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- The GOP remains firm on its resolution not to help Democrats raise the debt ceiling before a crucial October deadline.
- The Treasury Department technically has the ability to issue platinum coins of any denomination.
- In theory, Trésor Sec. Janet Yellen could order a $ 1,000 billion platinum coin, mint it, and deposit it with the Federal Reserve.
A new debt ceiling battle is brewing on Capitol Hill.
Senate Minority Leader Mitch McConnell has steadfastly refused the GOP’s help in renewing the United States’ ability to pay its bills, known as the debt ceiling. Instead, the Kentucky Republican said it was up to Democrats to increase it in order to fund their social spending plans for health, education and child care. He insists he is not “bluffing”.
But the riddle might have a coin-sized solution. A loophole in the law that prescribes the types of coins that can be legally minted in the United States theoretically allows the Treasury Department to mint a $ 1,000 billion platinum coin, deposit it in the United States.
Federal Reserve
, then continue to pay their bills normally.
The debt ceiling agreement
The debt ceiling places a fixed limit on the total amount that the Treasury Department can borrow to fund government operations, and Congress must vote to increase or suspend this limit from time to time as federal debt increases further. in addition.
Biden administration and Democrats are pressuring Republicans to back down, ruling out of themselves raising the debt ceiling and reminding the GOP they played a role in racking up $ 8 trillion new debt under the Trump administration. There is no clear path for lawmakers as they face a barrage of deadlines this month, including another spending scuffle that could end in a government shutdown.
Former President Barack Obama said in a 2017 interview with Crooked Media that senior officials considered minting a coin to avoid a potentially catastrophic default.
“We were having these conversations with Jack Lew and others about the options available, as this had never happened before,” said Obama, referring to the then Treasury Secretary. “There were all kinds of wacky ideas about how you could potentially have this huge room.”
The huge puzzle with a solution the size of a coin
The debt ceiling creates a frustrating conundrum: Congress can pass budgets that order the government to spend a fixed amount on its departments and programs, and set tax rates at particular levels to fund part of it. The difference between the expenses mandated by Congress and the revenues mandated by Congress must then be paid by borrowing money.
But, the debt limit requires yet another act of Congress to allow the Treasury Department to actually borrow the money needed to pay the spending lawmakers already authorized.
This is a problem once the department hits that debt limit, as it did at the end of July. While the Secretary of the Treasury has some leeway to use “extraordinary measures” to keep paying bills for a few months using cash on hand and shuffling money, it only works for a while. . This could exhaust these capacities by mid-October.
In fact, reaching a point where the US government is no longer able to meet its obligations would likely be a financial and economic calamity. A default on existing US debt would plunge financial markets into chaos, and government payments ranging from Social Security checks to military paychecks could come to a screeching halt. The White House also warns of potential cuts to national and local programs like Medicaid.
This is not the first time that Congress and the President have fought over the debt ceiling.
During Obama’s day, several economists and commentators noted a potential workaround to the debt limit. The law that governs the types of coins that the Treasury Department is legally allowed to mint includes descriptions of typical coins such as dimes, nibs, and coins, as well as commemorative coins and coins. special collection, such as a $ 25 palladium coin.
The law includes this clause: “The secretary may mint and issue platinum bullion coins and evidence platinum coins in accordance with specifications, designs, varieties, quantities, denominations and inscriptions which the secretary, at his discretion, may prescribe. sometimes. time.”
This clause leaves it up to the Secretary of the Treasury to decide the denomination of a platinum coin, which means that in theory Yellen could carve out the required amount and Congress could focus on more urgent business.
Of course, Treasury officials have long ruled out using the trillion dollar platinum coin as a solution to the debt ceiling, arguing that Congress should do its job and raise the ceiling itself.
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