The $1 trillion dollar coin solution to the federal debt ceiling crisis

Posted by AzBlueMeanie:

"For every complex problem, there's a solution that is simple, neat, and wrong." – H.L. Mencken

RonaldReaganCoinRonald Reagan epitomized the modern conservative movement's fixation with "simple solutions to complex problems." If it fit on a bumper sticker, all the better.

So it is only fitting that Ronald Reagan's image should appear on the $1 trillion dollar platinum coin that some are proposing as a simple solution to the Tea-Publican economic terrorists taking this country hostage over the federal debt ceiling and defaulting on the U.S. debt, in violation of the 14th Amendment to the Constitution, and causing another economic catastrophe.

Tea-Publicans have always wanted a Reagan coin. This would f#%king serve them right! (h/t graphic democratic underground.com)

Former Congressman Michael Castle accidentally enabled the weirdest possible solution to the debt ceiling. Michael Castle: Unsuspecting godfather of the $1 trillion coin solution:

As Brad Plumer explained
last month, the Treasury secretary has the authority to mint platinum
coins of any quantity and denomination. So, hypothetically, Tim Geithner
could mint a $2 trillion coin, deposit it in the Treasury’s account at
the Federal Reserve, and use that money in lieu of additional borrowing.
Suddenly, no one needs to worry if Congress refuses to raise the debt
ceiling.

The platinum-coin idea has now been endorsed by the likes of Paul Krugman and Rep. Jerrold Nadler (D-NY). It’s also the subject of a White House petition with 1,730 signatories. The hashtag #mintthecoin, created
by economist Stephanie Kelton and spread by supporters like Business
Insider’s Joe Wiesenthal, is catching on, at least among the financial
press.

* * *

[Castle] drafted a bill, the Commemorative Coin Authorization and Reform Act of 1995, that included this provision:

Notwithstanding any other provision of law, the Secretary of the
Treasury may mint and issue platinum coins in such quantity and of such
variety as the Secretary determines to be appropriate.

The logic, Castle tells me, was to enable the Treasury to put out
collectable platinum coins of a variety of sizes. At the time,
collectors had complained that the smallest platinum coins available
were too expensive, a problem the bill was supposed to enable the
Treasury to correct.

Dylan Matthews provides the history of the bill and its enactment into a public law. "When I told Castle about the platinum coin solution for the debt ceiling, he was baffled."

“That was never the intent of anything that I drafted or that anyone who
worked with me drafted…It seems to me that whatever’s being proposed
here is a stretch beyond anything we were trying to do,” he said,
audibly astonished.

So the platinum coin plan plainly goes against the legislative intent of
the Commemorative Coin Authorization and Reform Act of 1995, as
described by its congressional author.

But wait . . . Philip Diehl, the former Mint director and Treasury chief of staff who,
with Rep. Mike Castle, wrote the platinum coin law and oversaw the
minting of the first coin authorized by the law, disagrees. Former head of U.S. Mint: The platinum coin option would work:

Tuesday morning, I got an e-mail from Philip Diehl . . . It’s worth publishing in full:

I’m in a unique position to address some confusion I’ve seen in the
media about the platinum coin proposal so I’ve provided a brief that I
hope might be helpful.

* First, the law is not “poorly written”. The language accomplishes
precisely what was intended, though it also had unforeseen consequences;
but then how many other laws have had unintended consequences?

* 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). What is unusual
about the law is that it gives the Secretary discretion regarding all
specifications of the coin, including denominations.

* 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.

* This does not raise the debt limit so it can’t be characterized as
circumventing congressional authority over the debt limit. Rather, it
delays when the debt limit is reached. Those who claim otherwise are
misinformed or pursuing an agenda.

* This preserves congressional authority over the debt limit in a way
that reliance on the 14th Amendment would not. It also avoids the
protracted court battles the 14th Amendment option would entail and
avoids another confrontation with the Roberts Court.

* Any court challenge is likely to be quickly dismissed since (1)
authority to mint the coin is firmly rooted in law that itself is
grounded in the expressed constitutional powers of Congress, (2)
Treasury has routinely exercised this authority since the birth of the
republic, and (3) the accounting treatment of the coin is entirely
routine.

And if there are any doubts about the platinum coin method, Dylan Matthews explains an alternative method in his post:

But there’s another option. The American Eagle Palladium Bullion Coin Act of 2010,
proposed by then-Rep. Denny Rehberg (R-MT) and signed into law by
President Obama on Dec. 14, 2010, authorizes the Treasury secretary to
mint $25 palladium coins “in such quantities as the Secretary may
determine to be appropriate to meet demand.” So theoretically, Geithner
could issue 80 billion $25 palladium coins, collectively worth $2
trillion, and deposit them in a similar manner.

So this idea is not as crazy as it sounds. Certainly nowhere near as crazy as Tea-Publican economic terrorists willfully defaulting on the U.S. debt over a temper tantrum about government spending and destroying the full faith and credit of the United States, and causing another economic catastrophe.

Paul Krugman has updated his position on the platinum coin solution. Be Ready To Mint That Coin:

Should President Obama be willing to print a $1 trillion platinum coin
if Republicans try to force America into default? Yes, absolutely. He
will, after all, be faced with a choice between two alternatives: one
that’s silly but benign, the other that’s equally silly but both vile
and disastrous. The decision should be obvious.

* * *

So why not?

It’s easy to make sententious remarks to the effect
that we shouldn’t look for gimmicks, we should sit down like serious
people and deal with our problems realistically. That may sound
reasonable — if you’ve been living in a cave for the past four
years. Given the realities of our political situation, and in particular
the mixture of ruthlessness and craziness that now characterizes House
Republicans, it’s just ridiculous — far more ridiculous than the notion
of the coin.

So if the 14th amendment solution — simply declaring
that the debt ceiling is unconstitutional — isn’t workable, go with the
coin.

Krugman suggests that John Boehner's image should appear on the coin, but only dead people can appear on money. So "Ronaldus Magnus" it is.

Krugman gets snarkier today by suggesting Moral Obligation Coupons:

Don’t like the platinum coin option? Here’s a functionally equivalent
alternative: have the Treasury sell pieces of paper labeled “moral
obligation coupons”, which declare the intention of the government to
redeem these coupons at face value in one year.

It should be
clearly stated on the coupons that the government has no, repeat no,
legal obligation to pay anything at all; you see, they’re not debt, and
therefore don’t count against the debt limit. But that shouldn’t keep
them from having substantial market value. Consider, for example, the
fact that the government has no legal responsibility for guaranteeing
the debt of Fannie and Freddie; nonetheless, it is widely believed that
there is an implicit guarantee (because there is!), and this is very
much reflected in the price of that debt.

So the government should
have no trouble raising a lot of money by selling MOCs. It’s true that
if they’re sold on the open market, they would probably sell at a
substantial discount from face value, so this would in effect be
high-interest-rate financing. But that’s better than either default or
giving in to blackmail.

* * *

Again, while this may all seem kind of dodgy, it’s important to realize that unless the president does something like this he will be forced to do something illegal:
namely, fail to spend money that, by act of Congress, he is legally
obliged to spend. Fancy footwork is by far a better alternative; and if
it enrages Mitch McConnell, well, that’s just an extra bonus.

Of course, House Republicans mock the idea to save economy from threat of GOP sabotage, because they want to dismiss this idea as a silly gimmick (they are just sore that the GOP's Gimmicks-R-Us shop didn't think of it first).

But The Hill reports that Rep. Greg Walden (R-Ore.) plans to introduce legislation that would prevent the Treasury Department from minting a trillion-dollar platinum coin. GOP lawmaker to introduce bill to block Treasury from making trillion-dollar coin. "My bill will take the coin scheme off the table by disallowing the
Treasury to mint platinum coins as a way to pay down the debt," Walden
said in a statement on Monday. This is an admission by Walden that the platinum coin idea is legitimate and perfectly legal, or his bill to prevent it would not be necessary. [Two words for Rep. Walden: "presidential veto" — just sayin'.]

So time to strike that "Ronaldus Magnus" $1 trillion dollar coin. And screw you terrorists! You have no hostage.

0 responses to “The $1 trillion dollar coin solution to the federal debt ceiling crisis

  1. Yeah, yeah… Ron Paul and his gold standard bullshit. Take it up with tricky Dick Nixon on his 100th birthday today.

  2. The trillion dollar coin proposal is a fine example of how some people would rather evade the law as everybody understands it rather they obey the law. Given the fact that it has been decades since any US dollar had any connection to any fixed commodity (much less gold) it is possible (though perhaps not legal) for the people who give orders to instruct the US Mint to make such a piece of funny money.

    Let’s not put a dead persons face on such a farcical coin. I am sure that Andrew Jackson’s ghost is tormented every time his face is stamped on a $20 Federal Reserve Note. If Paul Krugman thinks it is such a good idea let his visage be put on it.

    http://mises.org/daily/5602/