The US Treasury Department will not mint a trillion-dollar platinum coin to avert another battle over raising the debt ceiling, meaning Congress and the White House have no option but compromise in order to avoid default.
“Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” Treasury spokesman Anthony Coley told the Washington Post‘s Ezra Klein Saturday.
The U.S. is slated to hit its debt limit next month. If Congress doesn’t act to raise the debt ceiling before then, the nation’s triple A bond rating – which helps contain the cost of borrowing money – will be at risk of a downgrade.
Republicans are generally against raising the debt ceiling without massive spending cuts, while Democrats believe the two issues should be considered separately.
With so much gridlock in Washington recently, lawmakers are not hopeful that they will reach a compromise to raise the debt ceiling in time to meet the deadline and some have been seeking ways to avert the battle altogether.
The idea of minting a platinum trillion dollar coin was floated as one way that lawmakers could increase render the debt ceiling obsolete.
The idea for the coin came from a 1997 bill that gave the Treasury the power to mint and issue platinum coins – but the author of that bill had only intended it to apply to smaller coins.
Some economists and lawmakers argued that the bill could apply to a coin of any value, and therefore give the Treasury the power to mint and issue a trillion dollar coin.
The coin could be deposited at the Federal Reserve, giving the Treasury the power to withdraw funds based on the account to meet
government obligations. The coin would not grant any new spending powers to the administration, however, so it would be unlikely to cause inflation.
Economist and Nobel prizewinner Paul Krugman said the time had come to use any economic tools available to the Government.
Paul Krugman was one of those backing the plan for the coin, even though he admits that it is an accounting gimmick.
On the New York Times website, Paul Krugman wrote: “This is all a gimmick – but since the debt ceiling itself is crazy, allowing Congress to tell the President to spend money then tell him that he can’t raise the money he’s supposed to spend, there’s a pretty good case for using whatever gimmicks come to hand.”
But hopes that the debt ceiling fight could be averted by a single coin are now dashed, with the Treasury’s declaration on Saturday.