Treasury Secretary Janet Yellen notified House Speaker Kevin McCarthy (R-CA) and other lawmakers in a letter that the debt ceiling, an arbitrary cap on the national debt established by Congress, crossed the statutory limit of nearly $31.4 trillion as of Thursday. As House Republicans and the Biden administration launch negotiations to determine potential budget cuts, some Left-wing economists reintroduced calls to mint a trillion-dollar coin to resolve the debt crisis.
Nathan Tankus, a leading proponent of the idea, asserted in an article for the Financial Times that the core objection to the move is the concern that policymakers at the Federal Reserve will not accept its validity. “The coin, having already been issued, would be legal tender, and the Fed would have no basis for refusing it,” he countered. “Even so, I don’t think the Fed would force the Treasury to seek alternatives. So the Biden administration should call the Fed’s bluff.”
Washington Post economics reporter Jeff Stein recently asked Tankus and Rohan Grey, an assistant law professor at Willamette University who also supports minting the coin, how they would respond to the Supreme Court striking down the idea. Grey responded by suggesting that policymakers could merely “ignore” the Supreme Court and “send troops” to ensure that the Federal Reserve accepts the currency.
Supporters of the plan claim that a law permitting the Treasury Secretary to “mint and issue platinum bullion coins and proof platinum coins” does not include an upper limit on a given coin’s denomination. Treasury officials would merely mint a trillion-dollar platinum coin under the plan and deliver the currency for deposit at the Federal Reserve.
Detractors for the theory meanwhile contend that the trillion-dollar coin would worsen inflation readings, which are currently near their highest levels in four decades.
The prospect of a trillion-dollar coin is by no means completely novel. Former President Barack Obama explained in a 2017 interview with Pod Save America that his advisers briefly considered minting the coin amid debate over the 2013 debt crisis. “There was this theory that I had the authority to issue through the mint this massive trillion-dollar coin and on that basis, we could try to pay off U.S. Treasurys,” he remarked. “It was a very realistic possibility that we couldn’t get the votes for that and we couldn’t get those debts rolled over and we would be in a situation where we were technically in default. At that point, you were in uncharted territory.”
A similar controversy over the federal government’s ability to fulfill obligations emerged two years ago, Rep. Rashida Tlaib (D-MI) tweeted “#MintTheCoin,” a hashtag that was used by proponents of the coin during the Obama-era debt crisis.
The most recent breach of the debt ceiling occurred after Republican lawmakers struck a deal with McCarthy under which the party’s new majority would introduce a budget that refrains from increasing the statutory debt limit. Senate Majority Leader Chuck Schumer (D-NY) and House Minority Leader Hakeem Jeffries (D-NY) contended in a statement that Republicans alone are to blame for the fiscal uncertainty. “A default forced by extreme MAGA Republicans could plunge the country into a deep recession and lead to even higher costs for America’s working families on everything from mortgages and car loans to credit card interest rates,” they said.