Now is not the time to mint a $ 1 trillion platinum coin to avoid the debt limit
- In 2013, looking at the default, I urged Obama to “Mint the Coin” and escape the debt limit.
- But now Democrats can defeat Republican intransigence without knocking the coin.
- They have the voices to do it on their own – and they should use them to effectively break the debt ceiling.
- This is an opinion column. The thoughts expressed are those of the author.
In 2013, you might remember that I was in favor of “knocking the coin”. Faced with the possibility of the US government defaulting on some of its debt, the idea was for the Treasury to use a loophole created in a law allowing commemorative platinum coins to be minted to bypass the federal debt limit and get around the federal debt limit. ensure that the US government can continue to pay its bills even if Congress has not raised it.
At the time, Republicans held a majority in the House of Representatives, and their intransigence in raising the limit left three options: convincing Republicans to fall back, use a gimmick like the coin, or default on government payments. In the end, the Republicans surrendered and provided votes to increase the limit. But the coin would have been a better choice than the default; I believe it was, and is, a legally available option.
Today, the United States again faces the possibility of hitting the debt limit and defaulting in part due to Republicans’ reluctance to vote for a raise. And again, hitting the coin was mentioned as a solution.
However, this is not the same fight as in 2013. There are other options on the menu today that are better than they were eight years ago, and the play is not warranted. today.
We have two better options than the coin available this time
The most important difference between the 2013 showdown and this one is that Republicans do not control any house of Congress. Suddenly, the consequences of the Republican refusal to cooperate in raising the debt ceiling are less formidable.
Senate Majority Leader Mitch McConnell rightly points out that Democrats have the option of raising the debt limit without any Republican votes if they do so through the budget reconciliation process – a move that allows bills that impact the federal budget to avoid obstruction and pass with just 50 votes.
The Senate parliamentarian confirmed that this is an option, and that she does not have to supplant the existing process to pass a large-scale spending bill through budget reconciliation. But it’s a boring option for Democrats – using the reconciliation process will take a long time time on the Senate floor and create two opportunities for Republicans to make inappropriate amendments to the Senate floor in an “vote-a-rama”.
Democrats have been particularly reluctant to spend so much legislative energy on raising the debt ceiling, as they are now trying to squeeze a major spending program through reconciliation. Republicans stress that this is exactly why they are reluctant to help – why should they help Democrats manage a legislative timetable to advance legislation that Republicans oppose?
But the stakes around speaking time may be lower than they looked a few weeks ago, as Democrats clearly aren’t ready to vote on a reconciliation plan anyway. So while this option is unpleasant, it’s not as if the group is willing to use this time to move the big bundle of expenses.
Alternatively, if Senate Democrats really do not want to proceed with reconciliation – or fear that it is too late to complete the reconciliation process before borrowing power runs out – they can use their control over it. organization to change obstruction rules to limit debt. the increase made outside of reconciliation cannot be systematically obstructed. Most laws require 60 votes to end debate and move to a adoption vote, but Senate rules are not set in stone. They can and have been changed with the support of a simple majority of senators.
There is a recent precedent for reducing filibuster: Democrats changed the filibuster rules to facilitate the movement of court confirmations from lower courts and executive candidates during the Obama administration, and Republicans the have done to facilitate the movement of Supreme Court candidates under Trump.
Those two options – reconciling or removing the obstruction for debt limit changes – weren’t available in 2013, and either has fewer downsides than hitting the coin.
The part is better than the default, but it still has problems
It is important to recognize that despite the legal possibility of minting the coin, the idea has drawbacks.
Congress had no intention of providing the Treasury Department with a debt limit workaround when it authorized the issuance of platinum coins. The coin strategy exploits a loophole caused by a drafting error, and there is some disagreement over whether the law actually allows seigniorage. In 2013, the Obama administration took the official position that the approach to the room was illegal.
I think the advocates of legality have the best of the argument, but there is still an argument – a system that gives the impression that the system behind the issuance of US government debt is not orderly. While I don’t think that issuing the coins would cause investors to stop viewing US Treasuries as safe assets, it risks damaging their image to some extent, which could have negative effects on US Treasuries. US borrowing costs and financial markets.
In addition, for the coin strategy to work, the
shall cooperate in accepting the coin for deposit. Back in 2013, the Treasury Department claimed the Fed was unwilling to do so, pop the test balloon out of the room. The Fed might change its mind, but that would lead to a partisan political dispute for the Fed at a time when the bank works diligently to maintain support on both sides of the aisle for the unconventional and effective measures it has taken to support. the economy. and the labor market.
A coin issue that prevents US default but makes it harder to gain bipartisan support for Fed appointments and quality policies would still have significant negative economic effects compared to a clean increase in the cap debt. It’s better if we can keep the Fed out of this.
Partisan increase in the debt ceiling creates an opportunity to effectively abolish the debt ceiling
There is good news for Democrats here. Another thing McConnell has said repeatedly is that in the past of unified government raising the debt ceiling was a responsibility that rests solely with the majority party. This is not entirely true – in some of the years cited by McConnell, members of the majority provided all or virtually all of the votes necessary to increase the limit, but the minority refused to obstruct the increase, what some Republicans threatened to do this time around. about.
A strategy that does not rely on Republican votes at all creates an opportunity for Democrats to design increasing the debt limit without any buy-in from Republicans. This means they could use Republican intransigence as an opportunity to effectively abolish the limit by raising it to such a high level that it would never be exceeded in our lifetime – the limit could be set at a quintillion dollars, for example. example.
Such a move would prevent Republicans (or Democrats, for that matter) from holding the economy hostage by setting the debt limit going forward.
Continuing to do so would also create influence that Democrats sorely lacked in these negotiations. Why should Republicans cooperate to raise the debt ceiling when Democrats try to spend money Republicans don’t want to spend? Well, maybe because the Republicans don’t want to get rid of any debt limits at all.
I’ve seen plenty of bar charts on how much of the extra debt we’ve seen in recent years has come from Republican or bipartisan initiatives – Republicans played a role in the spending that led to the borrowing, and therefore they should vote to increase the borrowing limit.
My answer to this is: so what?
Republicans don’t like what Democrats are doing on the legislative front right now, and they don’t want to help them. The Debt Limitation Act gives them the power to get in the way. If you think it’s bad, change the law, as McConnell is (perhaps unwittingly) giving you the opportunity to do so. But try to beg them or shame them to help you make your legislative life easier when you to do having the power to increase the limit on your own will not work.