Update 9/30/2013: Brad DeLong is on board, The Trillion Dollar Coin–or, More Sensibly, 1000 Billion-Dollar Coins–Is the Only Way for Obama to Fulfill His Oath of Office
My original post from 1/9/2013:
Reminder: The debt ceiling will soon come crashing down on us. (Not the greatest metaphor but cut me some slack for a minute.) If the debt ceiling issue is left unresolved, it could very well cause a Constitutional crisis. Not good. The fact that there is a debt ceiling crisis is absurd – basically comes down to Congress authorizing spending but then refusing to pay for it. (The GOP is 100% at fault but that’s actually beside the point.) Therein lies the crisis: On the one hand, if the President ignores Congress and orders Treasury to pay our bills – which seems entirely reasonable given Congress’s behavior – he is arguably – and it is very arguable – overstepping his Constitutional authority. On the other hand, if he fails to order our bills to be paid allows the country to default that would seriously fk up our economy. Furloughs, layoffs, and unpaid bills would almost certainly induce another recession. And you think we’d continue to be able to borrow at negative (that’s right, negative) real interest rates if we default on our bond payments? I suspect not. So, what to do?…
Well, awhile back someone (or perhaps many someones) floated the concept of the Treasury Dept. minting a multi-trillion-dollar platinum coin and depositing it in the Federal Reserve. Deposit the coin and, viola, the country now has the funds needed to pay its bills. End of debt ceiling crisis. Sounds silly, yes? It does sound silly. Very silly. But we should be able to get over that. Paul Krugman:
Here’s how to think about that: we have a situation in which a terrorist may be about to walk into a crowded room and threaten to blow up a bomb he’s holding. It turns out, however, that the Secret Service has figured out a way to disarm this maniac – a way that for some reason will require that the Secretary of the Treasury briefly wear a clown suit… And the response of the nervous Nellies is, “My god, we can’t dress the secretary up as a clown!” Even when it will make him a hero who saves the day?
Okay, so we can get past the silliness issue. But it can’t be legal, can it? Minting a multi-trillion-dollar coin? No way?! Well, up until about an hour ago I was pretty skeptical – and then I saw these comments by Laurence Tribe:
I don’t think it makes sense to think about this as some sort of “loophole” issue. Using the statute this way doesn’t entail exploiting a loophole; it entails just reading the plain language that Congress used. The statute clearly does authorize the issuance of trillion-dollar coins. First, the statute itself doesn’t set any limit on coin value. Second, other clauses of 31 USC §5112 do set such limits, but §5112(k)—dealing with platinum coins—does not. So expressio unius strengthens the inference that there isn’t any limit here.
Of course, Congress probably didn’t have trillion-dollar coins in mind, but there’s no textual or other legal basis for importing this probable intention into the statute. What 535 people might have had in their collective “mind” just can’t control the meaning of a law this clear.
It’s also quite clear that the minting of such a coin couldn’t be challenged; I don’t see who would have standing.
If Tribe is convinced it’s legal then I believe it. Mint that coin, baby! Not only will it solve a real problem but there’ll also be the fringe benefit of watching all those Tea Party maggots freak out over it. Nice two-fer.
Some background reading if you’re interested – various opinions on silliness and legality of issuing a multi-trillion-dollar platinum coin:
UPDATE 1/13/13: The former head of the US Mint says it’s legal. Some highlights from his email to Ezra Klein:
-
In minting a $1 trillion platinum coin, the Treasury Secretary would be exercising authority that Congress has granted routinely for more than 220 years. The Secretary’s authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).
-
The accounting treatment of the coin is identical to the treatment of all other coins. The Mint strikes the coin, ships it to the Fed, books $1 trillion, and transfers $1 trillion to the Treasury’s general fund where it is available to finance government operations just like with proceeds of bond sales or additional tax revenues. The same applies for a quarter dollar. Once the debt limit is raised, the Fed could ship the coin back to the Mint where the accounting treatment would be reversed and the coin melted. The coin would never be “issued” or circulated and bonds would not be needed to back the coin.
-
There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the $1 trillion dollars would be taken off the books, and the coin would be melted.