The President of the United States has the legal authority to end the debt ceiling crisis, entirely and at any time, by merely choosing to do it. Instead, like President Obama before him*, he has chosen to not take advantage of this authority, and instead risk a government shutdown or voluntary default. This reality reveals the debt ceiling to be not a tool to constrain a profligate government, but rather for the rich (via both corporate parties) to deceive those in the middle into thinking that depriving the poor is “unfortunate but necessary”. This is to hide what they really mean, which is, “Of course we can provide for the poor, we just don’t want to.”
This post provides a brief history and summary of the debt ceiling, and of the unique legal solution whereby the president (via the Treasury and Mint) can order the issuance of a platinum coin of any value he pleases, and the implications of doing so. It ends with several academic sources to learn more.
(I discussed this topic with Graham Elwood on episode 96 of Activist #MMT and on Podcast by George [full appearance, brief highlight].)
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These resources were created by Activist #MMT, the podcast (Twitter, Facebook, web, please consider becoming a monthly patron). This post was last updated February 22, 2022.
Disclaimer: I have studied MMT since February of 2018. I’m not an economist or academic and I don’t speak for the MMT project. The information in this post is my best understanding but in order to ensure accuracy, you should rely on the expert sources linked throughout. If you have feedback to improve this post, please get in touch.
*(See around the 28 minute, 30 second mark in this 2021 Money on the Left podcast episode)
A very brief history of the debt ceiling
In the early 1900s, Congress had to authorize the spending of hundreds of government agencies on an individual basis. To make the process less unwieldy, this authority was delegated to the Treasury. What was a good idea at the time, has in the past century been twisted to become a needless and arbitrary financial constraint on a government that has no (and can never have) purely financial constraints. Both corporate parties point to the debt ceiling as an excuse to grandstand and play chicken every few years, with all of the real world consequences suffered by millions of those at the bottom, and none of them by those doing the grandstanding.
The debt ceiling from different perspectives
From a financial point of view, the debt ceiling (here’s the Wikipedia entry) is a needless, completely unnecessary, and self-imposed constraint. Breaching the debt ceiling cannot naturally or inherently cause economic problems such as default or inflation. It is, however, Congresses way of proclaiming that they would rather uphold this pure fiction, than to prevent real world consequences for millions of Americans: reneging on obligations already appropriated by Congress, or shutting the government down completely, which would eliminate income for millions of government employees, and critical services for millions more.
From a legal point of view, breaching the debt ceiling is illegal because… it’s the law. It’s a stupid and meaningless law, but a law none-the-less*. Congress and the president choose what is and is not law, and for one reason or another, they choose this particular one to remain. As the national government, they are also are the only body capable of creating, altering, enforcing, and destroying laws in the United States. Because of this, to them the debt ceiling is pretty much a New Years’ resolution: only important because they say it is, and only until they get sick of it.
*(As Joe Firestone discusses in this September 2021 edition of his livestream show, there are questions surrounding the constitutionality of the debt ceiling law [such as whether it conflicts with section 4 of the 14th Amendment], and even if it’s already been repealed.)
From a political point of view, the debt ceiling is a very convenient way for the rich, via the two corporate parties, to deprive the poor but pretend they really don’t want to. Like the how’re-you-gonna-pay-for-it question and Inflation the Boogeyman, the debt ceiling is another tool to deceive those in the middle into thinking that depriving the poor is “unfortunate but necessary”. This is the shield behind which they hide what they really mean: “Of course we can provide for the poor, we just don’t want to.”
Why? Because helping the poor in any way makes them somewhat more powerful. This, relatively speaking, makes the powerful somewhat less powerful. (You can’t be rich by having a lot, you can only be rich by having a lot more than everyone else.)
Mint the f***ing coin
This reality is especially revealed by an obscure 1996 law that allows the United States president, via the Treasury and Mint, to create a coin stamped with any value he pleases, at any time he likes, by merely deciding to do it. (The only quirk is that it must be made of platinum.) Here’s the section of the federal law that makes this possible:
31 U.S. Code § 5112 – Denominations, specifications, and design of coins
(k) The Secretary may mint and issue platinum bullion coins and proof platinum 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.
The ability to use this law to circumvent the debt ceiling crisis was first discovered by lawyer Carlos Mucha, further developed by political scientist Joe Firestone (the author of the only full-length book on the topic), and more recently given a legal analysis in 2020 by Willamette University law professor, Rohan Grey.
Basically, the debt ceiling prevents the national debt from exceeding some arbitrary threshold. In the national context, however, the concept of “debt” has a precise and technical legal meaning that bears no resemblance to what the term means to average human beings.
Some of the money created by the government is legally considered to be debt*, some isn’t. When a bill becomes law, much of the new spending is accompanied by bond sales (which is, again, an arbitrary political choice, not a financial necessity). The totality of the bonds in circulation (specifically, the principal) is the definition of the national debt. No coin, however, no matter what it’s made of, is ever accompanied by bond sales This means it does not add to the national debt and therefore cannot cause a violation of the debt ceiling.
Importantly, the platinum coin has severe constrains places upon it – not unlike a pizza shop coupon that may only be used in a certain shop during certain dates and under certain conditions. The money from the platinum coin can only be used for one of two things. The first is spending already appropriated by Congress. This means that creating a several-trillion dollar platinum coin would do little more than prevent the current, and perhaps next debt ceiling crisis.
The second use for the funds is to re-purchase already matured US Treasury bonds. This can dramatically reduce the national debt.
Whatever the case, the President can’t use the coin to go on a shopping spree, and the unused portion remains in the Treasury and Federal Reserve until more of the above two options become available. This means the excess does not ever leave the national government, never reaches the hands of average citizens, can never be used by them for spending, and therefore cannot contribute to inflation.
*(All money is debt in an accounting sense. National debt is a purely accounting debt. This means the government can pay its debt with essentially zero effort: by merely typing a number into a spreadsheet cell. Personal debt is a debt in both an accounting and real-world sense.)
As Joe Firestone makes clear, the platinum coin has the potential to do much more than just get us through the next debt ceiling crisis:
There is a big difference between a one or two trillion dollar coin and a $100 trillion coin. The former is just a block for a few months while everyone roasts the president for doing something silly.
Since the creation of the platinum coin would allow the Treasury to repay all debt as it falls due, the creation of a $100 trillion coin would kill all austerity politics since you can’t bitch, moan, or terrorize about the debt when it’s constantly being paid off without any new debt being issued. In other words, the creation of the $100 trillion coin disarms people like Manchin and Sinema when they complain we can’t afford a $42 trillion Green New Deal bill, or even a $3.5 trillion reconciliation bill. Politically, the $100 trillion coin would be a revolution. It would change the face of politics for the foreseeable future.
(Source: private dialogue.)
In the words of Rohan Grey, “We don’t have a debt crisis, we have a debt ceiling crisis.” The true solution to the debt ceiling crisis is to not raise the debt ceiling ever higher, but to eliminate the concept altogether. Until that day, the president could unilaterally end the crisis both now and for the foreseeable future, by merely choosing to do so. The fact that he won’t brings up serious concerns about his true motivations and intentions.
Of course, the even larger picture is how both corporate parties lavish the rich and deprive the poor. This in turn is another chapter in the centuries-long battle between rich and poor. The debt ceiling is nothing more than another false economic shield behind which to hide immorality and corruption. Clinging to the idea is not ignorance or misguided concern, it’s a desperate attempt by the emperor to avoid being seen naked, and from having to scramble to find another shield.
Resources to learn about the reality of the debt ceiling and minting the coin.
- Mint The Coin online FAQ, created for Congresswoman Rashida Tlaib‘s proposed ABC Act, which would provide monthly relief checks for all Americans for the duration of the pandemic, and paid for with two trillion dollar coins. The bill was written with the assistance of Rohan Grey.
- A 2013 post by Eric Tymoigne: Public Debt, Debt Ceiling and Monetary Sovereignty: Some Accounting Realities
- Joe Firestone:
- 2014 post: Does the Debt Ceiling Have to Be Raised?
- 2014 book, Fixing the Debt without Breaking America: Austerity, the Trillion Dollar Coin, and Ending Debt Ceiling, Sequester, and Budgetary Crises
- 2018 post: As the Debt Ceiling Approaches, a Fiscal Myth Echos Across the Landscape of Politics
- Another 2018 post: Permanent Cures for Debt Ceiling Crises
- Rohan Grey:
- 2020 paper: Administering Money: Coinage, Debt Crises, and the Future of Fiscal Policy
- September 2021 interview with Money on the Left: Chekhov’s Coin
- April 2020 interview with Money on the Left: #MintTheCoin & Covid Relief With The Modern Money Network
- April 2020 interview with MMT Podcast: #48 Rohan Grey: #MintTheCoin
Mint the Coin Easter egg
The Mint the Coin image is from mintthecoin.org, which is Congresswoman Rashida Tlaib’s website, as described in the above resources list.
Go to mintthecoin.org, right-click on the black-green circle image at the top, and then select “Save image as…”. Check out the file name:
Mint the f***ing coin indeed.
TOP IMAGE: From this Guardian article.