Trillion dollar coin idea gains currency
If you had to flip a coin over whether the US Congress will raise the country's debt ceiling, here's the ultimate one - a freshly minted trillion-dollar platinum coin.
A formal petition has been started asking the White House to create such a coin in order to avoid another high-stakes fiscal battle to raise the debt ceiling.
The Treasury secretary has the authority to mint platinum coins in the denomination of his choosing. Meant for commemorative products, US law grants Treasury permission to "mint and issue platinum bullion coins and proof platinum coins", which would allow the Treasury to get around legal limits on printing money to pay the bills.
Depositing it would technically pay down US debt, buying time before the country reached the limit on it (the "debt ceiling") again.
It's an idea that's been discussed favourably (albeit cautiously) by everyone from Democrat Representative Jerry Nadler to economist Paul Krugman, who calls it a gimmick but says "there's a pretty good case for using whatever gimmicks come to hand".
"Should President Obama be willing to print a US$1 trillion ($1.19 trillion) platinum coin if Republicans try to force America into default? Yes, absolutely," Krugman writes in his New York Times blog. "He will, after all, be faced with a choice between two alternatives: one that's silly but benign, the other that's equally silly but both vile and disastrous. The decision should be obvious.
"By minting a US$1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling - while doing no economic harm at all," the Nobel prize laureate writes.
However, it's likely the idea would run into stiff opposition from lawmakers who have been trying to reduce the budget deficits. Creating the cash would also completely override the independence of monetary policy, something the Obama administration has been very careful not to do in the past.
The coin petition is one of many wacky requests to alight on the White House's website. People have petitioned the President to nationalise the Twinkie industry, deport British CNN talk show host Piers Morgan for gun control comments he made on air, and give Vice-President Joe Biden his own TV show.
About 4000 signatures have been collected for the coin petition, which was created two days after lawmakers passed a bill to avert austerity measures of higher taxes and spending cuts.
Shown are the petitioner's first name, first initial of surname, and in most cases, the city. In order to get a formal response from the White House, 25,000 signatures must be collected by early February.
"While this may seem like an unnecessarily extreme measure, it is no more absurd than playing political football with the US - and global - economy at stake," the petition said.
The TV series The Simpsons could take credit for at least some of the inspiration. In an episode in 1998 a US$1 trillion dollar bill from the postwar years went missing. It was Homer Simpson's mission to find it.
The US Treasury began shuffling funds in order to pay government bills after the country hit the US$16.4 trillion legal limit on its debt December 31.
However, the Treasury's accounting manoeuvres will last only until around the end of February, giving Congress two months to raise the debt limit before the US defaults on its debt.
Last week's deal forced Republicans to forgo their anti-tax pledges and give in to Democratic demands to raise taxes on the wealthiest.
Now Republicans want to use the debt limit increase to win spending cuts from Democrats as well as major changes to Social Security retirement and Medicare health care programmes.
- Reuters and BusinessDay