What if a single coin could solve the debt ceiling? The premise is kooky, yet simple: The Treasury would print a $1 trillion dollar platinum coin and deposit it at the Federal Reserve, and boom, instantly give the government some wiggle room as it rushes towards the debt limit. Seems about as plausible as paying our nation’s debt in magic beans.
But, thanks to a loophole in an obscure commemorative-coin law, the platinum option is perfectly legal.
The idea, once considered a total joke, has recently been picking up steam among policy wonks and politicians as a possible solution to bypass refusals by Republicans to raise the debt limit.
One GOP lawmaker is trying to stop this instant fix from seeing the light of day. Rep. Greg Walden, a Republican from Oregon, plans to introduce legislation to stop the U.S. Treasury from ever printing that currency as a means to balance the nation’s budget.
“This scheme to mint trillion dollar platinum coins is absurd and dangerous, and would be laughable if the proponents weren’t so serious about it as a solution. I’m introducing a bill to stop it in its tracks,” Walden said in a statement issued on Monday. “My bill will take the coin scheme off the table by disallowing the Treasury to mint platinum coins as a way to pay down the debt.
Walden’s bill comes in direct response to a proposal by Rep. Jerrold Nadler, a Democrat from New York, who proposed going with the coin option.
Further fueling this approach, Nobel Prize winning economist Paul Krugman came out in support of President Obama taking the creative route. “Should President Obama be willing to print a trillion dollar platinum coin if Republicans try to force Americans into default? Yes, absolutely. He will, after all, be faced with a choice between two alternatives, one that is silly but benign the other that is equally silly, but both vile and disastrous. The decision should be obvious.”
The law allows platinum coins worth any amount to be minted. Any amount at all. Even, like, one trillion dollars.
In an interview with The Last Word, former Democratic Congressman Barney Frank remained skeptical of platinum coin as a viable solution. “Things that seem really cute and clever almost never work. There is a reality to things.”
The law first came about in 1995 as the result of frustrated coin collectors. (Who would have guessed?) At the time, the Treasury was only issuing platinum coins worth hundreds of dollars—a steep price for many coin collectors. The coin enthusiasts complained to Rep. Mike Castle, a Republican from Delaware, who was in charge of the House Financial Service Subcommittee on Domestic and International Monetary Policy (one of their many jobs is to deal with coinage). So in a bill to fund the government, Castle attached a provision stating, “notwithstanding any other provision of the law, the secretary of the Treasury may mint and issue platinum coins in such quantity and such variety the secretary determines to be appropriate.”
Castle, co-author of the bill, explained the logic to The Washington Post: “People couldn’t afford the $600 dollar investment, so they wanted the flexibility to put in smaller coinage so that people could collect them.”
The congressman was shocked this bill—originally aimed at helping coin collectors—could now be used as a way to wipe the slate clean with the debt ceiling.
“That was never the intent of anything that I drafted or that anyone who worked with me drafted,” Castle said. “It seems to me that whatever is being proposed here is a stretch beyond anything we were trying to do.”
Philip Diehl, fellow co-author of the bill and former director of the U.S. Mint, addressed the issue with Daily Kos.
“This does not raise the debt limit so it can’t be characterized as circumventing congressional authority over the debt limit. Rather, it delays when the debt limit is reached,” he noted. “Yes, this is an unintended consequence of the platinum coin bill, but how many other pieces of legislation have had unintended consequences? Most, I’d guess.”