The Biden administration is looking to challenge Senate Minority Leader Mitch McConnell’s staunch position that the GOP will not raise the debt ceiling. One idea that was previously discussed by the Obama administration to circumvent a possible government shutdown was to exploit a loophole in the law and mint a $1 trillion platinum coin and deposit it at the Federal Reserve.
The Treasury Department hit the debt ceiling 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. It may exhaust those abilities sometime in mid-October,” Business Insider noted in an article about the possibility of minting the $1 trillion coin.
Treasury Sec. Janet Yellen would have to order the coin.
Far-left Rep. Rashida Tlaib (D-MI) floated the idea of minting two platinum $1 trillion coins in response to the Coronavirus crisis in her Automatic BOOST to Communities Act. She wrote:
- the program would be funded directly from the Treasury, using its legal authority to create money via coin seigniorage, which is a statutory delegation of Congress’s constitutional power of the purse.
- The mechanics of this funding approach would be as follows:
- The Treasury Secretary would direct the U.S. Mint to issue two $1 trillion platinum coins, under the legal authority provided by 31 U.S.C. § 5112(k).
- Congress would direct the Federal Reserve to purchase the newly issued coins at full face value.
- The Federal Reserve would complete the purchase by crediting the U.S. Mint’s account at the Fed with $2 trillion in reserves.
The Treasury Department can borrow money if it wants to finance additional government actions; Congress can raise or suspend the limit on the debt. The debt limit can be raised to pay for existing spending but doesn’t pay for new federal spending.
The U.S. Code states:
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.
Business Insider reported that McConnell said of the Democrats, “It’s their obligation. They should step up. It’s hard being in the majority. They are the ones who will raise the debt limit. Do you guys think I’m bluffing? … So the only issue is, whose responsibility is it to do it? A Democratic president, a Democratic House, a Democratic Senate.”
He further explained that his prior support of raising the debt ceiling covered spending with bipartisan agreement, but this year the Democrats passed their $1.9 trillion stimulus bill without support from Republicans.
Former President Barack Obama said in 2017 he had discussed the idea of a platinum coin with then-Treasury Secretary Jack Lew. He said, “We were having these conversations with Jack Lew and others about what options in fact were available because it had never happened before. There were all kinds of wacky ideas about how potentially you could have this massive coin.”
“There was this theory that I had the authority to issue through the mint this massive $1 trillion coin and on that basis we could try to pay off US Treasurys,” Obama continued. “It was a very real 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 were technically in default. At that point you were in uncharted territory.”
“Treasury officials have long ruled out using the trillion-dollar platinum coin as a solution to the debt ceiling, arguing that Congress should do its job and raise the ceiling itself,” Business Insider noted.