The trillion-dollar coin is both legal and responsible

Illustrated | iStock

The United States and the Democratic Party face yet another self-imposed crisis: the debt ceiling. At some point in mid-October, the government is going to run out of legal borrowing authority, which means a technical default on the national debt, and from there, quite possibly, a shattering global financial crisis. As yet there is little sign Republicans will vote not to destroy the economy or Democrats will carve out an exemption from the filibuster so they can raise the ceiling by themselves.

There is a simple solution to this dilemma: the famous trillion-dollar platinum coin. President Biden could direct the Treasury to mint such a coin, which would allow the government to fund itself with printed money for a time. Biden can do this legally, and he should. The platinum coin option is a legal and sensible way out of an impossibly stupid problem.

The main argument against this option is a fussy knee-jerk reaction that it sounds silly and undignified. You may have seen this view in anonymous White House staff comments that it is “unworkable,” or Treasury Secretary Janet Yellen’s statement that it’s a “gimmick,” or conservative talking head Michael Knowles’ argument that it’s not “how a free people governs itself,” or in Edward Snowden’s claim that it’s bad because ordinary people can’t do that with their student loans (what?).

That facile pushback is wrong. As I have previously written, the debt ceiling is a legal anachronism dating back over a century. Before the ceiling was introduced, Congress used to specifically authorize each new issuance of debt. That became annoying, so they started authorizing a particular quantity to save time. But as government spending grew tremendously, in line with the needs of an ever more complex economy, the debt ceiling evolved into a procedural nuisance. Today it has nothing to do with borrowing or spending per se — it’s a weird holdover that has become a new source of inconvenience, just like the authorization votes it originally replaced.

Hitting the debt ceiling on purpose was never envisioned by the people who created it — or indeed by anyone before about 2011, which is when Republicans started taking debt votes hostage to exact policy concessions from then-President Barack Obama. Before then, the idea of deliberately defaulting on the national debt was seen as wild-eyed lunacy — what country would simply refuse to pay its bills for no real reason? It’s the kind of financial disaster nations historically have done just about anything to avoid. (That kind of crisis helped touch off the French Revolution.)

What’s more, hitting the debt ceiling puts Biden in a legal bind. On the one hand, Congress is instructing him to spend money and tax the American people at specific rates. But on the other hand, when tax revenue falls short of the instructed spending, Congress is also saying Biden can’t borrow anything to make up the difference. Either way he risks violating the law.

The platinum coin is an elegant way out this idiotic legal trap. As economist Rohan Grey explains on the Odd Lots podcast, 31 U.S. Code § 5112 says the Treasury “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.” You couldn’t ask for clearer language than that. As Dylan Matthews reported in The Washington Post back in 2013, the co-author of the bill specifically intended this stipulation to be used to make a profit for the government through seignorage (that is, the difference between the face value of currency and what it costs to produce).

That legal clarity is why those fussy arguments against the coin are nonsense. If Congress fails to raise the debt ceiling, in effect it will have said Biden must spend, can’t borrow, but can mint the coin. Arguably the coin is not just an option for him, but a necessity — there is no other way to avoid breaking some law.

And it would be quick. Axios reports the U.S. Mint already has many platinum coin blanks on hand (used for commemorative coins) and could quickly alter the mold to add “trillion” to the denomination. Then, the Mint would deposit the coin at the Treasury’s Federal Reserve account. The Treasury would draw on it to fund spending until Congress finally raises (or, ideally, abolishes) the debt limit.

There’s no risk of additional inflation with this plan, because the coin is purely a legal contrivance to continue spending normally. Everything would continue as if the debt ceiling had been raised; spending would simply happen through a different mode of authorization. In a way, Yellen is right to call the coin a gimmick, but wrong to think that means it’s no good. There’s nothing wrong with a handy gimmick to get the nation out of a dangerous legal paradox.

Now, I think Biden would be entirely within his rights to take a more aggressive, straightforward approach here. I think he could simply declare the debt ceiling unconstitutional. The Fourteenth Amendment holds that the “validity of the public debt of the United States, authorized by law … shall not be questioned.” But in practice, hairsplitting legal arguments aside, whether the ceiling is legal depends less on the Constitution than raw power politics. Specifically, would the conservative-majority Supreme Court be crazy enough to risk obliterating the global economy through judicial rule-by-decree in defense of a facially preposterous rule?

Presidents have had showdowns like this with the court before. In Perry vs. United States (1935), the court pondered overturning a law which repealed all clauses in contracts and Treasury bonds that stipulated payment in gold. The law was intended to stave off mass bankruptcy because deflation during the Great Depression would have forced people to repay debts in gold that was steadily more valuable every day — effectively increasing the size of their debts. Millions would’ve defaulted on their debts, leading to economic calamity, so President Franklin D. Roosevelt drafted a fireside chat explaining why he would disobey the decision if the court overturned the law. (In the end, the court backed down, nonsensically holding that the law was unconstitutional but nothing could be done about it.)

By that standard, the platinum coin option is downright moderate. It’s legal, easy, and quick — and a heck of a lot more responsible than blowing up the world economy because Congress gave the president goofy, contradictory instructions.



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