MyStateline.com | Illinois-based Taxpayer Group Endorses U.S. 'Cancelling' Trillions in Debt

TUA’s commentary on the federal government’s debt default crisis was featured in an article at mystateline.com.
CHICAGO — The President of a Chicago based tax group is urging the U.S. to end its debt default crisis by simply cancelling a portion of the debt.
Jim Tobin, President of ‘Tax Accountability,’ is endorsing an idea floated by Rep. Alan Grayson (D-FL 9) that the Federal Reserve should forgive all debt the U.S. government owes its own Federal Reserve Bank.  “The solution … is brilliant and elegant,” said Tobin in a news release. “(Federal Reserve Chairman Ben) Bernanke should simply cancel the Treasury debt that it owns. The government can just forgive the government’s debt.”
The Federal Reserve owns roughly $2 trillion of of the nation’s $17 trillion in debt. Canceling this portion of the debt would, in Grayson’s words, “give the government substantial room under the debt ceiling standoff in Congress, and it would prevent a default.”  Tobin adds that this portion of the debt, “…. is a bookkeeping artifact corresponding to the money supply. In essence, the government owes this money to itself. This is not a debt problem; it is an accounting problem.”
The move would not do anything to end the government shutdown.  Many believe, however, that the possibility of the federal government defaulting on its debt is a far bigger problem than the shutdown.  Business and financial leaders have warned of catastrophic economic consequences should Congress allow the government to default by not raising the debt ceiling.
Grayson concedes the debt idea is not his.  He’s quoted in ‘Business Insider’ as saying that “…this idea was put forward not by me…but by Republican Rep. Ron Paul.”
It’s highly unlikely the Fed would consider such a move, even though Tobin believes that if Bernanke were to do it, “his legacy would be his being considered the greatest Federal Reserve Chairman in U.S. history.”