NEW YORK – Talk of a trillion-dollar United States coin has returned to Washington now that Congress is mired in another political impasse over raising the debt ceiling.
The idea for the pricey platinum – which would be unprecedented, but not necessarily illegal – was originally floated in 2011 as a runaround in the recurring war between Democrats and Republicans over lifting the debt limit to enable the government to pay its bills.
Champions of the idea point to a 1997 law, which, in theory, would allow the Treasury secretary to authorise a platinum coin at the value of his or her discretion.
The president could direct the Treasury secretary to mint a US$1 trillion (RM4.19 trillion) piece that could be deposited in the Federal Reserve and used to cover a big portion of Washington’s bills.
Such a manoeuvre would bypass Congress, which is again flirting with disaster.
Treasury Secretary Janet Yellen yesterday warned that the government will run out of cash unless the federal borrowing cap is lifted.
Accounting ‘gimmick’?
Though it may seem far-fetched, the idea got far enough during the 2013 impasse that the Treasury explicitly ruled out minting the coin.
Former president Barack Obama alluded to the internal talks on the concept in a January 2017 podcast, just as he was leaving office.
“There were all kinds of wacky ideas,” he told Pod Save America of the 2013 discussions with staff.
However, the solution has hardly been embraced by mainstream economists.
Critics include Paul Krugman, who wrote in March last year that the idea is “an accounting gimmick” that “wouldn’t even fool anyone”.
Laurence Kotlikoff, an economics professor at Boston University, said it is “the kind of thinking of a Third World country”.
“The essence of the issue here is printing money to pay the government’s bills. And when you print enough money, you get inflation.”
Policymakers are already grappling with pricing pressure in the wake of heavy fiscal spending during the Covid-19 pandemic. This marks a break from the anaemic inflation seen over most of the last two decades.
Congressional Republicans have opposed raising the debt ceiling, arguing that President Joe Biden’s enormous proposed investments in infrastructure and social programmes are fiscally irresponsible.
For now, there is no obvious solution to the impasse, raising the possibility that the US could default for the first time in its history.
But if the trillion-dollar coin draws eye-rolls from economists, it is a source of curiosity on social media.
Quadrillion-dollar coin
Yesterday, House Speaker Nancy Pelosi said senior Democratic Representative Jerry Nadler “wants to have a trillion-dollar coin that doesn’t require congressional approval”.
Economics Prof L. Randall Wray, a Bard College don who has championed the Modern Money Theory, which de-emphasises the drawbacks of debt, said the special coin is no wackier than other expansionary financial manoeuvres enacted by the Fed during the pandemic that have involved hundreds of billions of dollars in public and private debt.
“It is a workaround. It sort of makes it obvious that the debt limit itself is a pretty stupid idea.”
Wray and others noted that massive infusions of liquidity by the Fed in the wake of the 2008 crisis did not spur inflation.
For Matthew Gertz of Media Matters for America, the question is not whether the trillion-dollar coin is too big, but whether it is big enough.
“A trillion-dollar coin isn’t cool,” he tweeted.
“You know what’s cool? A quadrillion-dollar coin.” – AFP, September 29, 2021
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