Politics & Policy

The Platinum Bugs

Should Obama mint a $2 trillion coin to thwart the GOP? LOL.

The United States Mint’s portfolio is broad and varied, to be sure. America’s penchant for numismatics and its insatiable appetite for tokens (as it were) of recognition for sundry groups mean that commemorative coins have been struck to honor everything from Girl Scouts to eaglet chicks to Olympic high jumpers. And this is no mere nickel-and-dime operation. For more than a century, the Mint circulated legal-tender “half-eagles,” “eagles,” and “double-eagles” in $5, $10, and $20 denominations, and it still strikes precious-metal bullion to store value. In the year 2000, the Mint even authorized 150,000 units of a coin commemorating the thousand-year anniversary of Leif Ericson’s discovery of the New World; minted in Philadelphia, the coin was denominated at 1,000 Icelandic krónur.

But as far as I know, neither the U.S. Mint nor the Bureau of Engraving and Printing, which handles paper currency, has ever produced tender denominated higher than the Woodrow Wilson–emblazoned $100,000 bills it used for internal transactions in the 1930s.

Speaking of the 1930s, the impending debt-ceiling battle (nota bene: if you’re confused over which pending debt-ceiling battle, please consult the publication date atop this article) has convinced some that the U.S. Mint, and a little-known provision in the federal code, could deliver President Obama from the House GOP.

As first noted by Yale Law School professor Jack Balkin, Public Law 104-208 allows that

The Secretary may mint and issue bullion and platinum bullion coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.

This implies that the president could theoretically order the striking of, for instance, a pair of trillion-dollar-denominated platinum coins, deposit them at the Federal Reserve, and use the new balance-sheet flexibility to pay the bills, neatly circumventing the need to win the acquiescence of the Republican House.

And some are arguing that this is precisely what President Obama should do. Josh Barro has laid out the most detailed game plan at Bloomberg.

If Republicans start issuing a list of demands that must be met before they will raise the debt ceiling, Obama should simply say that he will issue platinum coins as necessary to pay government bills if he cannot borrow. But, to avoid causing long-term inflation expectations to skyrocket, he should pledge that he will have the Treasury issue enough bonds to buy back all the newly issued currency as soon as it is allowed to do so.

And then he should offer to sign a bill revoking his authority to issue platinum coins — so long as that bill also abolishes the debt ceiling. The executive branch will give up its unwarranted power to print if the legislative branch will give up its unwarranted restriction on borrowing to cover already appropriated obligations.

Joe Weisenthal got this right this morning: Hitting the debt ceiling isn’t an option. It’s no way to run the country, and Republicans know that. So, a debt-ceiling increase shouldn’t count as a “concession,” and it’s nutty for Obama to have to give substantive policy ground to get one.

Of course, there’s a hitch or two in the plan to mint The Coin. For one thing, numismatizing the debt by striking trillion-dollar debt discs is not exactly what former representative Mike Castle (R., Del.) had in mind in 1995 when he introduced the legislation that turned into the provision in public law 104-208. Dylan Matthews of the Washington Post tracked down this “unsuspecting godfather” of the platinum gambit, and Castle confirmed as much. “That was never the intent of anything that I drafted or that anyone who worked with me drafted,” Castle told Matthews. Indeed, the legislation was designed to give the Treasury flexibility to create more affordable platinum coins for collectors. To use that authority to backdoor the 17th and 18th trillion dollars of the national debt would be, according to Castle, “so far-fetched and so black helicopter-ish a type of methodology of trying to resolve something like this that I think the public would totally scoff at it.”

Some on the left understand this. Take, for instance, Kevin Drum of Mother Jones, who flatly titles a post on the subject “No, a $1 Trillion Platinum Coin Is Not Legal.” Drum, doubting there is enough of the requisite straitjacket brand of strict constructionism in the U.S. court system to uphold such a tortured reading of the statute, dismisses the ploy as “the kind of thing that Herman Cain would come up with” (the dread reductio ad Hermanum, a conversation-stopper in progressive circles).

Second, printing The Coin would send dark and foreboding economic signals. As Washington Research Group analyst Jaret Seiberg recently put it:

The $1 trillion coin would expand the money supply by a considerable amount, which could spark serious inflation. And it seems like something out of a Simpson’s episode. So we are not even sure anyone would take this as an actual solution. All of this economic chaos could worsen the economic downturn, which would further weaken credit conditions and impose higher losses on banks.

Its serious supporters think The Coin would work the same way a trillion dollars in Treasury securities does, except instead of moving paper to the Fed, the Treasury would move an ounce of the finest platinum, Pt-78. Never mind that if this is true, it’s unclear why the debt-ceiling statute doesn’t already cover such a transfer. It remains the case that, as Seiberg implies, the Fed would have to rationalize the money supply or risk inflation, meaning this is at best a kind of bee sting from the executive to the legislature — the kind of trick you can pull off only once.

Of course, by some accounts, the absurdity of The Coin solution is the whole point of it, a Swiftian modest proposal meant to put the Republicans off their intransigency. As Barro’s fellow platinum bug Timothy B. Lee put it on Twitter: “The stupid and harmful character of the debate is precisely why a gimmick is an appropriate solution.”

This is sorely misguided. I doubt there is a Republican on the House side of the Capitol who is kept awake nights fretting over how bad it will be for the party if the president puts twelve zeros on a fancy nickel and uses it to pay for green-energy subsidies. If the president minted The Coin, it might win him a few cheers from the same folks on the professional left who have called him a wuss for four years. But it would convince just about everybody else that he’s back on the Choom Gang. That’s why it won’t ever happen unless the luck of the GOP is as good in 2013 as it was bad in 2012.

Of course, there’s a tongue-half-in-cheek character to the calls to mint The Coin. But the half of the tongue not in the cheek suggests that the ploy’s proponents are missing the obvious in the debt-ceiling debate. On the one hand, there is no compelling reason to think that the GOP will let the United States default. It didn’t in 2011, and it won’t in 2013. Moreover, the fiscal-cliff deal and Sandy-relief bill have shown that Speaker Boehner is newly willing to let Nancy Pelosi provide a bulk of yes votes on urgent matters.

On the other hand, the House Republicans want spending cuts, and the debt ceiling is the nearest and biggest lever. It’s in their interest to maximize political uncertainty ahead of the deadline. After all, it makes no sense for the White House to make any concessions to the Republicans if it knows the GOP won’t allow default. It’s called chicken, and its older than dirt, never mind platinum. If you’re sure the other guy will swerve, you don’t yield an inch; and if you’re sure he won’t, you don’t play the game. That the White House is playing the game once again is evidence that the GOP has hit the credible-threat sweet spot. Combined with the fact that raising the debt ceiling is even more unpopular than raising taxes on the middle class, the Republicans might not get much, but they’ll get something.

The pundit class might find this frustrating, but given the legal, economic, and political risks of its preferred alternatives, President Obama is better off minting a pair of wishing coins and tossing them into the Capitol fountain.

— Daniel Foster is news editor of NRO.

Daniel FosterDaniel Foster is a former news editor of National Review Online.

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