Senator Minority Leader Mitch McConnell, President Joe Biden. Chip Somodevilla/Getty Images. Alex Wong/Getty Images
The GOP will not allow Democrats to raise the debt ceiling prior to a critical October deadline.
Technically, the Treasury Department has the ability issue platinum coins in any denomination.
Treasury Sec. Janet Yellen could order a $1 trillion gold coin and mint it before depositing it at the Federal Reserve.
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Capitol Hill is witnessing a new battle over the debt ceiling.
Senate Minority Leader Mitch McConnell insists on refusing GOP support to renew the US's debt ceiling. Instead, the Kentucky Republican stated that it was up to Democrats to increase it to fund their social spending plans for healthcare, education and childcare. He insists that he isn't "bluffing".
The solution to the conundrum may be a coin-sized one. The law that regulates the legality of US coins allows for a loophole that allows the Treasury Department, which determines which types of coins can legally be minted, to mint a $1 trillion-dollar platinum coin and deposit it at Federal Reserve. It then continues paying its bills as usual.
The agreement with the debt ceiling
The debt ceiling sets a limit on how much money Treasury Department can borrow to finance government activities. Congress must vote to raise or suspend this limit as federal debt increases.
Democrats and the Biden administration are pressing Republicans to back down. They have ruled out raising the debt limit by themselves and reminded the GOP that they were involved in the creation of $8 trillion worth of new debt under Trump. As lawmakers face a torrent of deadlines this month, which could lead to a government shutdown, there is no clear way out.
In 2017, former President Barack Obama stated in an interview with Crooked Media, that top officials had thought of minting a currency to avoid a potentially disastrous default.
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Obama stated, referring to Jack Lew, the treasury secretary, that "we were having these discussions with Jack Lew, and other about what options in fact were possible, because it hadn't happened before." "There were many crazy ideas about how you could possibly have this huge coin."
This is the huge conundrum that has a coin-sized solution
The debt ceiling creates a problem: Congress can pass budgets that direct government spending across its departments and programs. They also set tax rates to finance some of it. The gap between Congressionally required spending and Congressionally authorized revenues must be bridged by borrowing money.
To be able to borrow the money necessary to pay for spending already authorized by Congress, the Treasury Department must pass the debt limit.
This can lead to problems once the department reaches its debt limit at the end, which it did at July's end. Although the Treasury Secretary does have some leeway to take "extraordinary measures" in order to continue paying the bills for a few more months by using cash on hand and moving money around, this only works for so much time. These abilities may be exhausted by mid-October.
A financial and economic disaster would most likely result from the US government not being able to fulfill its obligations. A default on US debt could cause financial market chaos and stop payments to the government, including Social Security checks and military paychecks. The White House also warns about possible cuts to programs at the local and state level, such as Medicaid.
This isn’t the first time Congress has had to confront the president over the debt limit.
Many economists and commentators noted that there was a way to circumvent the debt limit during the Obama era. The law that regulates what coins the Treasury Department can legally mint includes descriptions for common coins such as dimes, nickels and quarters as well as special commemorative or collector coins, like the palladium $25 coin.
This clause is included in the law: "The Secretary can mint and issue platinum bullion coin and proof platinum coin in accordance with such specifications and designs, varieties and quantities, denominations and inscriptions that the Secretary may, at the Secretary's option, prescribe from time-to-time."
This clause gives the Treasury Secretary the right to determine the denomination of a platinum coin. In theory, Yellen could decide the amount and Congress could move on to more urgent business.
Treasury officials have long rejected the use of the trillion-dollar platinum coins as a way to reduce the debt ceiling. They argue that Congress should do its work and raise it.
Business Insider has the original article.
