The Biden administration could sidestep McConnell’s refusal to pay America’s bills by minting a $1 trillion platinum coin

Joe Biden and Mitch McConnell speaking
Senate Minority Leader Mitch McConnell (left) and President Joe Biden.
  • The GOP is standing firm on its resolution to not help Democrats raise the debt ceiling.
  • The Treasury Department technically has the ability to issue platinum coins of any denomination.
  • In theory, Janet Yellen could mint a $1 trillion platinum coin and deposit it at the Federal Reserve.
  • See more stories on Insider's business page.

A new fight over the debt ceiling is brewing on Capitol Hill.

Senate Minority Leader Mitch McConnell has firmly dug in on the GOP refusing to help renew the US's ability to pay off its bills, known as the debt ceiling. After saying for weeks that the Republicans wouldn't join Democrats in a vote to raise the ceiling, the entire Senate GOP caucus voted down a Democratic measure on Tuesday to raise it and avert a shutdown, moving the country closer to a potential crisis.

But the conundrum could have a coin-size solution. A loophole in the law that prescribes the types of coins that can legally be minted in the US theoretically allows the Treasury Department to mint a $1 trillion platinum coin, deposit it at the Federal Reserve, and then continue paying its bills as normal.

The deal with the debt ceiling

The debt ceiling places a fixed limit on the total amount of money the Treasury Department can borrow in order to fund government activities, and Congress has to vote to either raise or suspend that limit from time to time as the federal debt grows ever larger.

The Biden administration and Democrats are pressuring Republicans to back down, ruling out raising the debt limit on their own and reminding the GOP that it played a role in racking up $8 trillion in new debt under the Trump administration. There's no clear path out for lawmakers as they confront a barrage of deadlines this month, including another spending brawl that could end in a government shutdown.

Former President Barack Obama said in a 2017 interview with Crooked Media that senior officials had considered minting a coin to stave off a potentially catastrophic default.

"We were having these conversations with Jack Lew and others about what options in fact were available, because it had never happened before," Obama said, referring to the treasury secretary at the time. "There were all kinds of wacky ideas about how potentially you could have this massive coin."

The huge conundrum with a coin-size solution

The debt ceiling sets up a frustrating conundrum: Congress can pass budgets that direct the government to spend a fixed amount of money across its departments and programs, and it sets tax rates at particular levels to fund some of it. The gap between congressionally mandated spending and congressionally mandated revenues then needs to be paid for by borrowing money.

But the debt limit requires yet another act of Congress to authorize the Treasury Department to actually borrow the money needed to pay for the spending lawmakers already authorized.

This causes a problem once the department hits that debt limit, as it did at the end of July. While the treasury secretary has a bit of leeway to use "extraordinary measures" to keep paying the bills for a few months using cash on hand and shuffling money around, that only works for so long. And Treasury Secretary Janet Yellen warned on Tuesday that there's a specific deadline: The US is set to run out of money on October 18, barring a resolution to the debt ceiling fiasco.

Reaching a point where the US government is no longer able to meet its obligations would likely be a financial and economic calamity. A default on existing US debt would send financial markets into chaos, and government payments ranging from Social Security checks to military paychecks could abruptly halt.

The White House has warned about potential cuts for programs at the state and local level, such as Medicaid, while Treasury Secretary Janet Yellen has repeatedly stressed the "economic catastrophe" that would ensue. Not only would it spark "a financial crisis and economic recession," she testified to Congress on Tuesday, but she also said she couldn't "think of anything more harmful to the role of the dollar." She also said the government is set to run out of money by October 18.

On Wall Street, JPMorgan CEO Jamie Dimon echoed Yellen's comments, saying the bank was preparing for the US to default on its debt, calling such a scenario "potentially catastrophic."

Not Democrats' first tangle with the debt ceiling

This isn't the first time Congress and the president have had a showdown over the debt limit.

In the Obama era, economists and commenters mentioned a potential workaround to the debt limit. The law that governs the types of coins the Treasury Department is legally allowed to mint includes descriptions of typical coins, such as dimes, nickels, and quarters, as well as special commemorative and collectors' coins, such as a palladium $25 coin.

The law includes this clause: "The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary's discretion, may prescribe from time to time."

That clause leaves it up to the treasury secretary to decide on the denomination for a platinum coin, meaning that in theory, Janet Yellen could carve out the amount required, and Congress could get on with more pressing business.

Of course, treasury officials have long ruled out using the trillion-dollar platinum coin as a solution to the debt ceiling. They argued that Congress should do its job and raise the ceiling itself.

In a statement to Insider, the White House ruled out minting the coin to resolve the debt-ceiling stand-off in Congress. Politico first reported that the Biden administration had rejected the measure.

"There is only one viable option to deal with the debt limit: Congress needs to increase or suspend it, as it has done approximately 80 times, including three times during the last Administration," White House spokesperson Mike Gwin told Insider.

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