The Platinum Coin Option, Ctd

Jan 8 2013 @ 4:43pm

Drum recently argued that it would be illegal to mint a trillion dollar platinum coin in order to avoid the debt ceiling. Lizardbreath at Unfogged, who is a lawyer in New York, counters:

I don’t think a court would stop it, and I’m sure that a court that did stop it would be acting unusually and for politically motivated reasons. Courts are expected to do what legislatures say, not what they mean: “legislative intent” can only be considered where there’s an ambiguity in the law. Even if what the legislature said is obviously not what they meant, courts are still expected to follow the letter of the statute. And the platinum coin statute isn’t ambiguous (unless there’s something in the wording I’m missing): the treasury can mint platinum coins, and they’re real money.

Regardless, Felix Salmon sees the platinum coin option is reckless:

[I]t would effectively mark the demise of the three-branch system of government, by allowing the executive branch to simply steamroller the rights and privileges of the legislative branch. Yes, the legislature is behaving like a bunch of utter morons if they think that driving the US government into default is a good idea. But it’s their right to behave like a bunch of utter morons. If the executive branch failed to respect that right, it would effectively be defying the exact same authority by which the president himself governs. The result would be a governance crisis which would make the last debt-ceiling fiasco look positively benign in comparison.

McArdle foresees other consequences:

I think–and I assume the White House does as well–that there's a substantial risk that this sort of nominally-legal-but-obviously-tendentious reading of the law would trigger a selloff in US bonds. Minting a $1 trillion coin neatly end-runs GOP obstructionists, but only by proving that the president himself has little respect for the institutional restraints on his office. So while the pundit in me is eager to see how this would play out, the US citizen in me is afraid of the effect that this would have on my country. I assume that our president shares these sort of concerns.

Cowen believes that exploiting the platinum coin loophole would be counterproductive: 

[L]et’s say that — somehow — the whole thing miraculously worked out well from start to finish. The testier Republicans would in fact get exactly what they want. They would receive isolation from any negative consequences from brinksmanship, and a new narrative about how President Obama is a fascist incarnate.

Tomasky thinks the proposal doesn't pass the laugh test: 

Can you imagine a president giving a prime-time, Oval Office address and saying, what we're gonna do, people, is mint a coin worth $1 trillion. That just doesn't pass any laugh test I can conceive of. I'd bet Obama would drop 12 points in the polls within five days of making such an announcement.

But Josh Barro isn't so quick to dismiss the idea:

[W]e need to compare the platinum coin option against others on the table. For example, we could hit the debt ceiling and the government could start leaving about 40 percent of its bills unpaid. The president could accede to Republican demands for near-term spending cuts (of an as-yet-unspecified nature) in addition to the amounts from the Budget Control Act sequesters, which would cause another recession. Or he could assert authority under the 14th Amendment to continue issuing debt, notwithstanding the debt ceiling, which would lead to court battles and probably impeachment. (The 14th Amendment play sounds less "silly" than the platinum coin, but it's actually on much shakier legal ground.) Minting the platinum coin would be less economically damaging than any of the above options, which is why Obama should announce he will pursue it if the debt ceiling is not raised.