With Kevin McCarthy (R-CA) becoming Speaker of the House by giving more power to hard-core conservatives, we face a looming crisis when the federal debt ceiling has to be raised later this year. Is there an alternative to a bitter fight and a possible failed vote that could cause a U.S. default? Can the Treasury Department mint a “trillion dollar platinum coin” and deposit it with the Fed?
Remember the U.S. is essentially the only country requiring a separate vote on raising the debt ceiling. Most governments assume if spending is legally authorized then the necessary funds must be made available, either through taxes or borrowing.
And although the debt ceiling fight will focus on Republican demands for deep spending cuts, raising the ceiling wouldn’t authorize any new, additional spending. It’s just accounting, making funds available to cover the expenditures Congress already has authorized in law.
Some Republican leaders have signaled they want deep cuts in Social Security and Medicare as the price for debt ceiling negotiations. Representative Jason Smith (R-MO), the new chairman of the powerful tax-writing Ways and Means Committee and a self-described “firebrand” has made tough statements about cutting spending and rejecting compromise.
Smith is a member of the conservative House Republican Study Committee, which last year issued a reportcalling for higher Medicare and Social Security eligibility ages, along with cuts in disability insurance. Republicans also have hinted at partial or total privatization of Social Security, a proposal that politicians usually avoid.
President Biden and Democrats will push back strongly against any cuts to Social Security and Medicare, with Biden explicitly rejecting linking such cuts with the debt ceiling. Biden clearly thinks resisting Social Security cuts is a winning political strategy, but if both sides stick to their guns then raising the debt ceiling is in big trouble.
Are there alternatives? The Republicans only hold a nine-seat advantage in the House. Might a few moderate Republicans vote with Democrats to raise the ceiling? It’s unlikely such a vote could ever take place, because of the informal “Hastert Rule” among Republicans.
Named after former Speaker Dennis Hastert, it means a vote won’t happen unless a majority of Republicans support holding it. So even if all Democrats support raising the debt limit, and they could attract a handful of Republicans, Speaker McCarthy (who supports the Hastert Rule) won’t allow it to come to a vote because most Republicans would oppose it.
So congressional action faces a very problematic future. No negotiations on cutting Social Security and Medicare. No chance of a debt ceiling vote with mostly Democratic support. Does the Administration have any non-legislative options?
Behold the “trillion dollar platinum coin.” It may sound like a gag, but there are serious people who argue the Treasury Secretary has legal authority to mint such a coin and use it to back up government spending. Without raising the debt limit.
The idea goes like this. A 1996 law allows minting coins for sale to collectors. Amended in 2000 to only allow “platinum bullion coins,” the law gives the Treasury Secretary discretion on the coins’ “specifications, designs, varieties, quantities, denominations, and inscriptions.”
The key here is “denominations.” Other coinage provisions are specific on value—dimes, quarter dollars, dollars, etc. But the platinum bullion coin provision doesn’t specify any amounts.
So mint a trillion dollar coin. Deposit it at the Federal Reserve. Presto—available funds to spend without raising the debt ceiling.
Although it may sound goofy, the concept has been endorsed by some members of Congress, economic commentators, and serious economists including Nobel laureate Paul Krugman. They see minting the coin as a viable option rather than acceding to Republican threats to drive us into default or slash social spending. Krugman recognizes the coin is a “silly gimmick,” but contrasts it to what he calls Republican “naked sabotage” of the budget process through “abuse of the debt ceiling.”
Other options? Some legal scholars and experts say the Constitution’s 14th Amendment ending slaverywould allow the President to bypass the debt limit. In addition to its anti-slavery provisions, the amendment (section 4) says “the validity of the public debt…shall not be questioned.” The provision was added so former Confederates in Congress couldn’t overturn paying Union military pensions and other war costs.
President Bill Clinton actually considered using the 14th Amendment option during a budget fight with Republicans, saying his staff researched it and that if necessary he would use it “without hesitation, and force the courts to stop me.” But in the 2011 debt ceiling fight, President Barack Obama’s staff said the approach wasn’t legally sound.
So far, President Joe Biden has rejected any non-Congressional options. In 2021, Treasury Secretary Janet Yellen dismissed the trillion dollar coin as a “gimmick.” And Biden’s legal team has reportedly concludedthere’s no legal alternative to a Congressional vote raising the debt ceiling.
But Biden may reconsider if faced with default on U.S. bonds. If hard-core Republicans in the House hold the chamber hostage to deep entitlement cuts and Speaker McCarthy won’t let a vote come to the House floor without those cuts, Biden may be forced to consider extraordinary alternatives—like minting a trillion dollar platinum coin.
For more on the debt ceiling battle, see my recent Forbes blog: