Is a Trillion Dollar Coin the Way to Avoid the Debt Ceiling?

By Michael Glantz on January 8, 2013

 

From Flikr: DonkeyHotey

The 112th Congress has come to a pitiful close. Having only passed 238 bills, the 112th congress was the least productive Congress in modern American history. What can we expect will change with the 113th Congress? Sadly, not a whole lot. The Democrats retain control of the Senate with a slightly larger majority, and the Republicans retain control of the House albeit with a smaller majority. The Democratic majority in the Senate has proposed making changes to the filibuster rules to allow legislation to move more easily through the senate, but that change can only happen on the first day of a new congress and the rules didn’t get changed on the first day. However, Majority Leader Harry Reid (D-NV) didn’t adjourn the session from the first day, instead he sent the Senate into recess which means the first day will continue until Reid decides it’s over. So, a filibuster change may be yet to come but who knows. With all these legislative acrobatics on day one, it’s hard to be optimistic that our Congress is going to get its act together.

Also on the horizon is a contentious fight over the dreaded debt ceiling. There seems to be a lot of confusion over what the debt ceiling actually is, so allow me to briefly explain. Raising the debt ceiling does not give the President the power to go further into debt to spend money on his own pet projects down the road. Instead, raising the debt ceiling allows us to go deeper into debt to pay bills the Congress has already approved. In other words, this is the wrong point in the procedure to be taking issue with. If Congress wants spending cuts they need to bake those into the first deal rather than just trying to forcefully stop America from paying its bills. The debt ceiling doesn’t provide an opportunity for civil debate because the stakes are far too high. If the United States was to crash into the debt ceiling the results would be catastrophic world wide. The US would start defaulting on its bills, and be forced to make deep cuts to a shocking number of government programs. In layman’s terms; it would be extremely bad. The global economy would be cast into turmoil the likes of which no one has ever seen.

You’re probably thinking right now, “Well gosh, we should probably avoid running into the debt ceiling!” and I agree with you. However, Republicans in the House and Senate don’t agree. They think that they should be given all of the spending cuts they demand or they will ruin the global economy. Maybe I’m just young and naive but that seems more like a hostage situation than a negotiation. It’s safe to say that a majority of clear-eyed individuals know we have a spending problem and agree there needs to be cuts. It’s also safe to say that smashing into the debt ceiling is the single worst decision our elected officials could make.

How can we avoid this debacle? The President has said time and again that he is not willing to fight about the debt ceiling, not again. After we had our credit rating downgraded the last time a fight like this happened, you’d think a lesson would have been learned. That’s sadly not the case. Republicans are saying louder than ever that they want to fight about the debt ceiling. So, if the President says he’s not going to talk about it and Republicans insist they’re going to have this fight, does that mean our country is doomed to default? Not necessarily, there is an obscure law on the books that gives the Treasury Secretary the authority to mint coins made out of platinum at any denomination and specs the secretary chooses. This means that current Treasury Secretary Tim Geithner could legally mint a coin made out of platinum worth a trillion dollars and then deposit it in the federal reserve and continue paying bills normally regardless of the debt ceiling.

Now, this trillion dollar coin is just more political acrobatics like the neverending first day of Congress above, the difference here is it would be a last ditch effort to avoid global economic collapse. “But wait!” you say, “Wouldn’t that cause ridiculous inflation?” Good question! The answer is no. Because the money would only be used to continue government spending at the current levels, the economy wouldn’t see a sudden injection of a trillion dollars (which would cause inflation). The president wouldn’t mint a $16 trillion coin to completely pay back our debt either because that would put a ton of newly minted money into the world economy which would cause inflation. Is a trillion dollar coin just fighting crazy with crazy? Yes, I believe so. But it’s far better than the alternative.

I am a sophomore at the University of Denver studying Film and English. I am deeply interested in Politics and the role of the U.S. in the world at large.

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