Money Matters

Economics, Banking, Finance, and Supply Chains

Mint the coin: Why the constant debt ceiling crises?

Mint the coin: An image of a treasury bond
This entry is part 3 of 3 in the series Mint the coin

Mint the coin: Who wants a good old political fight about paying for what we already bought?

When Congress authorizes spending, then refuses to later increase the debt ceiling to allow that previously authorized spending to be spent, it’s like going to a restaurant, ordering and eating a mail, then refusing to pay the bill.

And starting in 1985, Congress started threatening to do this over, and over, and over, and over, and over.

Congress seems to know they MUST pay their bills

In February of 1996, the Treasury announced it had exhausted most of its extraordinary measures during prior debt ceiling fights and would be unable to make its obligated social security payments in March. So what did Congress do?

They passed laws (Public Laws 104-103 and 104-115) authorizing the Treasury to issue securities in an amount equal to the social security benefit obligations for March. Seriously.

Extraordinary measures were again exhausted in 2009 where the treasury found another rabbit to pull out of that hat.

And again 2011 when the Treasury Secretary wrote a sternly worded letter to Congress saying “Do you really want the US to default? Seriously?” (I paraphrased). So Congress raised it again.

In 2013 Congress passed a law that temporarily suspected the debt ceiling (the No Budget, No Pay Act).

Between 2013 and March of 2019 they did this an additional six times.

From March 2019 to today (21 Oct 2021), we’ve increased the debt ceiling two more times, the most recent one being last week. Now we’re good for another five weeks.

Maybe they’ve read section 4 of the 14th amendment

The first clause of which reads:

The 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.

Hm. I wonder.

Maybe they’re just playing politics

It’s a weird division of responsibility in the USA where Congress commits to spending by passing laws that require funding, yet it’s the President’s responsibility to see the bills get paid per Article 2 Section 3 of the constitution which contains (the language pertains to the President):

“… he shall take Care that the Laws be fathfully executed…”

So if Congress passes a bill requiring money to be spent for some purposes, to follow the law, the President has to do so.

The legal trilemma

When Congress passes three laws that directly contradict each other, the President is required to break at least one.

So when Congress says:

  • Spend as required by laws X, Y, and Z.
  • But tax as required by laws A, B, and C.
  • But don’t “borrow” to make up the difference.

What’s a President to do?

Legal scholars have actually discussed this and the prevailing view seems to be that if this is ever pushed to the limit, the President should ignore the debt limit as that would be the smallest of the three constitutional violations available.

But, but…. Mint the coin?

Weirdly, if Congress ever does push the President into this trilemma, there is a fourth option that does NOT violate any US laws.

In 2011, a lawyer named Carlos Mucha pointed out that there is a law on the books (U.S. Code Title 31 § 5112 section K) that states:

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.

And that is why such a coin needs to be platinum.

The US treasury then gets to keep the money per a provision in U.S. Code Title 31 § 5136, whereby the value of the coin is deposited into the Treasury General Account, where money then becomes available for use by the treasury.

Seriously.

If Congress ever creates the trilemma described above, the President and the executive branch are constitutionally mandated to print a platinum coin in order to allow the US government to pay its bills.

Seriously.


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