Trillion dollar coin? Washington considers solution to budget deadlock
Discussions over a trillion US dollar coin have returned to Washington now that Congress is mired in yet another political stalemate over raising the debt ceiling.
The costly platinum idea – which would be unprecedented but not necessarily illegal – was originally launched in 2011 as a workaround in the recurring war between Democrats and Republicans over lifting the debt limit for allow the government to pay its bills.
The champions of the idea point to a law of 1997, which in theory would allow the Secretary of the Treasury to authorize a platinum coin at the value of his discretion.
The President could order the Secretary of the Treasury to mint a $ 1 trillion coin that could be deposited in the Federal Reserve and used to cover a large chunk of Washington’s bills.
Such a move would bypass Congress, which is once again flirting with disaster. Treasury Secretary Janet Yellen warned on Tuesday that the government would be cash-strapped unless the federal borrowing limit is lifted.
– “Gimmick” accounting? –
While it might seem far-fetched, the idea went far enough during the 2013 standoff that the Treasury Department explicitly ruled out minting the coin.
Former President Barack Obama alluded to internal discussions about the concept in a podcast in January 2017, just as he was leaving office.
“There were all kinds of wacky ideas,” Obama said on “Pod Save America” of the 2013 discussions with the staff.
But the solution has hardly been adopted by mainstream economists.
Critics include economist Paul Krugman, who wrote in March 2020 that the idea was “an accounting gimmick” that “wouldn’t even fool anyone.”
Laurence Kotlikoff, professor of economics at Boston University, said it was “the kind of thinking of a third world country.”
“The essence of the problem here is printing money to pay government bills,” Kotlikoff said. “And when you print enough money, you get inflation.”
Policymakers are already grappling with price pressure as a result of heavy budget spending during the pandemic. This marks a break from the anemic inflation seen over most of the past two decades.
Republicans in Congress have opposed raising the debt ceiling, arguing that President Joe Biden’s huge investments in infrastructure and social programs are fiscally irresponsible.
As of yet, there is no obvious solution to the stalemate, raising the possibility that the United States could default for the first time in its history.
But while the trillion dollar coin catches the eye of economists, it is a source of curiosity on social media.
– Four billion dollar coin –
House Speaker Nancy Pelosi on Tuesday said top Democratic Representative Jerry Nadler “wants to have a trillion dollar coin that does not require congressional approval.”
Economics professor L. Randall Wray, a professor at Bard College who has championed modern money theory, which emphasizes the downsides of debt, said the special coin is no more wacky than the other expansionary financial maneuvers adopted by the Federal Reserve during the pandemic that involved hundreds of billions of dollars in public and private debt.
“It’s workaround work,” Wray said. “It kind of shows that the debt limit itself is a pretty dumb idea.”
Wray and others note that the massive cash injections by the Federal Reserve following the 2008 crisis did not boost inflation.
For Media Matters for America’s Matthew Gertz, the question isn’t whether the trillion dollar coin is too big, but if it’s big enough.
“A trillion dollar coin is not cool,” Gertz wrote on Twitter. “You know what’s cool? A quadrillion dollar coin.”
tu-jmb / md