For example, here's Paul Krugman's argument:
But wouldn’t the coin trick be undignified? Yes, it would — but better to look slightly silly than to let a financial and Constitutional crisis explode...When it comes to doing silly undignified things, this kind of advice would have been met by our mothers with the traditional response of: "So if your friends jump off a cliff does that mean you need to follow them?"
...it’s the president’s duty to do whatever it takes, no matter how offbeat or silly it may sound, to defuse this hostage situation. Mint that coin!
Seriously, that's the grade school level of thinking on which this whole argument is based.
I understand that these folks are panicked at the threat of a default by the United States government. And isn't that just what hostage-taking is designed to produce...panic? Thank goodness we have a President in the White House who doesn't tend to go off the rails into childish responses at a moment like this - but has a habit of thinking through these things like an adult.
First and foremost President Obama has said that he will not negotiate with the Republicans about the debt ceiling. So what he's signaling from the outset is that he is not going to engage in this little game of chicken. We've already seen how that has resulted in Republican leaders backing off the threat.
But I've always suspected that the President wouldn't have made that strong stand without a plan to protect the American people from financial collapse if Republicans were stupid enough to go there. Of course he's not going to broadcast that plan and let the media tear it to shreds in the eyes of the public. And he's not going to sink to the level of the tea partiers in being silly or explosive.
That's why I think his plan will be something more in line with what Edward Kleinbard suggested.
He should threaten to issue scrip — “registered warrants” — to existing claims holders (other than those who own actual government debt) in lieu of money. Recipients of these I.O.U.’s could include federal employees, defense contractors, Medicare service providers, Social Security recipients and others.This idea also has precedent in that the state of California did it as recently as 2009.
The scrip would not violate the debt ceiling because it wouldn’t constitute a new borrowing of money backed by the credit of the United States. It would merely be a formal acknowledgment of a pre-existing monetary claim against the United States that the Treasury was not currently able to pay. The president could therefore establish a scrip program by executive order without piling a constitutional crisis on top of a fiscal one.
To avoid any confusion with actual Treasury debt, and to be consistent with the law governing claims against the United States more generally, the scrip would not pay interest in most cases. And unlike debt, it would have no fixed maturity date but rather would become redeemable in cash only when the secretary of the Treasury was able to certify that there’s enough money available in the Treasury’s general fund to cover it.
Finally, the scrip would be transferable, allowing financial institutions to buy it at a high percentage of its face value, knowing that the political crisis would almost certainly be resolved before long.
I don't know if this is exactly what the President has in mind. And hopefully the Republicans will relent on this nonsense before we have to find out.
But I can assure you that meeting the tea partiers at their level of crazy is NOT something this President is likely to do.