Updated from 12:48 p.m. EST
Update: Monday was a big day for the "Mint the Coin" effort. First, NYT columnist Paul Krugman weighed in on the concept, encouraging President Obama to "go with the coin" if Republicans threatens an actual default. Second, U.S. Rep. Greg Walden (R-Ore.) announced plans to introduce a bill banning the controversial proposal. Joe Weisenthal has the details.
Earlier: A week ago the U.S. officially reached its $16.4 trillion debt ceiling, meaning the government can’t issue new debt. The Treasury Department can move enough funds around to pay bills for another 6-8 weeks. But if there’s no agreement to raise the debt ceiling in March, then the government will really run out of money.
Senate Minority Leader Mitch McConnell and House Speaker John Boehner have both said they want to tie raising the debt ceiling to spending cuts, while President Obama says he wants to address the two issues separately.
“I will not have another debate with this Congress over whether or not they should pay the bills that they've already racked up through the laws that they passed," Obama said last Saturday in his weekly address.
The last debate between the Obama and Republicans on the debt ceiling ended with a stalemate that caused the first downgrade of the country's AAA credit rating. With the two parties continuing to hold polar opposite views, how can a deal get done before it's too late?
One novel idea that's circulating in Washington is the $1 trillion platinum coin. The Treasury could issue the coin to service outstanding U.S. debt while the debt ceiling debate is underway. Once a deal is reached to raise the debt limit, the Treasury could issue enough bonds to buy back that $1 trillion.
There's even an online petition asking the White House to create such a coin to avoid another big debt ceiling battle in Washington. As of Monday morning it has 4,641 signatures.
The Treasury has the authority to issue the coin under a law passed about 12 years ago. The law allows the Treasury Secretary to issue coins in any denomination. It was intended for the creation of collector coins but it’s written in a way that could allow the minting of a $1 trillion coin.
“While the president doesn’t have the authority to borrow money...he has this authority to print money in order to pay bills,” says Josh Barro of Bloomberg View.
But will the president do that?
Joe Weisenthal, deputy editor of Business Insider, tells The Daily Ticker that it’s not likely -- but not impossible.
“Given that the debt ceiling debate is fundamentally about whether or not we will pay bills that Congress has already agreed to—and many think people that’s an absurd debate to be having—I don’t that think the trillion-dollar coin idea is that absurd in context….It highlights the ridiculousness of the debt ceiling debate," he notes.
Congressman Jerry Nadler (D-NY) supports the idea, saying the Obama Administration ought to do this if Congress does not increase the nation's debt.
“It’s the White House's own absurd threat to make,” says Weisenthal. “It’s absurd…but our government in Washington is becoming essentially comedic.”
According to Weisenthal and Barro, issuing a $1 trillion platinum coin will not impact inflation because it will be retired as soon as the debt limit is raised, allowing the administration to issue more debt.
“The idea is not to monetize the debt. ..the idea is just to get around this legal loophole," Weisenthal says. "It’s purely about a technical response to a bad law—the debt ceiling.”
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