With yet another debt ceiling battle upon us, I see that platinum coin zealotry is also upon us. For those of you who have more important things to do, the idea here is that the Treasury Department should mint a trillion-dollar platinum coin, deposit it at the Federal Reserve, and use it to pay all our bills. No increase in the debt ceiling needed!
How is this possible? Well, it turns out that in the statute authorizing the mint to produce commemorative platinum coins, someone made a mistake and failed to put any kind of dollar limit on the size of the coins. Theoretically, then, the mint could produce a coin worth a trillion dollars. Or hell, make it a quadrillion. That would take care of the debt ceiling forever.
Even Paul Krugman has now gotten into the act. He calls the coin a "silly gimmick," but figures Republicans are acting so irresponsibly that it's time to embrace a silly gimmick or two.
Which is fine, except for one thing: there are two sides to the platinum coin game. First, the treasury secretary has to mint it. Second, the Federal Reserve has to accept it.
But they won't, something that platinum coin fans routinely ignore. Unless you have some reason to think you can get Jay Powell on your side, the platinum coin ruse is a nonstarter even if the White House were willing to try it. So let's all give it a rest, shall we?
POSTSCRIPT: For what it's worth, even if the Fed did accept the coin, it would almost certainly be put on hold by court order. Eventually the Supreme Court would rule on it, and we should all have our doubts that the current court would be on our side.
On the other hand, Clarence Thomas might write a long dissent arguing that, by God, it's black letter law. Of course, his dissent might also include a long treatise on why the Federal Reserve is unconstitutional in the first place. It would be just like him.
Krugman was actually advocating the platinum coin the last time there was an impending budget crisis.
But in addition to the Fed obstacle that Kevin mentions, there is also the problem that Republicans could use the same trick for their own purposes. We don't have the money for another invasion of Afghanistan? Just mint another coin. The Founding Fathers carefully designed things to limit the war-making powers of the President (although he has been given a lot of those powers anyway) and they certainly didn't want him printing up money at will.
Would Democrats be able to mint coins while their man is in office and then somehow change the rules? It's hard to see how.
There’s a reasoning fallacy here. The idea that Democrats should prudently refrain from minting the coin to avoid an economic catastrophe caused by Republican irresponsibility and the Jim Crow era filibuster because the GOP could mint such a coin to facilitate their future wars suffers from the defect that war is almost universally beloved in America. No war of choice in my lifetime has suffered from lack of funding; every war of choice has been lavishly funded in a perfectly bipartisan manner.
@Mitch Guthman:
Yeah, you'll never go wrong inciting Americans to go somewhere far away and kick some butt. Almost any excuse will suffice: They have Covid, they practice Sharia, they will rape our daughters, they brutalize their own daughters, they'll bring drugs, etc.
Raping and killing Republican women in ancient socialistic practice will be fun. They will be collective property of the workers. The men exterminated.
We didn't have the money for the last two wars the Republicans started. They just "paid" for them with off-budget, "emergency" allocations that ballooned the national debt.
Not doing something because the Republicans might do the same thing is ridiculous. All having the Democrats doing something first does is give the world's most shameless hypocrite, Mitch McConnell the ability to say the Democrats did it first. But he has shown he will do whatever he wants to do and he doesn't need any cover from Democrats. If, for some reason, McConnell or Trump (or Hawley or DeSantis, etc.) wanted or needed a vigintillion dollar coin, rest assured they'd try to get it done.
The further assumption that the Fed chief wouldn't accept it could mean that he (or she) would willingly let the US go into default. The Fed chief might decide that a gimmick is better than the possibility of a worldwide financial disaster.
Maybe this SCOTUS is perverse enough to rule against such a coin, but again, they would knowingly be choosing catastrophe. Thomas, who is crazy, might not bat an eye, but other justices, worried about their own financial lives, might go along. If Bden calls for the head of the Pope to be put on the coin, could Alito or Barrett say no?
Similarly, claiming the Democrats shouldn't get rid of the filibuster because of what the Republicans might do when they retake the Senate, ignores the fact that if McConnell thinks he needs to get rid of the filibuster, he will and it won't matter at all what the Democrats have or haven't done previously.
I'm amazed that anyone would try to make that argument. Republicans do what they want to do. They aren't worried about Democrats or precedents or history or public opinion or anything else.
Getting rid of the filibuster doesn't do near as much as you would expect.
It does exactly what I expect it to do.
I'm curious why you think you know what I expect it to do -- a bit arrogant.
Nope. Don't got the votes.
“ But in addition to the Fed obstacle that Kevin mentions, there is also the problem that Republicans could use the same trick for their own purposes. We don't have the money for another invasion of Afghanistan? Just mint another coin.”
Didn’t they essentially do this though? I mean, nobody’s taxes went up during the entire Afghanistan war. They just dumped it all on the national debt, with no way to pay for it. The debt ceiling it’s just as ludicrous as $1 trillion coin, Something that no other country except one (Denmark) has, and even there it’s just a formality not a serious tool to control spending. That should tell you something about the (un)seriousness of the debt ceiling.
“ The Founding Fathers carefully designed things to limit the war-making powers of the President (although he has been given a lot of those powers anyway) and they certainly didn't want him printing up money at will.”
The founding fathers didn’t create the debt ceiling, and they certainly won’t be in favor of the US reneging on debts that they’ve already incurred, which is what the debt ceiling is. Also the founding fathers were cool with the gold standard, which has been proven in numerous countries over the last century, to be awful. Which is why almost no country uses it today, except economic basket cases.
there is also the problem that Republicans could use the same trick for their own purposes. We don't have the money for another invasion of Afghanistan? Just mint another coin.
Two different situations. Republicans would need Congress to appropriate money for an invasion. The platinum coin idea simply allows (if it worked) the debt ceiling to be pierced. It doesn't enable the White House to engage in spending Congress hasn't approved.
The coin trick is just a means of avoiding the debt ceiling, not of actually getting money to spend. Congress still holds the power of the purse. Spurious emergency declarations to fund walls notwithstanding, the president can't spend money without Congressional authorization, so worries about an "off the books" war or other unauthorized spending don't stand up.
The upshot is that the coin trick is one that would only be used by a Democratic administration when a debt ceiling increase is blocked by Republicans, because Democrats are just a bit too patriotic to hold the economy hostage by blocking a debt ceiling increase.
" Unless you have some reason to think you can get Jay Powell on your side, the platinum coin ruse is a nonstarter even if the White House were willing to try it. So let's all give it a rest, shall we?"
Has he "ruled it out" or are you just spiffballing here, hmmm?
Not only would I go the platinum coin route, President Biden should also got the 14th amendment route which basically says the full faith and credit of the government cannot be questioned and all debts paid. Period. That simple. Let the Republicans whine and cry they've lost their hostage-taking ability and let them go to court. The clause seem pretty damn clear to me not being a Constitutional scholar.
Sheesh, I would have thought you would be the first person to say, "Hey there's ways around a deliberately deadlocked legislature that are perfectly rational and legal to do and they should be explored not "ruled out" because they don't follow some traditional "norm".
"Which is fine, except for one thing: there are two sides to the platinum coin game. First, the treasury secretary has to mint it. Second, the Federal Reserve has to accept it.
But they won't, something that platinum coin fans routinely ignore. "
Why won't they accept it? Be specific. Use examples. Develop fully.
Hear, Hear! I fully approve of this message. And why wouldn't I? Imitation is the sincerest form of flattery.
Punctuation counts!
I agree with others here that Kevin’s argument is more like a rehashing of the conventional wisdom.
Without looking to rehash the previous arguments about the coin, my understanding is that the coin would be legal tender and its acceptance by a Federal Reserve bank would be a purely ministerial act. Assuming that the coin were minted, I see no basis for confidently assuming that any government official would refuse to accept it. If Kevin has such a basis, he should share it with us in addition to his thus far unsupported assertion.
I think a coin should be minted, but it should be rhodium. It's the most valuable metal and one that sounds more exotic than platinum.
The coin would necessarily have to be made of platinum because the loophole which people are looking to exploit relates to the treasury’s ability to mint what we’re assumed to be commemorative coins of any denomination made of platinum (and only of platinum):
“The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.” (https://www.law.cornell.edu/uscode/text/31/5112)
https://slate.com/business/2013/09/1-trillion-platinum-coin-the-debt-ceiling-standoff-can-be-averted-with-this-totally-legitimate-loophole.html
Well, then, it has to be "unobtanium."
I think it would have to be a Republican state attorney general who challenges the coin's legitimacy in Court, just to have standing to do so.
Let's see. Jay Powell would have two choices. Accept the coin or default on US Treasury bonds and destroy the international economy. I'm betting on the coin.
In terms of the courts, who has standing to bring suit?
That’s an interesting question. The rejection of “citizen standing” and the ridged imposition of standing limited to individualized economic harm harm would suggest that nobody has standing. And the political question doctrine should mean that the court wouldn’t hear the case even if someone could establish standing.
But, with the current composition of the court, it’s a brave new world and anything goes.
He wouldn't accept it. The world economy and really the dollar era would close. Much like the pounds day in the 1929-31 era. Reserve currency death is pretty ugly. Might as well get it over with.
With the current supreme court, probably any Republican would have standing. They seem to find standing for Republicans whenever they decide they hate something, even if it’s something they previously supported. Consistency isn’t strong with the current supreme court.
Lolz, without a central bank, capitalism is on the dust bin of history. Your argument there is out of date and the expansion of debt with its artificial expansion of GDP per capita devastating outside any intellectual fantasy.
Shut up, Walt.
Fuck off troll.
Why do I keep visualizing the coin (sorry, "The Coin") somehow getting lost - or stolen?
And what would be on it? The image of FDR, jaunty cigarette in its holder, laughing? John Maynard Keynes, looking solumn? I recommend "Blind Justice" for the obverse.
(duh) That should have been "solemn". My apologies for inadequate proofreading.
Put a picture of Trump on it. He would love his face on a quadrillion dollar coin and the Republicans would never try and block it.
There is another option. Ignore the debt ceiling. Continue as if it didn't exist. It's time to think outside the box.
I realize that democrats in congress and the administration, who cannot be bothered to repeal the law, are unwilling to ignore it. But you know... it is time do do one or the other.
We could try that. But it's unlikely in the extreme financial markets would ignore the debt ceiling.
But, think of the stimulus to the economy!
If we minted a trillion dollar coin it could go on tour. Everyone would buy tickets to stare at it, to applaud, have their babies photographed with it! It would pay for itself.
And, when it's not on tour, when it's just sitting around doing nothing, it could be used to execute criminals by dropping it on them.
'Somebody dropped a trillion dollar coin on him,' could be the shady catch phrase of the era.
It's something that almost has to be done, like Mount Rushmore.
And the movies!
It would be the ultimate McGuffin! Coinfinger! Nicholas Cage! Mission Numismatist!
A guy accidentally spends it in a Coke machine, Coke claims they don't know where it is, we think they do . . .
Oh, I've got it.
The US secretly already did this and didn't tell anybody, because it's a secret, and now they don't know where it is, because too much secrecy . . . so they call in Liam Neeson.
This was basically the plot of Cold Pursuit.
This is really getting into the spirit of the thing! What would you recommend for the obverse ("heads") and reverse ("tails")?
(and note that I used these terms improperly in my earlier post - sorry!)
I'm tempted to say it would have to be something everyone could agree on, so nothing and nothing.
Or Philo T. Farnsworth on the obverse, and crossed tv remotes on the reverse, with a wreath of earbuds.
There's no reason why the coin has to be big.
But it would be wrong if it weren't.
I doubt this very much. In the balance of harms it would be indisputable that an injunction would immediately shut down the very Court that would need to decide the issue. Just saying.
And shutting down the government would deprive the justices of their paychecks., they will certainly think of this.
Well, so we might think. But they're all millionaires, so probably not.
...it would be indisputable that an injunction would immediately shut down the very Court that would need to decide the issue.
That's not remotely "indisputable." The (temporary) end of the government's ability to borrow wouldn't end all federal spending. Rather, it would force the government to reduce spending. It's possible (I'd say very likely) courts would continue to operate, although perhaps many court employees would have their pay furloughed.
Nonsense. Of course he would. I point you to the Fed's balance sheet of $5.4T in treasuries -- https://fred.stlouisfed.org/graph/?g=HmCe
As you might notice, the Feds have more than doubled its holdings of treasuries since the start of the pandemic. This isn't about a $1T coin; it's about whether or not the Fed would purchase treasuries in mass volume. You bet your ass they would, to save the US economy from falling into a downward spiral recession.
Won't matter. The dollar's collapse would destroy the financial system no matter the amount of treasuries "bought".
It's possible Powell would accept the deposit. Though I'm not sure why you use "of course" in making that claim. We really have no idea what would happen. I personally think it's unlikely the Fed will play ball given A) the dubious legality of such a course of action and B) the perfectly legal alternatives (ie, Democrats' voting for a debt ceiling suspension) available.
Two points
1) on the 14th amendment, don't see that . I do not see how us debt having full faith and credit allows the govt to borrow MORE , which is what you need to do to in order to increase the debt to spend more .
In fact , this seems to make it more difficult to me for the administration as it might require the us to make required payments on old debt i.e not be able to just allow the old debt to increase in value by not making interst payments while spending all tax income.
I cannot see how the 14th amendment could allow the us govt to issue more debt , except that to pay existing interest payments as required . How would being prohibited from issuing new debt that broke the debt ceiling violate the 14th amendment?
I have not heard this argument made at even conservative sites but it seems so obvious. Am I missing something?
2) I do not see the reason why the trillion dollar coin idea would be used by a republican administration to finance wars . It only would allow us assets to increase to avoid new debt and thus enable new spending appropriated by congress .
Issuing a trillion dollar coin cannot create a slush fund that enables the president to spend without congressional approoval.
2)
And would seem to me that hitting the debt limit when already appropriated spending is exceeding taxes gives a number of alternatives for the president and the issue is which is required or allowed to comply with law .
A) just stop paying on existing debt . This seems a non starter as the 14th amendment means that the debt is still owed and has increased in value anyway. So this does not even stop you violating the debt limit
B) just ignore the debt limit and issue more debt
C) cut spending that has already been appropriated. This seems to be consensus as to what happens but not sure why it is the clear choice. And, if it is, does the president get to decide which appropriated spending to cut ?
D) no new appropriations allowed until debt limit increased. This seems a clear correct thing to me . But not much of a restraint because you can just increase debt limit in the new bill. All this would mean is that you have to include a debt limit increase in any new spending bill.
E) raise taxes or fees without congressional authorization. Why is this not being discussed? How is that any different legally than not spending money already authorized?
Not sure re income or corporate taxes but fees might have a chance. And allowing the president to choose which fees gives a lot of power?
F) sell us assets. Parks , office buildings, land , surplus or non surplus military, etc.
And seems like selling as much as possible while leasing it back could do a lot short term .
G) issuing currency and thus getting seignorage. Here is the trillion dollar coin.
Seems to me that issuing a coin or coins might be legally strongest. Because it does not conflict with any other current law . In fact, outside of prohibiting new legislation unless it contains a debt limit increase, it might be a required alternative for biden .
However, not a trillion dollar coin. That is not needed. Issue just enough lower level denominations like $ 100,000 coins as needed as you go along. That is both legally more reasonable and does not seem as outrageous politically.
And do not see the issue with treasury accepting either . First , if this is only option available without violating law , then maybe treasury is required to accept it. But even if not , as it is legal money, why could the admin not just spend it to pay bills?
I agree. There is a general rule of statutory interpretation that when two statutes conflict, the more recent one is deemed to amend the earlier one to the extent of the inconsistency. Any spending authorized by Congress since the last debt ceiling increase that would cause a breach of the debt ceiling must be deemed to increase the debt ceiling by the amount required to permit the authorized spending.
Effectively voiding the entire purpose of the debt ceiling?
That is another reason why this argument makes no sense . It means congress passed something with zero meaning when it first passed, and subsequently increased numerous times, the debt ceiling .
When the more recent bill did NOT include a debt ceiling increase to provide for the extra spending, congress implicitly still did limit spending by the debt ceiling.
What might be more arguable is that, in prioritizing payments, spending authorized in more recent bills gets priority.
A Supreme Court might rule that extending the debt ceiling, since it's done every single time, has, by precedent, voided the original law, or that further extensions, being intended to avoid the law are a contrivance that wear out their welcome over time to the degree they themselves are unconstitutional abnegations of responsibility, as if Congress passed a law to allow the murder of one guy in one case, and then the murderer does it again so they pass another, and how long should they be allowed to keep that up?
No, a Supreme Court would not rule that. It is ridiculous.
Increasing the debt ceiling at times is perfectly consistent with the basic concept of a ceiling itself. As times change, the economy grows and inflation decrease value of dollar, of course it makes sense to increase the limit as more debt can be reasonably supported.
Now , not saying that is all that is happening today as clearly we are increasing debt to possibly unsustainable levels. But the idea of increasing it every year or so is in no way incompatible with the concept.
And the court is not supposed to be second guessing congress in that way.
Even your murder example is off. Exactly what would be more unconstitutional for congress exempting a person from murder make times that is more than doing it once?
I don't know, public safety?
A conservative Court will contrive any rationale to rule in any way that appeals to causing more damage, and, in this case, is their any other law that at every opportunity of it's use has been routinely overridden? It's not like it's something that's hasn't been invoked in 150 years, it's come up in every single Congress for years now. Eventually it's either a real law or it isn't and that is something they will rule on given the opportunity.
Exactly.
I have not heard this argument made at even conservative sites but it seems so obvious. Am I missing something?
The federal government incurs debt every day. When a hospital performs surgery on a Medicare recipient, Washington now owes that hospital money, and will normally pay after it receives the bill. When a soldier retires, the government now owes that military retiree a stream of payments. Debt constantly accumulates.
Treasury operations merely raise cash. They don't constitute the sole way the government goes into debt. I have no idea, I should add, whether/not some future court would buy the 14th amendment argument or not. Maybe it would. Maybe it wouldn't. But the argument is far from nonsensical.
I'd guess that, despite the increasing use of credit cards, suspending the ability to convert physical cash into electronic cash, or even a serious suggestion that the ability might be suspended, would cause significant economic disruption. Kevin Drum doesn't provide a legal analysis showing that the Federal Reserve can legally refuse to accept cash deposits, but even if it has the ability I can't imagine that the Federal Reserve would be inspired to use it. I don't think Jay Powell or anyone else at the Federal Reserve has the desire to “burn it all down.”
I do have a problem to some extent with that rationalization.
Why did congress not simply then increase the debt limit in that recent spending bill? The argument that a later bill is deemed to amend an earlier one if inconsistent is an issue with respect to what congress intended i.e. did it intend to change the law based on the recent bill to the extent it differs from prior bill? But , if in the context of the passing of the most recent bill, it is implied that no change from prior bill was intended , that position does not apply.
And here , as congress knew there was an existing debt limit when it passed the earlier bill ( i.e. the first big spending bill early this year) AND it was clear then we would hit debt limit soon, and still chose not to raise the debt limit in that recent bill , congress chose deliberately in the recent bill to NOT have the new spending avoid the debt limit .
The supreme court would issue an immediate stay, collapsing the world economy? Stays are intended to prevent short term damage while a court case proceeds. Seems unlikely
Of course the current supreme court might well do *anything* if it's majority thinks the goals of The Party and The Society would be furthered. But this? Not sure I see how it helps the plutocracy.
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