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“The 360” shows you various perspectives on the main stories and debates of the day.
What is happening
As Democrats negotiate the scope of a broad infrastructure package that President Biden sees as key to the future of the U.S. economy, they also face a more immediate challenge: raising the debt ceiling of ‘by October 18 to avoid a major economic collapse.
The debt ceiling is a legal limit on the amount of money the United States can borrow. Because the government consistently spends more money than it takes, Congress must periodically increase the debt ceiling to avoid falling into the ceiling. For most of the last century, raising the debt ceiling was an uncontroversial procedural step for lawmakers on both sides – in large part because they understood that exceeding the debt ceiling would result in “widespread economic catastrophe.” “.
Over the past decade, however, debt ceiling votes have grown heavier, and the current stalemate is the third time since 2011 that the United States has flirted with default. Faced with the once unthinkable possibility that a partisan game could lead to financial disaster, some economists and legal scholars have proposed dramatic steps the executive could take to avoid a collapse if Congress did not act on time.
The most eye-catching of these ideas would be to take advantage of a loophole in US law that allows the Treasury Department to mint platinum coins in any denomination. The proposal asks the Treasury to create one or more platinum coins worth $ 1,000 billion, then deposit those coins with the Federal Reserve to give the government more purchasing power without raising the cap on the debt.
Why there is debate
The concept of a trillion dollar coin first caught on blogging in the early 2010s, but began to gain mainstream attention during the debt ceiling crisis of 2011. Au At least two Democratic members of Congress have offered to strike a coin to resolve the current impasse, although the Biden administration says it is not under consideration.
Supporters say that $ 1 trillion coins, as crazy as the idea may sound, are actually a fancy solution to what has become an increasingly dangerous chicken game played by Congress around votes on the debt ceiling. They argue that coins provide an opportunity to avoid flaws with a single, simple action that is free from partisan play. Some economists argue that the seeming absurdity of the coins is actually positive, because it could draw attention to the silliness of the dead-ends on the debt ceiling and possibly convince Congress to abolish the debt limit altogether.
Others say the practical reality of trillion dollar coins could be dire. Some legal experts argue that it would be unconstitutional for the executive branch to create a workaround to the budgetary powers that the founders bestowed exclusively on Congress. Many economists are also concerned that such a drastic measure sends a message to investors that the U.S. economy is on shaky ground, which could lead to the same kind of financial collapse that going beyond the debt ceiling would cause.
And after
Democratic leaders in Congress have tried to pressure Republicans to raise the debt ceiling on a bipartisan basis, a tactic that appears to have failed so far. Democrats have the ability to raise the debt limit on their own, but would have to use a complex and time-consuming process called reconciliation to bypass a Republican obstruction in the Senate.
Viewpoints
Supporters
Trillion dollar coins are a dumb fix, but they would work
“Go ahead, Democrats, and do whatever it takes to overcome this. The gadget in the defense of reason – and, in an important sense, of democracy – is not a vice. – Paul Krugman, New York Times
Coins could help end dangerous debt ceiling fights for good
“The debt ceiling was never designed to be a weapon of destruction. Lawmakers should not have the power to threaten global financial calamity in pursuit of increasingly mean-spirited partisan goals. With a platinum coin or two in an account at the Fed, the debt ceiling could lose its meaning indefinitely, eliminating a totally artificial and unnecessary source of crisis. Dumb problems demand dumb solutions. – Zachary D. Carter, Washington Post
None of the disadvantages of the parts would be worse than the defect
“If the choice is for Republicans to stick to their guns and watch Biden preside over the first debt default in American history or feel silly about minting a coin?” Go ahead and make the thing. – Hayes Brown, MSNBC
The coins would draw attention to the absurdity of the debt ceiling itself
“It’s a work of circumvention. This sort of shows that the debt limit itself is a pretty dumb idea. “- L. Randall Wray, economist, to AFP
The fate of the US economy matters more than obscure debates over the president’s constitutional authority
“If the choice is between default and a presidential seizure of power, a seizure of power is the only defensible course of action. A responsible leader does not plunge his people into a completely preventable financial crisis. If he’s leaning against a wall, Biden must not give up. It must remove the debt ceiling once and for all. – Dylan Matthews, Vox
Skeptics
It is risky to set the precedent that trillion dollar coins can solve all of America’s problems
“Would relaxing the Treasury’s ‘self-imposed’ rule against minting trillion-dollar coins leave us as safe, or more immune, from abuses of monetary power than we are?” are not currently? To answer this question, consider the possible future consequences of the change. It means wondering what could happen if the Treasury could mint not just a trillion or two trillion dollars, but as many coins as it wanted. »- George Selgin, Caton Institute
Striking the coins would be unconstitutional
“Article I gives Congress the purse strings and the credit card. If the president took these powers, he would make himself king. – Christopher M. Russo, Barrons
It would be a political disaster for the Democrats
“I think minting the $ 1,000 billion coin would actually be unpopular, because it’s literally about printing money and people get what it is.” – Slate political writer Jordan weissmann
Coins could trigger their own financial collapse
“Global investors will know that this is not a sustainable way to pay government bills, and given the constitutional crisis it would trigger, it will increase the chances that they will not be paid in a timely manner at some point. in the future. The trillion dollar coin will not prevent a financial crisis and a slowing down of the economic crisis. – Mark Zandi, chief economist at Moody’s Analytics, to CNN
A probable legal challenge would sow economic uncertainty
“If Biden were to take any of these steps, it is almost certain that Republicans would at least try to mount a court challenge. And as long as there is uncertainty about the legality of US debt payments, some of the negative impacts of exceeding the debt ceiling could still be felt. Investors will likely want a bounty for accepting the risk of conservative judges wreaking havoc on U.S. finances at any time. “- Eric Levitz, New York
The coins would cause permanent damage to the value of the US currency around the world
“At the end of the day, the stability of fiat currency depends on nothing more than people’s belief that money is worth what they think it is worth. Doing something like the trillion dollar coin is a great way to make people believe that [the] the dollar is not such a big currency. – Philip Wallach, senior researcher at the American Enterprise Institute, at CNN
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Photographic illustration: Yahoo News; photos: Getty Images, Eric Baradat / AFP via Getty Images, Sotheby’s / Getty Images
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