The “trillion dollar coin” solution to the federal debt reared its absurd head, again, during the recent “debt ceiling” brouhaha.
I wrote about it over ten years ago, when Big Talkin’ Republicans were challenging Big Spendin’ Democrats over raising the debt ceiling at that time.
The idea is bold trickery, allowing the President to inflate the currency by leveraging Treasury’s Congress-given ability to coin platinum coins at any face dollar value.
Typically, such collector coins sport on the reverse a value far below the metal’s value.* The trillion dollar coin would invert that, fixing the face value far, far above the metal value. The freshly minted coin would be sent to the Federal Reserve, covering the books that way.
It’s inherently deceptive and obviously ridiculous.
Thus it symbolizes contemporary politics quite aptly.
After the recent budget compromise that forestalled any real work of marshaling the federal government’s scarce (if astoundingly awesome) financial resources, however, the trillion dollar coin has been shelved.
For now.
Indeed, Democrats are tiring of the debt ceiling brinksmanship game. And it is mostly posturing. “Democrats have introduced a bicameral proposal to overhaul the debt ceiling process, leaning heavily into the recent default scare to push a bill that would essentially let Treasury ignore the debt cap and continue writing cheques with no limit,” explains The Epoch Times.
Would this any be better than the fake coin?
Perhaps more honest.
But, once again, it would be Congress giving away its authority.
And until Congress can restrain its spending habits, we, the people, will always come up tails.
This is Common Sense. I’m Paul Jacob.
* On the day I checked, the spot price for an ounce of platinum was just over $1000, and the face value on the American Platinum Eagle remained $100, the ratio being a tenth of metal value.
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5 replies on “Facing the Debt with Deceit”
As I have noted elsewhere, the use of platinum is just mystification. The coin could as well be made of cardstock. Or, instead of a coin, an NFT could be issued; or some other widely recognized claim on an amount of dollars could be issued. Which is all to say that the proposal of a coin is really no more than a disguised proposal to dispense with the debt ceiling.
Some people, such as economist Mario Rizzo, insist that a debt ceiling has no foundation in the Constitution, that once Congress has decided to spend some money and the President has agreed or his veto has been overriden, the Federal state must by law borrow to make-up for any shortfall in tax revenue. The immediate flaw in that argument is that an alternative to borrowing would be to sell assets. But a legislated debt ceiling is no less law than a bill calling for more spending; and nothing tells us which law takes precedence, though plainly the Fourteenth Amendment gives precedence to debt-service over all other spending, and would mandate a lifting of the debt ceiling if — but only if — the debt could not be serviced by diverting all revenues (including those from liquidating all Federal assets!) to that service.
Conservatives will suggest a balanced-budget amendment, but with an exception for war and perhaps for other emergencies. If passed, this amendment would drive our ruling class to maintain a perpetual state of emergency. In fact, borrowing is an especially bad idea in time of war, because it makes the ruled classes too accepting of war.
Of what use is the debt cap today? Congress raises it every time it is reached. There will always be another ’emergency’ to spend money on. The debt ceiling is artificial and does nothing to control spending. Only voters can do that. Why go through this charade every two years (or less)? Any ‘cuts’ are temporary at best and ignored in the next Congress. Just scrap the debt ceiling entirely.
Prior to the introduction of a debt ceiling, the Treasury was required to get authorization for each issuance of notes, bills, or bonds, much as the Executive must still seek authorization from Congress to impose new taxes. Arguably, elimination of the debt ceiling would be rather analogous to Congress delegating open-ended authority to the Executive to raise taxes.
I will readily agree that the Republican Party does not use the debt ceiling to particularly good effect. Likewise, they don’t use the US Constitution to nearly the good effect that they might. But, rather than dispense with the debt ceiling or with the Constitution, we should look for ways to get better people in office.
Daniel,
Article 1 gives the Congress, not the executive, the power to raise taxes. Furthermore, any bill to raise revenue must originate in the House of Representatives. Congress is already spending money on ’emergencies’, the latest being the ‘climate emergency’. A balanced budget amendment is not the answer. The federal government itself must be downsized and more power returned to the states. We have to balance the budget, period. Unless we want to go the way of Venezuela. If we continue on this course, the day will come when the US government runs out of other people’s money.
I advisedly wrote “delegating” because Congress has delegated a variety of its powers to the Executive. The very same section (Article I §8) that gives the Congress control of taxes also gives it control of tariffs (now delegated!) and issuance of debt (now delegated but with a cap). Removing the debt ceiling would fully delegate control of the debt. If we hold that the power to tax cannot properly be delegated, then we must say the same for the issuance of debt.