noscript
Semafor LogoJ.D. Capelouto
newsNorth America

The best arguments for and against minting a $1 trillion coin to solve the debt crisis

Sign up for Semafor Flagship: A global, insightful daily briefing. Read it now.

Title iconThe News
A conceptual rendering of the $1 trillion coin.
A conceptual rendering of the $1 trillion coin. Wikimedia Commons/DonkeyHotey

Once again, the U.S. is facing a crisis over the debt ceiling. So once again, the #MintTheCoin craze is back.

The idea that the U.S. Treasury could mint a platinum coin worth $1 trillion — and then swiftly deposit the coin into the Federal Reserve to fund the government — began as a theory in a comment on a blog post in 2010. It's based on a 1996 law that allows the U.S. Mint to create platinum coins of any value as a way of minting commemorative coins.

It's since become a legitimate proposal among left-leaning policy wonks, with Treasury Secretary Janet Yellen forced to acknowledge and dismiss the concept as a "gimmick." The #MintTheCoin movement gained further traction in 2021 as Bloomberg editor Joe Weisenthal promoted the idea. Economist and New York Times columnist Paul Krugman has also backed it.

Here are some of the best explainers and arguments in support of and against the idea.

Title iconMint that coin!
  • Ryan Cooper, MSNBC columnist and managing editor of The American Prospect, argues that minting the coin is President Joe Biden's most "legally defensible" option, since Republicans would put him in a bind if they refuse to raise the debt ceiling, "requiring him to spend, but forbidding him from borrowing the necessary money." Cooper writes, "Biden would have no way out — unless he opts for the platinum coin loophole."
  • In The Washington Post, writer Zachary D. Carter declares, "Silly problems demand silly solutions." He says the debt ceiling discussion has been used as a political weapon, and the $1 trillion coin could put that to rest. The coin would not "authorize additional spending," he writes, but it "simply allows Treasury to fulfill the fiscal orders Congress has already placed." He adds: "With a platinum coin or two on account at the Fed, the debt ceiling could be rendered meaningless indefinitely, eliminating a wholly artificial and unnecessary source of crisis."
  • The New Republic's Jason Linkins directly appealed to "Dark Brandon," the nickname used by some on the left to celebrate Biden's policy wins, to argue in favor of the coin. He writes that the solution would avoid "the constant fear of a GOP-precipitated debt default for the next year," and the coin would have fewer economic consequences than defaulting on the nation's debt.
Title iconRoom for Disagreement
  • For economist Ryan Young, a major concern is that the trillion-dollar coin could lead to inflation. He wrote in National Review that the coin would only "buy less than a year of debt-ceiling relief, after which either the Treasury Department would have to mint another coin or leadership would have to cave in to whatever demands the populist holdouts in Congress think up."
  • "Minting the $1 trillion coin would be like creating money out of thin air. When all that new money poofs into existence, the other currency in circulation becomes less valuable," The Washington Post explained.
  • Mark Zandi, the chief economist for Moody’s Analytics, told CNN in 2021 that the coin idea is a "badly flawed effort to workaround the debt limit that will make a bad situation even worse." He expressed concern over what it would do for global confidence in the dollar. "Global investors will know that this isn’t a sustainable way to pay the government’s bills, and given the constitutional crisis it would ignite, it will increase the odds they won’t get paid in a timely way at some point in the future," he said.
  • Yellen also torched the concept in 2021, calling it a gimmick on CNBC. Instead of showing the world that the U.S. is able to pay its bills, it would do the opposite, she argued. "The platinum coin is equivalent to asking the Federal Reserve to print money to cover deficits that Congress is unwilling to cover by issuing debt, it compromises the independence of the Fed conflating monetary and fiscal policy."
Title iconExpert View

Could this realistically happen this year?

AD

Since Congress has made it clear that they control the debt ceiling, it could pose a problem for the Treasury to clearly subvert the will of Congress by creating a new coin, Brookings Institution senior fellow Wendy Edelberg told Semafor.

"This is a problem that Congress has created and it's a problem for Congress to solve," she said.

On the other hand, if the debt ceiling binds in several months — meaning the government would essentially run out of money to pay its bills — it would have "significant negative consequences" on the U.S. and its economy, Edelberg said. The Treasury could be left with no choice but to create a new coin to pay off its obligations.

Rather than a $1 trillion coin, Edelberg said, it's more conceivable that the Mint would print a platinum coin that is worth the exact amount of money the government needs to cover its shortfall.

"There's nothing particularly substantive about the fact that people have imagined this being a trillion-dollar coin," she said.

AD