The self-imposed debt ceiling is the true gimmick that is proving to be extremely irresponsible and is causing far more issues than it is resolving. Minting the coin would entirely diffuse this contrived crisis. It’s the better option for people, communities and our planet.
The deadline to raise the U.S. government’s $31.4 trillion debt ceiling has come and gone, and Congress has managed to raise it. A failure to do so would have resulted in the first-ever national default, with catastrophic consequences for global financial stability and the livelihoods of Americans — Social Security, Medicare benefits, tax refunds, government salaries, and millions more scheduled payments would go unmet. That’s why the U.S. has never failed to raise the debt ceiling, although the threat of default has loomed large many times.
As has happened before, some politicians have effectively used the debt ceiling as a political weapon to force policy concessions. They refused to raise the limit unless Congress agreed to deep spending cuts and other harmful measures, like pushing through the disastrous Mountain Valley Pipeline (MVP).
Many elected officials agreed to these demands, which are now in the “Fiscal Responsibility Act” — a dirty deal in exchange for averting a manufactured crisis. According to the administration, raising the debt ceiling through a bipartisan agreement was the best way to avoid a debt catastrophe. But this isn’t true, Biden could have stood his ground and refrained from falling for the trap. And in order to fulfill its payment obligations, Treasury could have used other legal alternatives.
THE DEBT CEILING ISN’T USEFUL ANYMORE
The debt ceiling is an arbitrary, self-imposed constraint that serves no purpose anymore. The debt limit is the total amount of money the U.S. government is allowed to “borrow” in order to pay for services such as Medicare and Social Security. Hitting the debt ceiling does not mean that the U.S. government has run out of money — it means that the Treasury cannot issue any more of the instruments it normally does in order to meet its legal obligation to make payments that Congress has already authorized. Here’s Janet Yellen explaining this in a letter to Congress,
“Increasing or suspending the debt limit does not authorize new spending commitments or cost taxpayers money. It simply allows the government to finance existing legal obligations that Congresses and Presidents of both parties have made in the past.”
The government already makes decisions about how much it should spend. So why does this measure exist when it doesn’t really have any impact or bearing on the national debt? It’s not clear what useful purpose the debt ceiling serves anymore; this has been a widely agreed upon position.
Rather, time and again, the debt ceiling has been turned into a political weapon, with dire consequences for many communities and families across the U.S. As law professor Rohan Grey explained in an interview in The Atlantic,
“The debt ceiling has become a locus, a symbolic place, for politicians to fight over overall spending, overall budgeting. Every time people want to second-guess budget practices, every time they don’t like a certain social-welfare program, the debt ceiling becomes a way to object.”
No other country, except Denmark, has a debt ceiling. It’s doing more harm than good, and the U.S. would be better off without it.
But since doing away with the debt ceiling isn’t an option right now, there is another way forward that wouldn’t necessitate making any detrimental policy compromises: minting a $1 trillion dollar coin.
According to the 1997 Coinage Act, the Treasury Secretary may authorize the Mint Director to create platinum coins in any value. It seems like a wild idea, but it’s brilliant in its simplicity. The Treasury would simply mint a platinum coin with a face value of $1 trillion (or any denomination it deems appropriate) and deposit it in its account at the Federal Reserve (Fed). Because the Fed is the government’s “fiscal agent”, we could reasonably anticipate that the Fed would accept the deposit. The U.S. government would thus be able to continue making payments by completely avoiding the debt ceiling, as Professor Rohan Grey has laid out.
In an interview with Wired, Philip Diehl, who oversaw the mint through the passage of the Coinage Act and assisted in its drafting, said that minting the coin is “an ingenious use of the law to avoid a ridiculous and irresponsible situation, in which the country would be driven to default.” Every time the “ridiculous and irresponsible situation” has propped up, social programs and safety-nets that help regular people are put on the chopping block for funding.
Minting a coin is a legal and straightforward workaround to the persistent debt ceiling problem. Despite being a reasonable option, many have dismissed it as a gimmick, including, unfortunately, Treasury Secretary Janet Yellen. But when the alternative is national default, it’s hard to see how minting the coin could be any worse.
The current situation we are in is far more absurd than the idea of minting a $1 trillion coin, if you think about it. Treasury has taken “extraordinary measures” to avoid default, and a bill that will have disastrous effects on our social programs and the climate has been passed (despite the fact that many members of the Progressive Caucus voted against it), all because of the archaic debt ceiling.
IT’S BETTER FOR OUR COMMUNITIES AND OUR PLANET
By minting the $1 trillion coin, Congress would be able to avoid hostage situations with the debt ceiling and wouldn’t be pressured to approve legislation that harms working-class Americans and jeopardizes our planet’s ability to support life.
The “Fiscal Responsibility Act” is a fossil fuel giveaway. It guarantees the speedy build-out of the climate-destroying MVP, the emissions from which would equal 26 new coal fired power plants — emissions we cannot afford. Not surprisingly, NextEra Energy, one of the companies backing the MVP, has flooded a number of elected officials with campaign cash. And the other company behind the pipeline, Equitrans, has already spent $40,000 on lobbying for the MVP this year.
The bill would also prevent judicial review of the permits issued for the project, gut the National Environmental Protection Act (NEPA), require student loan payments to resume, slash Internal Revenue Service funding, and increase work requirements for food stamp recipients. All of these concessions are essentially ransom payments, made in exchange for not tanking the economy. At the same time, the bill gives handouts for wealthy tax cheats and, per usual, defense spending has gone untouched. Representative Jamal Bowman has summed up the consequences quite clearly in this tweet,
The debt ceiling will continue to be a roadblock to achieving a rapid and just transition. Instead if we minted the coin, we’d be able to sidestep these vested interests and open the door to the kind of large-scale spending we need to address the climate emergency.
The self-imposed debt ceiling is the true gimmick that is proving to be extremely irresponsible and is unquestionably causing far more issues than it is resolving. Minting the coin would entirely diffuse this contrived crisis and buy enough time to hopefully abolish the debt ceiling altogether, which would be the responsible thing to do for long-term economic stability. It’s the better option for people, communities and our planet.