The only idea circulating in Washington to avoid another big battle on raising the debt limit is dead. This weekend The U.S. Treasury Department put the kabbash on minting a $1 trillion platinum coin to service U.S. debt payments while Congress deliberates on raising the debt limit.
“Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” Anthony Coley, a Treasury spokesman, said in a written statement.
“The inclusion of the Federal Reserve is significant," writes Washington Post columnist Ezra Klein. “For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don’t believe it’s legal and would not credit the Treasury Department’s deposit, the platinum coin would be worthless.”
The ball is back in Congress’ court. Either it raises the debt limit, which technically was reached at the end of December, or the U.S. will miss one or more interest payments on its debt, which is considered a default.
As of now, Republicans in Congress insist on tying any increase in the debt limit to government spending cuts, but President Obama refuses to marry the two. On New Year’s Day, he repeated his pledge to “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.”
Which leaves the situation where it started. “Either [Congress] raises the debt ceiling or we will have some kind of default,” says The Daily Ticker’s Aaron Task in the accompanying interview.
“Do these lawmakers not remember anything?” asks The Daily Ticker’s Lauren Lyster, referring to the 2011 debacle. “Do they forget we almost had a default and lost the triple-A credit rating from one ratings agency?”
That downgrade didn’t impact the financial markets—interest rates fell to record lows where they remain—but it did affect the public’s view of Congress. As of now, only 14% of Americans approve of the way Congress is handling its job, according to the latest Gallup poll.
“It will take the financial markets to have some of freak out to get these guys and gals to do their jobs,” says Task.
Tell us what you think!
Do you think Congress should act to raise the debt ceiling before a default?
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