now. What happened?

Two things: zoning (as in “Twilight Zone”) and FEMA.

Our first exposure to the town zoning authorities came a couple of weeks after Sandy. We’d met with insurance adjusters, contractors and “remediation experts.” We’d had about a foot of Long Island Sound sloshing around the ground floor of our house in Connecticut, and everyone had the same advice: Rip up the floors and subfloors, and tear out anything — wiring, plumbing, insulation, drywall, kitchen cabinets, bookcases — touched by salt water. All of it had to go, and pronto, too, lest mold set in.

Yet it wasn’t until the workmen we hired had ripped apart most of the first floor that the phrase “building permit” first wafted past us. Turns out we needed one. “What, to repair our own house we need a building permit?”

Of course.

Before you could get a building permit, however, you had to be approved by the Zoning Authority. And Zoning — citing FEMA regulations — would force you to bring the house “up to code,” which in many cases meant elevating the house by several feet. Now, elevating your house is very expensive and time consuming — not because of the actual raising, which takes just a day or two, but because of the required permits.

Kafka would have liked the zoning folks. There also is a limit on how high in the sky your house can be. That calculation seems to be a state secret, but it can easily happen that raising your house violates the height requirement. Which means that you can’t raise the house that you must raise if you want to repair it. Got that?

“A paradox, a paradox, a most ingenious paradox. Ha, ha, ha, ha, ha, ha, ha, ha, this paradox.”

H/T to Monty for the link. Monty also has this meditation on bureaucracy:

This is where Leviathan does the most damage, I think. Tyranny is always a danger in centralized governments, but a greater danger is the proliferation and growth of bureaucracies. The rules become ever more Byzantine, ever more contradictory, ever more pointless, and ever more expensive (both to implement and comply with). The bureaucracies themselves achieve a life outside the body politic: they persist, age after age, irrespective of their political origin. Their sole imperative (regardless of their ostensible purpose) is to perpetuate themselves. They are an amoeba, growing to engulf everything they touch — not because they are evil, necessarily, but simply because it’s in their nature to do so. They cannot help themselves. Bureaucracies — lethargic, slow, risk-averse, rules-bound, pedantic, expensive, often causing more harm than good — are perhaps the very worst creation of human society.

The odd concept that is “money”

Filed under: Economics, Government, History — Tags: , , , , , — Nicholas @ 00:03

In his nominally NFL-related column, Gregg Easterbrook talks about the phenomenon that is money:

Currency is surprisingly abstract as a concept. Money is whatever you agree to accept in trade, with the understanding that others will accept it in turn. If there’s a $20 bill in your wallet or purse, you view it as valuable because you know that others will as well. If you have $1 million in a bank account, you view it as valuable because you know that others will as well. But you can’t eat a $20 bill or sleep under a bank account. Money is valuable only if others agree that it is.

Even if money is backed by some precious substance such as gold, the abstraction doesn’t change much. You can’t eat or wear gold. You view gold as valuable only because you know that others will as well. Whether a thin sheet of linen-like paper or a gold ingot or a string of digits on an electronic financial statement, money is, itself, worthless.

That money has value only when others think it does is why currencies collapse. The ruble and the Zimbabwean dollar lost value when no one wanted them, because a person holding this currency couldn’t be sure that others would also view it as valuable. But if Barack Obama ordered the minting of a trillion-dollar platinum coin, and it was viewed as having a trillion dollars’ worth of value, then it would.

[. . .]

Bear in mind, that’s how the past six years of irresponsible debt-based federal giveaways — two years under George W. Bush, now four years under Obama — have been funded. The Federal Reserve keeps buying Treasuries, or mortgage-backed securities issued by Fannie Mae and similar federal agencies. That gives the executive branch money to spend. One division of government tells another, “Here is a new string of numbers,” and money comes into existence.

What’s underlying these transactions? Nada, beyond the belief that strings of numbers issued by the United States are more likely to be useful in trade than strings of numbers issued by, say, Greece. Because the credibility of the United States is so high, its strings of numbers bear heft. But if government keeps printing money and talking about obvious gimmicks such as trillion-dollar coins, how long will that credibility last?

Economists including Friedrich Hayek have contemplated the idea that privately issued money would be more solid than government-issued money, since privately issued money would be cross-checked by market forces, while government is run to please campaign donors. Governments from the Roman emperors of the far past to the liberal Scandinavian democracies of today insist that they alone control the supply of money. One reason is to ensure taxation. At a deeper level, governments know how easily it could all unravel, and money be viewed as worthless.

January 15, 2013

“Spending cuts” in Washington are not like actual reductions in spending

Filed under: Economics, Government, USA — Tags: , , , , — Nicholas @ 00:02

A. Barton Hinkle clues us in on how to save big in our budget plans:

Would you like to save $20,000 this year? Of course you would. Here’s how: Plan a month-long vacation to Disneyland, and budget $20,000 for the trip. Then don’t go. Presto! You just “cut” your family budget by 20 grand.

This sounds absurd — because it is. Yet that is precisely how Washington operates.

A couple of weeks ago, President Obama claimed on national TV that “I cut spending by over a trillion dollars in 2011.” But as many people quickly pointed out, in fiscal 2011 federal spending rose from $3.4 trillion to $3.6 trillion. Nevertheless, the President repeated the claim on Jan. 2, insisting that “last year we started reducing the deficit through $1 trillion in spending cuts.”

What he meant was that in 2011 he agreed to “cut” spending in future years, in much the same way canceling a future vacation “cuts” your own budget. It is a fiction necessary to sustain the president’s pose that he wants a “balanced approach” to deficit reduction.

That is also nonsense. Take the midnight deal to avert the fiscal cliff, which the White House says will reduce the deficit $737 billion. Of that amount, $620 billion comes from raising taxes. Some balance.

“You kids are screwed”

Filed under: Economics, Education, Government, USA — Tags: , , , — Nicholas @ 00:01

Feeling optimistic about the future? Bryan Goldberg is here to slap that silly optimistic grin off your face:

Hey kids, you’ve all read “The Hunger Games,” right? Almost all young people have read the best-selling books or seen the Hollywood movie about Katniss Everdeen, a smart and ambitious young lady whose life prospects are diminished by historical events that predate her. What little hope she has is seemingly reduced to nil when a bunch of old people drop her into an arena and force her to fight with her fellow children in a battle royale to the death.

But that’s just fiction, right? Your loving parents and grandparents would never screw up their world and then throw you kids under the bus…or would they?

Actually, they already have.

Last week, the economics blog Calculated Risk ran a chart that tells a pretty compelling story. To an economist, this chart means that the magnitude and duration of the 2007 recession’s impact on unemployment outpaces that of any prior post-war recession. To young people, it simply means this…

You kids are screwed.

In fact, teenagers today probably aren’t old enough to remember the “Dot Bomb” recession of twelve years ago. But even at its peak, that really bad recession did not reach a level of unemployment that matched the one we are still currently experiencing. With the Federal Reserve losing its appetite for quantitative easing, the last bullet in their holster, and both political parties deciding to half-ass the fiscal policy debate, it’s safe to say that…

You kids are really screwed.

Pay careful attention to Lesson No. 4: it’s even more important than you think it is.

H/T to Jon, my former virtual landlord, for the link.

January 14, 2013

Insufficient bribes and transport aircraft

Filed under: Government, Italy, Military — Tags: , , — Nicholas @ 09:35

Strategy Page on the sad-but-predictable situation in Afghanistan:

Afghanistan recently announced that it would cancel the contract to buy and use 20 C-27A transports. The official reason was the inability of the Italian maintenance firm to keep the aircraft operational. The unofficial reason is the unwillingness of the Italians to pay as much in bribes as the Afghan commanders were demanding. Over half a billion dollars was being spent on buying and operating these aircraft and all the money was coming from the United States. Afghan government and air force officials were determined to grab as much of that cash as possible. That meant there was not enough money for the spare parts and tools needed to keep the C-27As flying. The Afghans can be self-destructive in so many ways, and letting these transports get away because not enough could be stolen from the contracts was another example of this.

More self-destructive behavior is expected. The Western donor nations are getting fed up with the increasingly aggressive Afghan corruption. Last year, as the Afghans asked for more military aid, the donor nations instead cut contributions. The Afghans were told that the aid would be reduced from $11 billion a year to $4.1 billion a year between 2012 and 2017. That would only change if, by some miracle, the Afghans managed to get their thieving ways under control. Currently, the Afghans will go to great lengths to get around donor auditors and anti-corruption measures. The C-27A was a case of everyone just giving up. Expect to see more cases like this.

January 13, 2013

Calling it a “debt ceiling” is misleading: it’s actually a “debt sky”

Filed under: Economics, Government, USA — Tags: , , , — Nicholas @ 12:40

In Reason, Sheldon Richman explains the absurdity of allowing governments to go this deeply into debt:

The last time the debt-ceiling controversy arose, it occurred to me that if the raising the “ceiling” is a mere formality — if in fact the sky’s the limit to government borrowing — it’s no ceiling at all. Hence, I dubbed this charade the “debt sky.”

Those who favor automatic increases in the “limit” — or no limit at all — give the game away when they argue that the borrowing authority must be increased because the full faith and credit of the United States is on the line. After all, they say, the money is needed to pay bills already incurred, not for new spending. Obama makes this claim routinely, as though the case for raising the limit is open and shut.

Who knows if that is true? But if it is, think about what it means. Congress has been incurring bills the payment of which depends on a future increase in the debt limit that theoretically could be rejected. It’s bad enough that Congress can incur financial obligations under the statutory authority to borrow; it’s intolerable that Congress can incur financial obligations based on a possible but not certain future expansion of its authority to borrow. This is truly government run amok.

You and I can’t force banks to raise our credit-card limits merely because we have bills to pay. Why should Congress be able to do the equivalent? The road to fiscal responsibility would begin with an end to this practice. Better yet, no more raising of the debt limit — cut spending and live within the current limit. And even better: No more borrowing. Government borrowing is a source of many evils, not least of which is that for decades it made big government appear cheaper than it is. Could the federal government spend nearly $4 trillion a year if it had to raise every penny through taxation? Unlikely. A tax revolt would have been ignited. But let the government borrow a trillion dollars a year, more than 40 cents of every dollar spent, and government looks relatively inexpensive — or it did before things got so out of hand that everyone could see the looming danger.

January 11, 2013

Public choice theory is neither Left nor Right

Filed under: Bureaucracy, Economics, Government — Tags: , , , , — Nicholas @ 00:01

In his obituary for the late James Buchanan, Radley Balko debunks the meme that public choice theory — of which Buchanan was one of the founding fathers — is by nature anti-left:

The discrepancy struck me at the time, and has stuck with me ever since. Buchanan’s work is often seen on the right as a critique of the left’s faith in public service. He showed that like everyone else, public servants tend to serve their own interests, not necessarily the interests of the greater public good. When a new federal agency is created to address some social ill, for example, there’s a strong incentive for the employees of that agency to never completely solve the problem they’ve been hired to solve. To do so would mean there would no longer be a need for their agency. It would mean layoffs, smaller budgets, even elimination entirely. In fact, there’s a strong incentive to exaggerate the problem, if not even exacerbate it. The agency itself is never going to get blamed for the problem. So exaggerating it helps the agency argue for more staff and a larger budget. (Thus, Milton Friedman’s axiom, “Nothing is so permanent as a temporary government program.”)

It doesn’t even need to be a deliberate thing. When your livelihood, your self-worth, and your career depend on things looking a certain way, there’s always going to be a strong incentive for you to see them that way.

Conservatives have always bought into public choice theory when it comes to paper-pushing bureaucrats. But when it come to law enforcement, they often have the same sort of blind faith in the good intentions and public-mindedness of public servants that the left has for, say, EPA bureaucrats. But public choice problems are as prevalent in law enforcement as they are in any other field of government work. And you could make a strong argument that it’s more important that we recognize and compensate for the incentive problems among cops and prosecutors because the consequences of bad decisions can be quite a bit more dire.

If we reward prosecutors who rack up convictions with reelection, higher office, and high-paying jobs at white-shoe law firms, and at the same time provide no real sanction or punishment when they break the rules in pursuit of those convictions, we shouldn’t be surprised if we start to see a significant number of wrongful convictions. If we reward cops who rack up impressive raw arrest numbers with promotions and pay raises, and at the same time don’t punish or sanction cops who violate the civil and constitutional rights of the people who live in the communities they serve, we shouldn’t be surprised if we start to see a significant number of cops more interested in detaining and arresting people than in protecting the rights of the citizens they encounter on their patrols. We can certainly hope that a sense of civic virtue and veneration for justice will override those misplace incentives, but it would be foolish — and has been foolish — for us to rely on that. Incentives do matter.

Any time I link to an article, it’s assumed that I suggest you read the whole thing. In this case, it’s a very strong recommendation that you read the whole thing.

January 9, 2013

What does “status” mean in the Canadian First Nations context?

Filed under: Cancon, Government, Law — Tags: , , , , — Nicholas @ 13:23

If you’re confused by the current debate over First Nations people and their relationship with the Crown, you’ll probably want to read âpihtawikosisân‘s explanation of “status” and other terms-of-law that are used in these discussions:

It has been my experience that many Canadians do not understand the difference between Status and membership, or why so many different terms are used to refer to native peoples. The confusion is understandable; this is a complex issue and the terms used in any given context can vary greatly. Many people agree that the term ‘Indian’ is a somewhat outdated and inappropriate descriptor and have adopted the presently more common ‘First Nations’. It can seem strange then when the term ‘Indian’ continues to be used, in particular by the government, or in media publications. The fact that ‘Indian’ is a legislative term is not often explained.

As a Métis, I find myself often answering questions about whether or not I have Status, which invariably turns into an explanation about what Status means in the Canadian context. The nice thing is, as time passes, fewer people ask me this because it does seem that the information is slowly getting out there into the Canadian consciousness.

To help that process along, I figured I’d give you the quick and dirty explanation of the different categories out there. Well…quick is subjective, I am after all notoriously long-winded.

H/T to Andrew Coyne, who retweeted the link from @romeoinottawa.

Why stop at a mere trillion dollars?

Filed under: Economics, Government, USA — Tags: , , , , , — Nicholas @ 08:59

Zero Hedge on the trillion dollar platinum coin nonsense:

A year ago, out of nowhere, the grotesque suggestion to “resolve” the US debt ceiling with a platinum dollar coin came, and like a bad dream, mercifully disappeared even as the debt ceiling negotiations dragged until the last minute, without this idea being remotely considered for implementation, for one simple reason: it is sheer political, monetary and financial lunacy. And yet there are those, supposedly intelligent people, who one year later, continue dragging this ridiculous farce, as a cheap parlor trick which is nothing but a transparent attempt for media trolling and exposure, which only distracts from America’s unsustainable spending problem and does nothing to address the real crisis the US welfare state finds itself in. And while numerous respected people have taken the time to explain the stupidity of the trillion dollar coin, few have done so as an integral part of the statist mainstream for one simple reason — it might provide a loophole opportunity, however tiny, to perpetuate the broken American model even for a day or two, if “everyone is in on it.” Luckily, that is no longer the case and as even Ethan Harris from Bank of America (a firm that would be significantly impaired if America was forced to suddenly live within its means), the whole idea is nothing more than “the latest bad idea” straight “from the land of fiscal make believe.” We can only hope that this finally puts this whole farce to bed.

[. . .]

Taking these sorts of actions would almost certainly worsen, not ease, the coming battles over the spending — a second reason to be skeptical of the idea of the trillion dollar coin. As we have noted before, the debt ceiling is just one of three brinkmanship moments looming in the next few months. The across-the-board spending cuts that constitute the sequester have only been delayed for two months, and absent new legislation, will start in March. Even more troubling, on March 27 the latest continuing resolution ends and, absent new legislation, all nonessential government programs would have to shut down for lack of funding.

Third, throwing the trillion dollar coin into this mix would not only intensify these two other fights, it would likely poison the well even further in future budget negotiations. With split government, fiscal policy making requires bipartisan agreement. The cliff compromise earned support from both parties, marking a welcome — if brief — respite from partisan politics. The last thing Washington needs is a further escalation in gamesmanship.

Finally, there is a slippery slope from avoiding the debt limit to outright debt monetization. Although proponents see it as a technical fix to a problem that, in their view, never should occur, it means the Treasury would have established a precedent to thwart Congressional limitations on spending and the debt ceiling.

Outside of the legal questions, nothing precludes the Treasury from issuing a coin to pay down the full $16.4 trillion in debt in one fell swoop: true monetization. A trillion dollar coin also would subvert the whole budget process, undermining already fragile public confidence and spooking financial markets. And based on the criteria put forth by the rating agencies, it would represent a stunning failure to devise credible political processes to resolve the longer-term budget issues for the US. A downgrade would very likely follow, in our view.

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