Tag Archives: President Obama

01.04.2013 | The Trillion Dollar Coin Solution to the Debt Ceiling Problem

Through a hypothetical Oval Office meeting, a Yale law professor describes a platinum solution to the debt ceiling problem. The basic idea is that if Treasury can get the money to cover government spending without borrowing then it does not need to exceed the debt ceiling maximum. How? Just use 2 platinum coins.

At this hypothetical meeting, Secretary of the Treasury Geithner explains to the President, Vice President and Harry Reid, that an obscure provision in “31 U.S.C. Section 5112(k) says that we can print platinum coins in any denomination at our discretion…”

Geithner continues, “So we told the Mint to make a couple of trillion dollar platinum coins. Then, if the President gives the order, the Mint deposits the two coins in its account at the Federal Reserve. The coins are legal tender. We direct the Federal Reserve to move this money into the Treasury’s accounts, and we are up around two trillion dollars.”

That means the Treasury has an extra $2 trillion to spend and does not need to have the debt ceiling raised.

While no one takes the idea seriously, it could happen.

Please note that Bloomberg says Secretary Geithner has indicated he will be leaving Treasury before the next debt ceiling crisis strikes. He has already notified lawmakers (posted here at econlife) that we have hit the ceiling but not to worry because he can manipulate spending for approximately 2 months to avoid a default. And by then, he will be gone.

One question: Whose picture should appear on the coin?

A 2009 $100 Platinum Coin From the US Mint:

A Platinum Coin Can Have Its Face Value Determined by the Treasury

Sources and Resources: Since Yale Law Professor Jack M. Balkin described the idea here in his hypothetical Oval Room meeting, it has spread through countless blogs and new articles. A summary of the comments on the platinum coin solution is here and recent articles from The Washington Post and Businessinsider are here and here. For my information on Secretary Geithner’s departure, I used this Bloomberg column.

Note: The title of this note has been slightly edited.

Posted by: adminEcon
Tags: $1 trillion platinum coin, borrowing, debt ceiling, deficit, Jack Balkin, President Obama, Timothy Geithner, US debt, us mint, US Treasury, Yale Law School
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11.24.2012 | Tax Code Untouchables

Just eliminate deductions and exclusions to cure our budget problems. Yes? Not so easy.

Here is a list of the 20 largest “Tax Expenditures” for 2012 from Credit Suisse. As you can see, each provision connects to an incentive that makes it desirable. The employer-sponsored exclusion that involves $171 billion? But we want to encourage employer provided health insurance. Pension contribution? But we should push people to save. Charitable contributions? Yes, people should get an additional perk from doing good. Mortgage interest deduction? Let’s continue to facilitate home ownership.

And maybe the biggest incentive of all? It would be political suicide for lawmakers to touch many of these provisions.

On the other hand, we should remember the opportunity cost of the $900 billion cost of these 20 provisions. It is a healthier federal budget.

A final fact: Looking at the federal budget, how big is $900 billion? This NY Times bubble interactive perfectly conveys the numbers. In President Obama’s 2013 budget proposal, Social Security is allocated $895 billion while the Centers for Medicare and Medicaid Services get $1.18 trillion.

Sources and Resources: The chart is from a Business Insider article.

Posted by: adminEcon
Tags: 2013 federal budget, capital gains, Centers for Medicare and Medicaid Services, Credit Suisse, dividends, employer health insurance deduction, Mortgage interest deduction, President Obama, social security, tax deductions, tax exclusions
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11.13.2012 | Making Presidential History

President Obama has been having dinner with historians.

Described by the NY Times as a “largely left tilting group,” the names I consistently discovered that attended the dinners were: Doris Kearns Goodwin, Michael Beschloss, Robert Caro, Robert Dallek, Douglas Brinkley, H. W. “Billam” Brands, David Kennedy, Kenneth Mack, and Garry Wills.

Politico reports that during the May 2011 dinner, historian Robert Dallek asked the President how they could help him. The President replied, “What you could do for me is to help me find a way to discuss the issue of inequality in our society without being accused of class warfare.”

How to discuss inequality? I hope that people look at comments from Branko Milanovic, a former lead economist at the World Bank. Perhaps a dialogue on inequality should involve the key questions that Milanovic presents in The Haves and the Have-Nots.

What is the cause of inequality? For example, does income inequality increase or decrease as the economy grows. (Called the Kuznets Hypothesis, one theory says inequality is like an inverted “U.” As an economy grows, it moves from equality–lots of poverty–to inequality when some prosper, and then as an advanced economy, to more equality because the state redistributes income.)
What is the impact of inequality? For example, does inequality create positive or negative economic incentives? Does it lead to more foreign investment, education and growth? How is governance affected?
What are the ethical implications of inequality? For example, are there good and bad ways to have ascended to affluence? Are the absolute incomes of the poor increasing? Is inequality because of work more acceptable than inequality because of inheritance?

How would you connect public policy and your answers to these questions?

And, finally: When the President told the group he was considering “A New Foundation” as the theme for his administration(s), Doris Kearns Goodwin, author of books on Lyndon Johnson, FDR, Abraham Lincoln, the Kennedys suggested that “A New Foundation” might not be the best choice. “Why not?” the President asked. “It sounds,” said Goodwin, “like a woman’s girdle.”

Other slogans? Woodrow Wilson’s New Freedom, Theodore Roosevelt’s Square Deal, FDR’s New Deal, Harry Truman’s Fair Deal, John F. Kennedy’s New Frontier, Lyndon Johnson’s Great Society.

Sources and Resources: My information about the President’s historian dinners was primarily from the NY Times and Politico. But, what I most recommend is the Branko Milanovic book, The Haves and Have-Nots: A Brief and Idiosyncratic History of Global Inequality. A combination of great vignettes and scholarly ideas, it is a good read.

Posted by: adminEcon
Tags: communicating a vision, David Kennedy, Doris Kearns Goodwin, Douglas Brinkley, Gary Will, H. W. “Billam” Brands, income inequality, John F. Kennedy, Kenneth Mack, Lyndon Johnson, Michael Beschloss, President Obama, presidential slogans, Robert Caro, Robert Dallek, Simon Kuznets, The Fair Deal, The Great Society, The New Deal, the New Foundation, White House Dinners
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11.05.2012 | Election Economics: Looking at the Millennials, Xers, Boomers, and Silents

Before tomorrow’s election, let’s take a look at the voting age gap. Absent since 1972, the young and the old again are voting differently.

The Silent Generation: The oldest slice of the population, the Silent Generation was born between 1928 and 1945. Representing 17% of all registered voters at the end of 2011, they tend toward conservative views, support less government, and are politically engaged. One of their top issues, Social Security, reflects a contradiction. The Silents tend to be Republican but favor the Democrats’ position on Social Security.

The Baby Boomers: Currently 47-65, the Baby Boomers are a potent political cohort. Numbering 37% of all registered voters, the older Boomers tend to be more Democratic than their younger peers. The concern, though, that resounds for many is uncertainty about their financial future and retirement security.

Generation X: Born between 1965 and 1980, Xers make up 26% of all registered voters. Politically, they tend to split by age. Older Xers sympathize with Republicans while those closer to 30 are more likely to vote Democratic. As for the issue they most care about, it appears to be financial health.

The Millennials: The youngest population group that votes, Millennials are currently 18 to 30 years old. relatively unengaged politically, and 17% of the electorate. 41 percent nonwhite or Hispanic, they are diverse, vote Democratic, and are almost evenly split on whether we have too much or too little government. According to a July 2012 USA TODAY/Gallup Poll, creating good jobs was the key issue for those under 30.

How to summarize the similarities and differences? I suggest looking at the table below. Although it is based on data from October 2011, still the priorities remain similar according to the more recent Gallup poll. And, for more background data, the graphs that follow it are fascinating.

Election Economics Topics:

Sources and Resources: The surveys on which I based my facts were from Pew (Nov. 2011) and USA TODAY Gallup (July 2012). Also, you might have some fun with this USA TODAY candidate match game. All graphs and tables are from Pew.

Posted by: adminEcon
Tags: 1972 election, baby boomers, campaign issues, deficit, Democrats, financial security, Generation Xers, George McGovern, jobs, Medicare, millennials, Mitt Romney, President Obama, presidential election, Republicans, Richard Nixon, Silent Generation, social security, voting generation gap
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10.24.2012 | Big Macs and Currency Manipulators

In China, a Big Mac costs close to the equivalent of $2.44. That same burger in the US is $4.20. The basic idea is PPP, purchasing power parity. The dollar can buy more when the yuan is undervalued. And President Obama and Governor Romney have both indicated that an undervalued yuan displeases them.

Actually, they probably would not mind if price fluctuated naturally in foreign currency markets. Instead though, they say currency manipulation might be occurring because a government is intentionally, over a long time period, affecting the demand for and/or supply of its money. And by impacting demand and/or supply, they are shaping its price.

China, though, is not the only one. We could add to the list, Denmark, Hong Kong, Israel, Japan, Singapore, Taiwan, Korea, Switzerland, Argentina, Bolivia, Malaysia, Philippines, Thailand, Angola, Algeria, Libya, Saudi Arabia, Azerbaijan, Russia. Some overvalue and others undervalue. But all, according to the Peterson Institute, are engaging in “currency manipulation.”

Finally though, I wonder whether currency “manipulation” is necessarily bad. One position says, “Yes.” An undervalued foreign currency lowers US demand for US made goods and destroys US jobs. The other side says that consumers and businesses that purchase Chinese goods benefit from their artificially low prices. Because consumers have extra money to spend elsewhere, jobs are created. In addition, businesses that buy Chinese metals and motors, for example, have lower costs.

Sources and Resources: To check out the PPP of other currencies, you might enjoy the Big Mac Index and also an econlife PPP explanation. For all the detail you could ever want about currency manipulation from many viewpoints, this Peterson Institute paper, this Treasury Department report and this Mark Perry blog are ideal complements.

Posted by: adminEcon
Tags: Big Mac Index, China, consumers, currency manipulator, demand, foreign currency markets, Governor Romney, job creation, overvalue currency, Peterson Institute, President Obama, supply, tariffs, The Economist, undervalue currency, unemployment, Wal-Mart, WTO
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