Ten Miles Square

Blog

January 09, 2013 11:01 AM If not the Coin, then what?

By Mark Kleiman

Though I somewhat playfully supported the Platinum Coin fix* to the debt-ceiling problem during the last crisis – as the perfect non-solution to a complete non-problem – I’m sympathetic to Kevin Drum’s impatience with the idea.

The Coin may be within the text of the law, but it’s hardly within its spirit, and the national credit of the United States should not depend on legal shenanigans. Much, much better to have the Republicans in Congress grow up and authorize the President to issue debt to pay the bills already incurred, and still being incurred, by Acts of Congress.

Politically, it looks to me as if the Republicans know they have a losing hand – their Wall Street paymasters won’t hold still for default – and are prepared to throw it in, now that the President has said he won’t ransom the hostage. That’s another good reason not to give them an out.

Still, there’s a real question here. The President’s oath of office commits him to “take care that the laws be faithfully executed.” The law commands the President to expend appropriated funds, and gives him no authority either not to expend them or to withhold payment when the bills come in. (Not paying the debt when due is not only a horrible, terrible, awful, no-good idea, it might violate the 14th Amendment to boot.) But the debt ceiling forbids the President to borrow the money required to obey the command that he spend it.

So: if we imagine a situation where the Congress doesn’t lift the debt limit, and the President has to choose between the Coin and default, would default really be the better option? If default is preferred, on what principle should the President choose which bills to pay and which to refuse to pay? And by what authority would he make that choice? If you’re sworn to execute the laws, and your choice is between the Coin and not executing some of the laws, aren’t you pretty much stuck with the Coin?

* For those who haven’t been following, the idea is to take existing legal authority to mint platinum coins in any denomination by the horns and mint a trillion-dollar coin. You then deposit that coin in the Treasury’s account at the Fed, reducing the national debt by $1T. The authority to mint gold bullion coins – which don’t count against the statutory limit on paper currency – requires that they only be issued at their intrinsic value, but somehow that clause got left out of the legislation extending coinage authority to platinum.

[Cross-posted at The Reality-based Community]

Mark Kleiman is a professor of public policy at the University of California Los Angeles.

Comments

  • Josef K on January 09, 2013 11:35 AM:

    So: if we imagine a situation where the Congress doesn’t lift the debt limit, and the President has to choose between the Coin and default, would default really be the better option?

    I'm going to take this as a rhetorical question, as Ezra Klein already covered what would happen:

    http://www.theatlantic.com/business/archive/2013/01/after-the-debt-ceiling-breach-what-day-1-in-default-america-might-look-like/266949/

    All told, I agree in principle that exploiting a nominal loop-hole in a relatively obscure statute isn't a very good way of keeping the federal government functioning.

    In more practical terms, the coin is a preferrable option to watching yet another government shutdown, a more damaging one this time. I daresay the markets would also respond favoarably to seeing some actual, decisive action on the President's part to shore up the economy, even if it is by a glorified accounting gimmick.

  • Peter C on January 09, 2013 5:55 PM:

    "Much, much better to have the Republicans in Congress grow up and authorize the President to issue debt to pay the bills already incurred, and still being incurred, by Acts of Congress."

    Do you seriously see any indication that Republicans would do this? It would amount to their admitting that they were wrong. What sitting Republican can you imagine saying that?

    The Republicans only acted to avert the 'Fiscal Cliff' because they decided to use the debt ceiling negotiations as an opportunity to take the US Government's credit rating hostage in order to force-through their agenda. They did NOT suddenly adopt a 'power-sharing' perspective; they are out to impose their will.

    We should mint the coin NOW and short-circuit 2 months of pointless posturing. No doubt there will be other points in the year where they will have a chance to try to sieze hostages - there are appropriation bills which must be passed - but we need to make the narrative one which highlights their persistent FAILURE to perform their basic function. Americans are much less likely to re-elect failures.

  • Kevin S. on January 10, 2013 9:32 AM:

    I'm not sure the platinum coin is even legal by the letter of the law. The law in question authorizes the Treasury secretary to issue "platinum bullion coins" and "proof platinum coins" of any denomination. A bullion coin has to be worth approximately the value of its metal content, so a trillion-dollar bullion coin *would* be big enough to sink the Titanic (the right's favorite meme on this subject now). Proof coins are coins minted either for technical and archival purposes or to sell to collectors. The way I read the statute, the secretary could have a coin minted and declare it worth trillion dollars, but the coin would cease to be a "proof coin" once he tried to deposit it with the Fed.