Why Did Obama Nix The Trillion Dollar Coin?
Today the White House shot down one of the more interesting ideas of recent years, the trillion dollar coin. In case you missed it, this idea’s been floating around for more than two years as a way to deal with the debt ceiling. Using an obscure provision of the law intended to allow low-denomination collectible coins, Treasury would mint a single coin worth a trillion dollars (for example), deposit it at the Federal Reserve, and meet obligations with the newly created money.
It’s a beautiful solution. Treasury could mint a $20B coin every day (as in the variation I saw on Mike Konczal’s blog), march it over to the Federal Reserve, and deposit it. To the economy, there’s no difference between this and an increase in the debt ceiling; the government would pay its bills, same as always, but would not borrow as much in Treasury auctions. When the Congress finally got around to allowing further borrowing, Treasury would buy the coin(s) back from the Fed.
There are some (Matt Yglesias was the first I saw float this, but there are others) who say not only can Treasury issue large-denomination coin(s) if Congress doesn’t act on the debt ceiling, but that it must. There is no other legal option; Congress has directed a certain amount of spending, but has also directed that the administration shall not exceed a certain level of debt. The two laws are in opposition; following one would necessarily mean breaking the other. The trillion dollar coin provides an avenue for the administration to follow the letter of both laws.
But there’s a problem. The trillion dollar coin sounds wacky, sounds like a big fat scam. I mean come on, you can’t be serious. And from Chris Jansing to Jon Stewart to everybody on Fox News, big media’s been ridiculing the idea. And so even if it’s legal, and even if it’s a great economic solution, the administration has big public relations reasons not to do it. So they killed it on Saturday.
Proponents across the country began drinking heavily. Why, they asked their whiskeys and Buds, would the administration put the kibosh on such a perfect solution to the problem? Especially when they’ve already nixed another possible option related to the 14th Amendment, and when President Obama has plainly said he will not negotiate on the debt ceiling?
The answer: Because the administration has a better way, and they only need one. And both the constitutional option and the trillion dollar coin are distractions, taking the focus away from where it should be: Congress.
The administration believes it can beat, and I mean really wallop, the Republicans on the debt ceiling issue.
The administration will continue to push (correctly) the debt ceiling as a problem invented by Congress, manufactured so the minority can unreasoningly force policy changes they can not achieve legislatively. They will note that Congress controls the purse strings and that every dollar spent is done so at the direction of Congress.
They will explain in detail the shuffling they’re doing to work around this nonsensical debt ceiling impediment. They’ll tell old folks that the Social Security checks may not go out because of Congress. They’ll tell everybody that because of Congress, income tax refunds won’t go out. They’ll tell government contractors to prepare for stop work orders because of Congress. They’ll tell government employees to prepare for furloughs because of Congress.
And when they get to the point where no amount of dancing can avoid the debt ceiling…
They’ll ignore it.
The administration will announce that it must ignore the debt ceiling law, because it’s in direct opposition to the appropriations laws passed by Congress. Since one of the laws must be violated, Obama will say, the debt ceiling is the proper one to be invalidated. Otherwise, Obama will say, the President and the President alone would prioritize spending, which is a most fundamental function of Congress. Only by ignoring the debt ceiling law can the administration avoid this unprecedented shift of power to the executive branch.
To keep appropriations power in the Congress, Obama will say, the administration must ignore the debt ceiling.
Bills would be paid, the government would continue to operate, checks would go out as scheduled. And what could the Republicans do? Besides bitch and moan?
They could take the administration to court, but imagine that; Congressional Republicans suing President Obama for sending Social Security checks. For acting in the best interest of businesses across the country. For assuring bondholders that their claims are good and always will be.
Republicans could ask for an injunction enforcing the debt ceiling while the matter was decided, but they wouldn’t get it. The potential damage of violating the debt ceiling law for a few weeks is almost infinitely less than the potential damage of stopping the government from meeting its obligations.
And in the end they’d lose. The chances the Supreme Court would rule that the debt ceiling takes precedence over appropriations strikes me as near-zero. And if by some bizarre twist they did rule that way, then the administration could roll out the trillion dollar coin and make the whole thing moot.
And by the time this played out in the courts, we’d be up on the sequester anyway, which is where this kind of thing should be fought.
The only problem I have with this direction is that it doesn’t kill the debt ceiling permanently. Assuming the Republicans see what would happen, they will avoid the endgame and raise the debt ceiling, enabling them to play this game of charades again in the future. Applying the Coin would very likely eliminate the debt ceiling law altogether, which should be the preferred result of EVERYBODY. The law is flat stupid.
But the administration prefers to keep the focus on Congress, and I don’t blame them. The Republicans are going to lose this. The question is how badly they will lose it.