Thor’s hammer, Lancelot’s sword, Yellen’s trillion dollar platinum coin: It’s human nature to yearn for a magical weapon to save us from our enemies — or worse, our own blunders.
That’s why the idea of the United States Treasury Secretary Janet Yellen minting such a coin to save the country from the looming debt ceiling which Republicans refuse to raise, is such a popular one. Without an increase to the limit, the government faces imminent shutdown and the inability to pay off its debts.
That’s because the federal government’s fiscal year ends on September 30th, and if Congress doesn’t agree on a spending bill by then, nonessential parts of the Federal Government will begin to shut down. The debt ceiling is not the same as the budget, but the two are typically linked. Republicans, who are the minority in Congress, are using their power to limit the debt ceiling to attempt to stop Democrats from passing their proposed $3.5 trillion Build Back Better reconciliation deal.
On Tuesday, every House Republican, including those from Louisiana which is still recovering from Hurricane Ida, voted against a continuing resolution that would fund the government until December 2021, suspend the debt ceiling until December 2022, and provide hurricane relief.
So what can be done if the two sides won’t budge? Technically, Yellen has the authority to create a coin with enough ascribed value to pay off all debts, and drop it off at the Federal Reserve. In fact, 31 U.S. Code § 5112 puts it into law. “The Secretary 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,” it reads.
The concept has been around for a while, Populist Party presidential candidate Bo Gritz first suggested it in 1992. The idea picked up steam in 2012 during the fiscal cliff debates. In 2017, President Barack Obama even gave it a nod.
“We were having these conversations with [former Treasury Secretary] Jack Lew and others about what options in fact were available, because it had never happened before,” said Obama on the Pod Save America podcast. “There were all kinds of wacky ideas about how potentially you could have this massive coin.”
Wacky being the key word.
But proponents of the coin use it as a foil to a concept they think is just as silly: The debt ceiling.
To put it simply, the ceiling, which was enacted by Congress in 1939, sets a legal cap on the amount of money the Treasury can borrow. When that cap is reached, and there’s no more money to be spent, the U.S. stops making legally mandated payments like military salaries and pensions. Eventually, if the ceiling isn’t raised, the Treasury is forced to stop making payments on interest from debts, sending the country into default.
A recent report by Moody’s found that if the U.S. defaults, the recession that ensues could raise the nation’s unemployment to 9%. A default on America’s debt obligations, Yellen told Congress, would be “unthinkable” and “would have absolutely catastrophic economic consequences.”
Still, every few years the ceiling must be raised, and the party that isn’t in power inevitably holds it hostage in order to wield power around relatively unrelated bills. The cost of the last three government shutdowns, caused by debt ceiling debates, is estimated to have cost taxpayers at least $4 billion.
Democrats like to point out that the country’s more than $28 trillion in debt surged by $7 trillion under President Donald Trump, and that the need to raise the ceiling falls on the shoulders of the Republicans who refuse to.
Senate Minority Leader Mitch McConnell has fired back with his own response. “Let’s be clear,” he wrote on Twitter last week. “With a Democratic president, a Democratic House and a Democratic Senate, Democrats have every tool they need to raise the debt limit. It is their sole responsibility. Republicans will not facilitate another reckless, partisan taxing and spending spree.”
The concept of creating a ceiling to keep the nation’s debt in check, advocates say, has clearly not been effective. It has been raised 87 times since 1959, and the debt has continued to soar. The debt ceiling is relatively unique to the U.S. Peers like Japan, Canada, the UK, France, and Germany have no regulations and get on just fine without them.
“Instead of harming the economy by risking default on our obligations, lawmakers should focus on the key drivers of our fiscal challenges,” wrote researchers from the Peter G. Peterson Foundation, a noted deficit hawk group.
In a statement to The Washington Post, Treasury Department spokesman Anthony Coley said that the White House has ruled out minting the $1 trillion coin. “There is only one viable option to deal with the debt limit: Congress needs to increase or suspend it,” he said, indicating that the White House would like to see the debt ceiling go away altogether, at least for the time being.
And while there will probably be no $1 trillion dollar coin this time around—and the weapon remains just as real as those in the mythical lores of history—advocates still rally for this made-up solution to what they believe is a made-up problem.
As Nobel Prize winner Paul Krugman said of the coin while Obama was president, “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.”
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