Senate leaders reportedly reached an agreement Thursday to avert a government debt crisis, but it’s only good until December when the issue will reappear.
Before reaching the agreement, and while Congress was in a gridlock over raising the debt ceiling to avoid the United States defaulting on its obligations, administration officials were seriously talking about minting a platinum, trillion-dollar coin as a solution.
The scheme goes something like this: As the U.S. national debt approaches the congressionally-imposed ceiling, President Biden would direct Treasury Secretary Janet Yellen to mint a $1 trillion coin, deposit it in the Federal Reserve, and pay the bills.
It sounds too good to be true — akin to depositing Monopoly money in your own bank account. By simply minting a coin, the White House can thumb its nose at Congress and its debt ceilings.
By extension, they could conceivably mint a couple dozen and eliminate the federal debt altogether — just like that.
There has to be a catch, right?
According to Boston University economics professor Laurence Kotlikoff, that catch is called inflation.
"The essence of the issue here is printing money to pay the government's bills," he said
. "And when you print enough money, you get inflation.”
That’s on top of the inflation Americans are already experiencing.
Using a gauge favored by the Federal Reserve, as of October 1 inflation is at its highest rate
in 30 years. Anyone want to try for 50 years? A hundred? Maybe a new record?
Kotlikoff called minting trillion-dollar coins "the kind of thinking of a third world country.”
In confirmation, Zimbabwe experienced
peak inflation in 2008, estimated at 79.6 billion percent, causing the price of goods and services to double every 24.7 hours.
But hyperinflation isn’t limited to Third World countries. Germany’s Weimar Republic also fell victim to it in 1923. Their inflation rate was a more modest 29,500%, prompting prices to double only every 3.7 days.
If the idea of a trillion-dollar coin sounds familiar, it’s because former President Barack Obama considered that very same scheme in 2013, and alluded to it in a 2017 podcast.
"There were all kinds of wacky ideas about how potentially you could have this massive coin," Obama said
on "Pod Save America.” But it was more than a mere “wacky idea,” according to a Huffington Post story that came out later that year.
that Obama was deadly serious about it — serious enough that his administration “had its top lawyers draw up a memo laying out the legal case for such a move.”
Although the lawyers green-lighted the “wacky scheme,” the Treasury Department and the Federal Reserve put their foot down. They refused to be a party to any gimmickry.
And it would be even more gimmicky today, given that Democrats have the votes to raise the debt ceiling on their own. Apparently Senate Majority Leader Chuck Schumer, D-N.Y., wants Republicans to share the blame.
Schumer and Senate Minority Leader Mitch McConnell, R-Ky., averted a shutdown in their Eleventh Hour agreement, but the issue will come up again in December.
Nobel laureate and economist Paul Krugman recently flipped on the notion. He wrote
in March 2020 that the idea was "an accounting gimmick" that "wouldn't even fool anyone."
On October 1 Krugman still considered it a gimmick, but nonetheless told Democrats to “do whatever it takes to get through this.” He added, “gimmickry in the defense of sanity — and, in an important sense, democracy — is no vice.”
But if they were to mint the coin, it would still amount to Democrats acting on their own — except this time it would be the White House rather than congressional Democrats.
And unlike 2013, Biden doesn’t have the clearer heads that Obama enjoyed. Biden would give the order, and Yellen would merely say “OK.”
Newsmax anchor Rob Schmitt mentioned the trillion-dollar coin Wednesday while discussing the federal debt crisis.
“Janet Yellen could mint this platinum coin with that value, deposit it at the Federal Reserve, and draw on that account to keep paying the government’s bills without borrowing any more money,” he said
“This is what it looks like to be a country $28 trillion in debt. How stupid does all this sound? Yes, welcome to your government.”
Ronald Reagan observed early in his political career that if we don’t fight for our liberty, "one day we will spend our sunset years telling our children and our children's children what it was once like in the United States when men were free.”
Freedom is real — and that includes freedom from debt.
Trillion dollar coins are fairy tales, right up there with leprechauns, unicorns and fire-breathing dragons.