Sometimes the simplest solutions work best.
With the nation still exhausted from several breathless weeks on the brink of the fiscal cliff, the new year began with another crisis in Washington. This time it’s the debt ceiling
If Congress doesn’t raise it, the United States of America will go broke sometime around the end of February.
Many observers have pointed out that the debt ceiling – like the fiscal cliff – is a phony, manufactured crisis. Ultimately, the federal government has no choice but to pay its debts, so the debt ceiling is another example of politicians shamelessly pandering to their right-wing base.
Unfortunately, this periodic brinksmanship not only plays havoc on Wall Street, but it also impacts the nation’s credit rating, which in turn drives up interest rates, thereby adding to the federal debt. Go figure.
One tactic pundits are pushing is for the president to ignore the debit ceiling on grounds that it violates the 14th Amendment, which holds that “the validity of the public debt, authorized by lawshall not be questioned.”
Since expenditures that led to the federal debt were authorized by Congress, the argument holds, President Obama could conclude the 14th Amendment trumps the debt ceiling.
The president seems reluctant to go that route, either because he still has hope Congress will come to its senses or he’s unwilling to risk that the Supreme Court, which hasn’t been too friendly to his administration to date, would slap down this strategy.
In that case, a second and even simpler idea for circumventing the debt ceiling is being circulated – the $1 Trillion Coin.
Here’s how the scenario goes: The secretary of the Treasury exploits a 1997 law that authorizes him to issue platinum coins in any design, quantity or denomination as he sees fit.
So, if Congress stands firm on a debt ceiling of, say $16 trillion, all Timothy Geithner or his successor would have to do is to stamp out a $1 trillion coin and run it down to the Federal Reserve. Once Congress raised the debt ceiling, the $1 trillion coin could be destroyed.
That the intent of the law that created this loophole was to authorize the sale of commemorative coins to collectors doesn’t obviate that, technically, it gives the treasury secretary power to mint coins in any denomination.
Most pundits scoff at the idea, but others think it offers a workaround to the debt ceiling impasse. Some have suggested that minting smaller-denomination coins, say $25 billion each, would be more palatable. And at last count, some 7,000 people had signed a petition in favor of the $1 trillion coin on the White House Website.
Constitutional questions are best left to lawyers and others more learned than this humble citizen, but in my mind, the pricey platinum coin solution raises practical concerns.
For example, how big should we make a $1 trillion coin? Should it be size of a quarter, a half-dollar or perhaps a silver dollar?
One Republican congressman pointed out that a $1 trillion coin would have to contain enough platinum to sink the Titanic. (He apparently didn’t know that the U.S. went off the platinum standard years ago.)
But what if the treasury secretary, in his haste to get to the Federal Reserve before the debt ceiling crashes the economy, reaches into his pocket, pulls out some loose change and inadvertently plugs the parking meter with a $1 trillion coin?
Or, picture this: The treasury secretary calls Federal Reserve Chairman Ben Bernake at home:
“Good evening, Mr. Chairman,” he says. “I have good news. Congress has raised the debt ceiling, so if you would be so kind, on your way to work tomorrow, drop off the trillion-dollar coin I asked you to hold.”
On the other end of the line: Silence.
“Hello! Ben? Hello?”
“Mr. Secretary, this is Mrs. Bernake. How can I be of help?”
“What happened to Ben? Please put him back on.”
“I’d be happy to, but right now he’s on his knees in the family room, cussing and tossing sofa cushions onto the floor.”
On second thought, perhaps we should stick to the debt ceiling.