The latest Debt Ceiling battle begins at Capitol Hill.
Janet Yellen, Treasury Secretary, notified Kevin McCarthy, the House Speaker (Republican from California), and others in a written letter that the debt limit, an arbitrary ceiling on the nation’s debt, had exceeded the statutory limit at nearly $31.4 trillion by Thursday. While the House Republicans launch negotiations on potential budget cuts and the Biden Administration begin negotiations, Left-wing economists again called for the minting of a trillion-dollar currency to end the debt crisis.
Nathan Tankus is a prominent proponent of this idea. He wrote an article for Financial Times stating that the main objection to the move was the fear that Federal Reserve policymakers will reject it. “The coin, having already been issued, would be legal tender, and the Fed would have no basis for refusing it,”He retorted. “Even so, I don’t think the Fed would force the Treasury to seek alternatives. So the Biden administration should call the Fed’s bluff.”
Jeff Stein, Washington Post economist recently askedRohan Grey (an assistant law professor at Willamette University) and Tankus discussed how they would handle the Supreme Court’s rejection of the coin. Grey suggested that policymakers can merely “ignore”The Supreme Court “send troops”to make sure that the Federal Reserve is willing to accept it.
The plan’s supporters claim that the law allowing the Treasury Secretary (the Treasury Secretary) to be elected would allow them to. “mint and issue platinum bullion coins and proof platinum coins” does not include an upper limit on a given coin’s denomination. Under the scheme, Treasury officials would only mint one trillion dollar platinum coin and hand it over to the Federal Reserve for deposit.
The theory’s detractors claim that the trillion-dollar coin will increase inflation, currently at their highest level in over 40 years.
A trillion-dollar coin seems not farfetched. In a 2017 interview, former President Barack Obama said that his advisors had briefly thought about minting the coin during the debate surrounding the 2013 debt crisis. “There was this theory that I had the authority to issue through the mint this massive trillion-dollar coin and on that basis, we could try to pay off U.S. Treasurys,”He made the comment. “It was a very realistic possibility that we couldn’t get the votes for that and we couldn’t get those debts rolled over and we would be in a situation where we were technically in default. At that point, you were in uncharted territory.”
A similar controversy over the federal government’s ability to fulfill obligations emerged two years ago, Rep. Rashida Tlaib (D-MI) tweeted “#MintTheCoin,”This hashtag was created by supporters of the coin in the midst the Obama-era credit crisis.
The most recent breach of the debt ceiling occurred after Republican lawmakers struck a deal with McCarthy under which the party’s new majority would introduce a budget that refrains from increasing the statutory debt limit. Senate Majority Lead Chuck Schumer (D–NY) and House Leader Hakeem Jeffries, (D–NY), claimed in a statement that fiscal uncertainty is solely the fault of Republicans. “A default forced by extreme MAGA Republicans could plunge the country into a deep recession and lead to even higher costs for America’s working families on everything from mortgages and car loans to credit card interest rates,”They agreed.
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