I don’t know if Ian Welsh is completely right, but I think there’s a large element of truth:
I don’t know if there’ll be a debt default. What I do know is this: if Obama doesn’t want to default he has options. Forget the platinum coin nonsense (though he could if he wanted), Obama can just tell the Treasury to keep on keeping on, and continue selling treasuries. There isn’t anything Congress can do about that, they don’t have the votes to actually impeach him, they don’t have an army, they don’t have the balls to, say, lock up the Treasury Secretary. In short, they don’t have an army.
Now I assume Obama doesn’t want a default. But, to be sure, I could be wrong. Why? Because a default throws all the cards in the air. It lets you remake the country in your image. Obama has long wanted a “Grand Bargain” and the ultimate neo-liberal no-no is defaulting on bond-holders. Then, of course, there are all the SS checks…
If there is a default, whoever sets the terms of the new arrangement gets to remake America in their image. Obama might want a crack that that.
Why does this keep coming to mind to me?
“…they realized that to be in power, your didn’t need guns, or money or even numbers, you just needed the will do what the other guy wouldn’t.”
“The he showed these men on will, what will really was…”
https://www.youtube.com/watch?v=EdeCPGNRjOU
Obama can just tell the Treasury to keep on keeping on, and continue selling treasuries. There isn’t anything Congress can do about that, they don’t have the votes to actually impeach him, they don’t have an army, they don’t have the balls to, say, lock up the Treasury Secretary. In short, they don’t have an army.
Except that might not work. Sure, the President can tell the treasury to keep issuing debt. The question is will the wider world honor that debt? If they wonder whether Obama might be exceeding his authority, there won’t be as many buyers for treasury bonds, and/or bondholders will demand a higher interest rate to loan the U.S. money, which itself would be a terrible blow to the U.S. economy. The only thing we have going for us economically right now are really low interest rates. If that goes away, our economy probably tanks.
I also don’t buy that Obama wants default. Even if you assume that he is a conservative at heart and licking his chops trying to find a way to cut entitlements, throwing the cards in the air is the last thing he would want to do. Conservative people want to preserve the status quo, that is the system they have done well under. They might want to tweak the system to maximize their returns at the expense of poorer people, but in the end they are committed to and want to defend the existing economic order. It would be madness for them to upset the apple cart. Which is why I think that whole theory that Obama might secretly want default to advance conservative goals like ending entitlements to be delusional.