Some prominent liberal commentators are upset that Treasury and the Fed have ruled out the “$1 trillion coin” option. The basic reasoning: the declaration weakens the President’s bargaining position and forecloses a way that it could have ameliorated the consequences of a failure to extend the debt limit.
I suspect that the reason for the declaration was sincere: key players believe that it is neither legal nor prudent. The second is Ezra Klein’s position. He also notes that the decision coheres what the administration has been arguing all along:
The administration’s position is that raising the debt limit is Congress’s responsibility until the day that Congress votes to make it the White House’s responsibility, which is a resolution the Obama administration would happily accept. Until then, White House officials say, they will not negotiate over the debt ceiling, and if congressional Republicans attempt to use it as leverage, then the consequences will be theirs to bear. As White HOuse Press Secretary Jay Carney put it, “there are only two options to deal with the debt limit: Congress can pay its bills or they can fail to act and put the nation into default.”
And, in fact, bargaining theory suggests that this move strengthens Obama’s hand. Continue reading