Laurence Tribe On The Trillion Dollar Coin

Ken AshfordEconomy & Jobs & DeficitLeave a Comment

So, in case you haven't been paying attention….

A strange idea has been floated about how to deal with the deficit, particularly if House Republicans are prepared to take the full faith and credit of the United States and destroy it.

You see, we are up against another debt ceiling soon.  No big deal; we've faced this dozens of times, under Republlican and Democratic administrations, for several decades.  The debt ceiling simply means that the government cannot pay its bills unless it borrows more money, requiring Congressional approval.  This, of course, adds to the deficit.

But deficit hawks are wrong to block passage of the debt ceiling.  If you want to lower the deficit, you pass budgets that tax more or spend less in the future.  You don't stop the deficit by refusing to pay bills for things you've already agreed to pay (things like Medicare and Medicaid, VA benefits, etc.)

Never mind that, though.  The House Republicans don't care if they destroy the United States credit rating (doing so will send the global economy into a tailspin).  And if they threaten to do that, well, that's where the trillian dollar coin comes in.

Thanks to an odd loophole in current law, the U.S. Treasury is technically allowed to mint as many coins made of platinum as it wants and can assign them whatever value it pleases.  Therefore, there will be no need to borrow, and we won't hit the ceiling.

Under this scenario, the U.S. Mint would produce (say) a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Fed then moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations for the next two years — without needing to issue new debt. The ceiling is no longer an issue.

Much of the discussion of the trillion dollar coin is whether or not it is legal or constitutional.  Today, Larry Tribe weighed in:

I don’t think it makes sense to think about this as some sort of “loophole” issue. Using the statute this way doesn’t entail exploiting a loophole; it entails just reading the plain language that Congress used. The statute clearly does authorize the issuance of trillion-dollar coins. First, the statute itself doesn’t set any limit on coin value. Second, other clauses of 31 USC §5112 do set such limits, but §5112(k)—dealing with platinum coins—does not. So expressio unius strengthens the inference that there isn’t any limit here.

Of course, Congress probably didn’t have trillion-dollar coins in mind, but there’s no textual or other legal basis for importing this probable intention into the statute. What 535 people might have had in their collective “mind” just can’t control the meaning of a law this clear.

It’s also quite clear that the minting of such a coin couldn’t be challenged; I don’t see who would have standing.

Bottom line: This is a situation where the political and economic considerations, not the legal considerations, have to drive the decision-making about this option. It’s certainly a lot better from just about every perspective than having the nation stuck on either horn of the very real dilemma you outlined below, which I agree offers no plausible way out as long as enough leaders in Congress insist on playing Russian Roulette with our economy and risking our full faith and credit by using the debt ceiling as a bargaining chip as they are threatening to do.

So it seems quite do-able, legally.  The question is what will be the political ramifications if it is done.  It is, to be sure, unprecedented.  But then again, so is Congress refusing to pass the debt ceiling.  As the chart blow shows, it was passed 8 times during the Bush administration:


Might Obama do it?  He probably doesn't have to decide unless the House Republicans are serious about their debt ceilling threat.  But it does seem to be a huge gun in the Obama arsenal.  In fact, some argue that he must mint it, if there is no other choice:

Whether he likes the idea or not, President Obama might be legally required to mint a trillion dollar coin if Congress fails to raise debt limit and he has no other way to meet Congressional spending mandates

Matt Yglesias argues that President Obama appears to be legally required to pursue the trillion dollar coin option in the event that Republicans refuse to raise the debt limit:

  1. Under the Congressional Budget and Impoundment Act of 1974 it's illegal for the president to spend less money than congress has appropriated—the Nixon administration had this idea that it could enact unilateral spending cuts, but it can't.
  2. Under the terms of the statutory debt ceiling, the president can't borrow extra money without congressional authorization.
  3. I don't believe there's a specific statutory prohibition on collecting taxes that congress hasn't authorized, but this principle is pretty literally the foundation of the entire fabric of common law.
  4. The Treasury Secretary can instruct the mint to create platinum coins of any denomination.

Given those facts, Yglesias concludes, the coin must be minted if Republicans refuse to raise the debt limit.