What Goes Around (Comes Back Around)

I find little to disagree with in Scott Lemieux’s look at the legality of minting a trillion-dollar coin. For those who have no idea what I’m talking about, the idea is simple. When the president is required to spend all money authorized by Congress, in most instances, that requires the Treasury to borrow money to fulfill congressional obligations. But Congress has also imposed a borrowing limit on the Treasury. In the past, Congress has lifted the limit with little fuss, but beginning in 2011, House Republicans have used it as leverage for spending cuts. If Treasury reaches the limit without paying its full obligations, it defaults, which would have catastrophic consequences for the global economy.

At the moment, Republicans are threatening not to lift the limit (though, there is some question of their sincerity). This leaves President Obama with three options: He can let the government default, triggering a global recession. He can concede spending cuts to the GOP, giving further incentive to legislative hostage taking, or he can take advantage of a loophole in the law, which allows Treasury to mint platinum coins of any denomination.

The law was passed to facilitate the creation of commemorative coins and generate a little revenue for the government. Treasury would mint a coin for $10, sell it for its full value of $50 to collectors, and pocket the difference. The trillion-dollar coin is a variation on this idea. Treasury would mint a coin worth $1 trillion, deposit it in the Federal Reserve, and use the funds to pay its obligations, as mandated by Congress.

As Lemieux notes, there’s no legal argument against this: The plain text of the law gives this authority to Treasury, which is to say that it gives this authority to the president. But there are critics, on the left and the right, who are wary of going down this road. Justin Green, for example, doesn’t think the president should make inroads around Congress, even if its facing a real abuse of congressional power.

I understand the sentiment, but it's mistaken. For starters, in a system of shared powers, all branches of government act as a check against each other. By refusing to lift the debt ceiling—and blocking the government from fulfilling its obligations—Congress is abusing its power. It’s as if your parents told you to mow the lawn, but then barred you from using the mower. Insofar that the $1 trillion coin is an expansion of executive power, it’s one meant to check an abuse—a distinction worth making.

What’s more, if there’s anything that would provoke a constitutional crisis, it’s hitting the debt ceiling. Lemieux explains:

Complying with a refusal to lift the debt ceiling, however, would require Obama to violate the law. Drum is of course correct that “the debt ceiling is legal,” and President Obama cannot directly refuse to obey it. But the problem is that Congress has also instructed the president to spend more than the debt limit in its appropriations bills. Not only that, but allowing a default based on the debt ceiling would conflict with the 14th Amendment, which states that “[t]he validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” If Congress refused to raise the debt limit, then, Obama would be forced to violate federal law either way.

Finally, I think opponents of the coin are missing a key fact in this debate: If there’s anything that would provoke a constitutional crisis—or at least, undermine public faith in our system of government—it’s a global recession. Constitutional governance tends not to fare well in periods of economic distress, and that’s even more true when the distress is self-inflicted.

The $1 trillion coin is a ridiculous idea. But it’s no less ridiculous than the debt ceiling, and in the big scheme of things, it’s far preferable to defaulting on our obligations.