It’s probably legal for the Treasury Department to issue a $1 trillion platinum coin to cover government debts, an idea bandied about in the media recently, says Donald Marron, director of the Urban-Brookings Tax Policy Center and former acting director of the Congressional Budget Office.
But the Treasury should use that power only if there’s a complete standstill on debt ceiling negotiations, he writes on the center's TaxVox blog. And if coins are ever used, they should be denominated in billions or millions, Marron argues.
As for the law, while it gives the Federal Reserve the power to print money, the Treasury can issue platinum coins of any amount that would ultimately go to collectors.
Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did
So some have suggested that the Treasury issue a $1 trillion platinum coin and deposit it at the Fed, creating an effective $1 trillion increase in the $16.4 trillion debt limit. The federal government has already reached its debt limit, and the Treasury is taking "extraordinary measures" to meet debt payments.
“Minting a trillion-dollar coin sounds like the plot of a Simpson’s episode or an Austin Powers sequel. It lacks dignity,” Marron writes.
“It would also be premature,” he says. “President Obama and Congress have roughly two months to strike a debt limit deal.”
If no agreement can be reached, issuing coins “would be much less provocative than President Obama asserting the debt limit is unconstitutional,” he maintains.
White House Press Secretary Jay Carney, asked about the idea Wednesday, declined to rule it out. But, “the option here is for Congress to do its job and pay its bills,” he said, according to Time.com.
“There is no Plan B.”
Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did
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