Picture this: The debate on the debt ceiling is in its 11th hour, and the US is almost at default.
Members of Congress are rushing around the US Capitol, holding press conferences and starting discussions. As Republicans and Democrats clash, an unexpected savior appears. A machine stamps “$1 trillion” to mint platinum his coins and give them to the Central Bank of the United States.
With this $1 trillion coin, the U.S. federal government has the money to continue paying for services like Social Security and Medicare and avoid a catastrophic default.
At least some believe it will be the solution to the current debt ceiling problem. As silly as the idea may sound, proponents of the coin argue that defaulting on debt beyond the debt ceiling could cost the United States huge economic damage, and is even more ridiculous. doing.
In early January, Treasury Secretary Janet Yellen told Congress that the country: $31.4 trillion debt ceiling reached The Treasury Department should also pursue “special measures” to keep payments on track.
of debt ceiling It is the maximum amount that the federal government can borrow to pay expenses already allocated by Congress. In other words, Congress has already directed Biden to spend the money, but has not granted him access to all the money he needs to carry out his spending.
Democrats need Republican buy-in to raise the debt ceiling, but Republicans rejection Unless the Democrats agree to cut spending, they will yield.
Over the past decade, disputes over debt ceilings have become more common. His worst was in 2011, when Republicans used the debt ceiling to negotiate his $1 trillion spending cuts from then-President Barack Obama. Throughout the stalemate, S&P lowered the country’s credit score, making it more expensive for the US to borrow money.
This time the White House said it would do not negotiate exceeds the debt ceiling. The Biden administration has said there will be a default if Republicans refuse to raise the debt ceiling by June at the earliest. A stalemate can be ugly, and the longer it lasts, the more serious the consequences, but academics say the administration has several options to avoid the worst-case scenario. says there is.
Proponents of this strategy say the coin’s legitimacy lies in a law passed in the ’90s that allowed the U.S. Mint to mint platinum coins of any denomination.
To avoid default, the Mint strikes the 1 trillion dollar coin, federal reserve And Chachin, the government will have more money to pay off the debt.
If the idea of a trillion dollar coin sounds like it came from the internet, it sort of did. popped up in the comments From a 2010 blog by a lawyer from Georgia named Carlos Mucha.
This blog was that of Warren Mosler, a prominent proponent of modern monetary theory known as MMT. promotion In recent years, by progressive Democrats like Alexandria Ocasio-Cortez. I argue that there is no need to act as if there are constraints.
The trillion dollar coin encapsulates this idea. It shows very clearly how the US government can make its own money by actually minting it.
“Coins are like being able to talk to your kids at the dinner table,” said Rohan Gray, a Willamette University law professor, MMT advocate, and mint of the $1 trillion coin. “[It] It is a huge symbol of public financial power. This is a very concise and condensed symbol.
“Whenever we talk about government budgets, we’re not even talking about money generation as the underlying force upon which the whole framework is built: taxes, borrows, taxes, borrows.”
While supporting coin minting – include Former U.S. Mint Commissioner Philip Deal, who helped create the Platinum Coin Act, has vouched for its legality and the process it went through, but critics have questioned whether the Fed will accept the coin, supporters say. I question whether it is legally sound.
Investors also objected that minting such coins could be viewed as valid reason to doubt the United States’ ability to service its debts, as the United States would have to resort to such outlandish measures. faction claims.
Treasury Secretary Yellen herself has dismissed the idea many times. In October 2021 she said: It’s really gimmicky. Again in January she turned down the idea, wall street journal The Fed may not accept such coins.
In addition to rejecting the coin idea, the administration is tight-lipped about alternatives to avoiding the debt ceiling, even though it said it refused to negotiate with Republicans.
Some scholars have argued for another option: ignoring the debt ceiling would mean the Treasury would continue to sell bonds to pay off its debt.
“I think you’ll eventually get to the point where there’s nothing you can legally do,” says Michael Dorff, a Cornell University law professor. You should choose.”
Dorf, along with frequent collaborator Neil Buchanan, a law professor at the University of Florida, claimed Given that the Platinum Coin Act covers commemorative coins, the $1 trillion coin is probably illegal.
“When this law was passed, no one thought it would be used for this purpose,” he said. “It’s a worse option than issuing debt in the normal course, as if there were no debt ceiling.”
Ignoring the debt ceiling means that the executive branch is circumventing legislation passed by Congress, but Dorf and Buchanan argue that legislative powers, such as raising taxes and deciding where to cut spending, are not enough. I think it’s better than exercise-like behavior.
Some scholars clause The 14th Amendment states that the national debt “should not be questioned,” essentially setting a debt ceiling. unconstitutionalThe so-called “public debt clause” could give Biden constitutional protection if the matter goes to court and Biden flouts the cap.
Cryptocurrency proponents such as Gray admit that ignoring the debt ceiling is an option, but minting cryptocurrencies is within existing laws and is not a government currency. I think it makes the issuance ability transparent.
“Something as big and disruptive as a coin, that’s the scale we need to break people’s minds,” Gray said.
In the debate over how the administration should respond to this impending debt ceiling crisis – whether to mint coins or ignore the debt ceiling – academics say Democrats have both majorities in Congress. The idea was around in December but never got the momentum it needed to gain traction.
“What we are dealing with now is the same problem we had [in 2011]said Gray. Democrats “took us to the point where we had a chance to solve the problem, [they] We did not make it a priority to remove the debt ceiling during the legislative session. ”
https://www.theguardian.com/business/2023/jan/31/one-trillion-dollar-coin-debt-ceiling-solution Could the $1 Trillion Coin End the US Debt Ceiling Controversy?