Last week the Republicans offered to raise the debt ceiling for another three months to avert the immediate disaster looming on our horizon. That is a vast improvement over their stance of the past few months, but President Obama should still beware, and take preemptive steps to forestall a future, and even more disastrous, standoff on the ceiling.
While the Republican gesture to raise the debt ceiling and then negotiate on spending cuts might seem like a statesmanlike move, it is actually more of a smokescreen, and as Nancy Pelosi described it, a "gimmick." Since they are only raising the ceiling for three months, what the GOP is really saying is that they will not shoot the hostage immediately but reserve the right to shoot him three months from now if their terms are not met... As long as the mere possibility of another fight remains, the Republicans will retain the upper hand in their political blackmail of the White House.
That is why Obama should mint the trillion dollar coin even if he does not think he will need it. The coin is legal and even if the Republicans eventually challenge the measure in court, the immense benefit to our economy (not to mention our sanity) of eliminating the debt ceiling debate and preserving the integrity of our government will more than make up for any battles that might need to be fought in the future.
The trillion-dollar coin will take the hostage out of the equation completely and give the president the solid leverage he needs to negotiate spending cuts that are reasonable and which will not derail our incipient economic recovery, which is the exact opposite of what the Republicans will do if they get their way.
Contrary to what conservatives claim, Obama has tried to be bipartisan, but the simple fact is that there is no feasible way to do that with today's GOP. The GOP is not in a rational place and has not been there for a long time. This is the same party, after all, that ran an entire presidential campaign on the platform of financial elitism and tried to win by telling the majority of Americans that they could not care less about them. It is also the party that thumbed its nose at our very democracy by accepting large sums of dark money from dubious sources and trying to suppress voting by minorities and young voters, failed to denounce the insane ramblings of people like Todd Akin and John Sununu even when it was hurting them in the polls, completely ignored the concerns of women even though they make up half of the country, and did everything in their power to alienate the massive Hispanic vote.
As I said, the president is not dealing with a rational opposition, and as long as Republicans can continue to hold our economy hostage through the mechanism of the debt ceiling, Obama will have to revisit this fight over and over this year, and that in turn will create unnecessary turmoil in the markets, distract from the administration's other priorities like immigration and gun control, imperil our hard-fought economic recovery, and force Americans to live in a constant state of fiscal terror.
That is what is at stake here and that is why the trillion dollar coin is not an overreach but simply a necessary response to a national crisis. By invoking this option, the president will be declaring a war on fiscal terror and will be able to do what he was elected for rather than wasting his precious time trying to reason with lunatics.
SANJAY SANGHOEE has worked at leading investment banks Lazard Freres and Dresdner Kleinwort Wasserstein as well as at a multi-billion dollar hedge fund. He has an MBA from Columbia Business School and is the author of two financial thrillers, including "Merger" which Chicago Tribune called "Timely, Gripping, and Original". Please visit his Facebook page for more information.