The Obama administration has killed any notion of minting trillion-dollar platinum coins to solve the nation’s debt ceiling woes.
In a written statement released Saturday, White House Press Secretary Jay Carney says there are only “two options” to deal with the looming need for the U.S. government to pay creditors for federal funding it has already spent. Minting the proposed currency to pay it off and avoid an impending battle with Capitol Hill is not one of them.
“Congress can pay its bills or it can fail to act and put the nation into default,” he writes.
Carney blames Congressional Republicans for having “played politics” during the last negotiations over the country’s borrowing limit in summer 2011. The stalled talks resulted in a downgrade of the U.S. credit rating by Standard and Poor’s.
“The President and the American people won’t tolerate Congressional Republicans holding the American economy hostage again simply so they can force disastrous cuts to Medicare and other programs the middle class depend on while protecting the wealthy,” the statement reads. “Congress needs to do its job.”
The Treasury Department has been staving off the ceiling using accounting tricks for months — most recently on Dec. 31. But with no comprehensive solution reached during the recent “Fiscal Cliff” negotiations, a brewing fight on how to deal with the $16.4 trillion borrowing limit is set for the late winter.
The coin proposal has floated around academia and economic policy circles for some time, but gained traction after the cliff ordeal, when it was taken up by cheeky monetary wonks and some members of the progressive left.
The idea follows that should Congress fail to extend the debt limit, Treasury could begin minting trillion dollar coins (in a process explained mostly seriously by Jim Pethokoukis on his American Enterprise Institute blog), a number of which could then be put toward fulfilling debt obligations in the event new legislation stalls in Congress. The Federal Reserve would hold the hefty currency until it was time to pay the bills.
While there are laws in place to regulate how much paper, gold, silver or copper currency can be circulated by the government, there is nothing so clearly stated when it comes to platinum.
The White House statement comes a day after Senate Majority Leader Harry Reid and Democrats urged the president to “take any lawful steps” to avoid default — “without Congressional approval, if necessary.” In response Republican Leader Mitch McConnell railed against the notion in a written statement.
“Democrats are looking at everything from the ridiculous (printing a trillion-dollar coin) to outright abdication of Congressional responsibility,” it reads. “But avoiding this problem will only make it worse.”
The idea to mint the coins as a way around the federal debt ceiling won a high profile advocate Friday when Pulitzer Prize winning economist Paul Krugman used his New York Times column to say “Mint the coin!”
But a senior administration official told ABC News there was one key factor in making that course of action impossible: The Federal Reserve said it would not view the coin as viable.
“Since they wouldn’t view the coin as viable, the issue isn’t not wanting to do the coin. We just can’t,” the White House official said.
In other words, the scheme favored by folks like Krugman just would not work.
ABC’s Gregory Krieg contributed reporting.