Congress managed to avert one looming crisis Thursday as it passed a stopgap funding bill that will keep the lights on across the federal government through early December. That just leaves the rest of its to-do list from hell, including what to do about the debt ceiling.
Of all the potential catastrophes in the making, this one may be the most arbitrary and self-imposed. Nobody likes the debt ceiling. It’s burdensome, it’s a political nightmare, and it has been raised or suspended every time it has been a problem since it was set into place in 1939. Despite that, for the third time in a decade, we’re facing a situation in which, if it isn’t lifted, the entire U.S. economy could plummet for no good reason.
Faced with a problem this asinine, the country may require a solution that is truly absurd.
As a reminder, the debt ceiling is the legal cap on how much debt the federal government can have on the books. Running up against this limit is bad because it means the Treasury can no longer borrow money to pay for all the other things that Congress has told it to do, including paying off the interest on previous borrowing. Economists predict the fiscal version of Dr. Peter Venkman’s description of the apocalypse if that happens: “Human sacrifice; cats and dogs, living together; mass hysteria.”
Treasury Secretary Janet Yellen has warned that by no later than Oct. 18, she’s going to run out of bookkeeping trickery to hold off disaster. Democrats wanted to use the continuing resolution that passed Thursday to lift the debt ceiling, but Senate Minority Leader Mitch McConnell, R-Ky., forced that provision to be removed. Which leaves less than three weeks to figure out a solution.
Faced with a problem this asinine, the country may require a solution that is truly absurd.
The best choice is to get rid of the debt ceiling entirely, a move Yellen endorsed Thursday. Or at the very least to restore the so-called Gephardt Rule, which said that when a budget passes Congress, “it shall be deemed to have authorized whatever borrowing is implied by that budget.” Both seem unlikely in the near term, which leaves three immediate options.
Option one: Congress passes a debt ceiling lift.
That would be the most obvious answer, except Senate Republicans have promised not to provide the votes to dodge a filibuster. Using budget reconciliation, it’s possible to raise the debt ceiling with just Democrats’ votes — but doing so would be time-consuming and complicated, and it could wind up blowing up the efforts to pass President Joe Biden’s Build Back Better agenda. (McConnell is well aware of both of these things, which is why he’s holding his ground despite insisting that a default won’t happen.)
Option two: Biden invokes the 14th Amendment.
The 14th Amendment says the “validity of the public debt of the United States, authorized by law ... shall not be questioned.” Under this scenario, the Treasury is ordered to borrow more money despite the debt ceiling because the public debt has to be paid one way or another. The problem with that is it’s a really bad look to deliberately break the law, especially when it comes to Congress’ power of the purse. Presidents shouldn’t be able to unilaterally set spending policy because, well, that’s basically a monarchy.
Since a constitutional crisis is nobody’s idea of a good time, that brings us to option three, which is absolutely the most bonkers of them all — but the one most likely to succeed if push comes to shove: minting a few trillion-dollar platinum coins.
Thanks to a truly goofy loophole in the laws governing coinage, treasury secretaries can mint platinum bullion coins in literally any denomination they want. So far that’s been used to produce commemorative coins that are worth more than they cost to produce, netting a small profit for the government from collectors. But starting in 2011, and especially in 2013, the idea started being kicked around that maybe this law could be the solution to the debt ceiling crisis.
Thanks to a truly goofy loophole in the laws governing coinage, treasury secretaries can mint platinum bullion coins in literally any denomination they want.
Here’s how it would work: Yellen orders the U.S. Mint to strike some number of platinum coins, each worth $1 trillion. She would then be able to “purchase $1 trillion worth of debt from the Fed, retire that debt, and then create breathing room under the debt ceiling,” Joe Weisenthal, the executive editor of Bloomberg and chief platinum coin advocate, recently explained.
Now, the Obama administration mulled the idea in 2013 before it rejected it as both legally shaky and imprudent. But people such as Harvard law professor Laurence Tribe and former U.S. Mint Director Philip Diehl say the platinum coin trick totally could work legally.
So does House Judiciary Committee Chair Jerry Nadler, D-N.Y., who has renewed his call to mint the coin(s), even bringing the idea up in a House Democratic Caucus discussion of the debt limit this week. Rep. Rashida Tlaib, D-Mich., is backing him up, tweeting “#MintTheCoin” on Tuesday. So far, the Biden administration has yet to really acknowledge that anything other than Congress’ raising the ceiling will happen — but it may be time for the White House to start considering it.
There are two main arguments against the platinum coin option. The first is that it would potentially spark inflation, an unlikely prospect as the coin would never enter circulation. Instead, the biggest argument is that it’s a really weird idea that lays bare just how much of our financial system is arbitrary and capricious. Because it is! Money is an illusion; debt is a social construct! The problem is that it’s a construct that our society needs to function.
The risk of default in 2011 and 2013 was triggered by Republican demands that President Barack Obama slash spending broadly or defund Obamacare entirely. This time around, the White House and congressional Democrats refused to negotiate at all over the debt ceiling rise. And that’s fine with the GOP. It has no real belief that it will get Biden to give up his economic agenda to win its votes. Instead, it’s content to let the Democrats flounder and then place the blame on their shoulders if there’s a default.
That’s a whole other level of nihilism. The GOP’s blasé recklessness manages to exceed what we saw during the hostage-taking of the last two stalemates. If the choice is the Republicans’ sticking to their guns and watching Biden preside over the first default on debt in American history or feeling silly about minting a coin? Just go ahead and mint the thing, deposit it with the Fed and then make sure Nicolas Cage doesn’t get within 500 feet of it.
