It’s A ‘Gimmick’: Yellen Opposes Minting $1 Trillion Coin To Save The United States From Historic Debt Default
Topline
Treasury Secretary Janet Yellen on Tuesday dismissed the contentious idea of tapping a legal loophole to mint a $1 trillion coin as a last-ditch effort to help the United States pay its debt, saying the concept shouldn’t be considered seriously despite its popularity on social media and the growing risk that the United States could plunge into a recession if lawmakers fail to raise or suspend the debt ceiling in the next two weeks.
Though Yellen voiced staunch opposition to minting a trillion-dollar coin, the seemingly absurd idea … [+]
Getty Images
Key Facts
In a televised appearance on CNBC, Yellen said she’s opposed to minting a coin to help pay off some of the nation’s debt—a seemingly absurd idea that’s nonetheless garnered backing from a few notable economists, including Nobel Prize winner Paul Krugman.
Minting the coin, Yellen said, would be equivalent to asking the Federal Reserve to print money to cover deficits that Congress is unwilling to cover by issuing debt—thereby compromising the independence of the Fed, which is charged with overseeing monetary policy.
“It’s a gimmick,” the former Federal Reserve chair added, saying the idea also conflated the responsibilities of the central bank and the Treasury.
Yellen’s comments follow a wave of renewed interest in the concept of a trillion-dollar coin, with a few lawmakers, including Reps. Jerry Nadler (D-N.Y.) and Rashida Tlaib (D-Mich.) even jumping on the #MintTheCoin Twitter trend by advocating for it on social media.
Despite turning down the idea, Yellen doubled down on the critical nature of ensuring the United States acts to raise or suspend the debt ceiling, saying she “fully expect[s]” the nation would plunge into a recession it doesn’t do so by October 18, when she believes the Treasury will exhaust its ability to make payments on financial obligations.
In a briefing Monday, White House Press Secretary Jen Psaki also struck down the idea of minting a coin, saying it wasn’t a “viable” option “either because [it] wouldn’t be accepted by the Federal Reserve, by the guidance of our Treasury Secretary, or just by legal restrictions.”
Key Background
Minting a trillion-dollar coin is an idea that first emerged during a similar debt crisis in 2011, when a few scholars identified a legal provision allowing the Treasury to mint a platinum coin without a maximum limit. “On the face of it, Janet Yellen could mint a platinum coin with a face value of $1 trillion—no, it needn’t include $1 trillion worth of platinum—deposit it at the Federal Reserve and draw on that account to keep paying the government’s bills without borrowing,” Krugman wrote in a New York Times op-ed last week. Though he opposed the idea in 2011, Krugman’s stance has notably shifted given repeated efforts by Republicans to block action on the debt limit, saying: “Given the stakes, who cares if the approach sounds silly?” Some critics, however, have noted the idea may violate the 14th Amendment, which gives Congress—and not the president-appointed Treasury Secretary—the ability to appropriate funds.
What To Watch For
Though minting a trillion-dollar coin seems out of the question for now, lawmakers still have a few options to raise or suspend the debt limit before the looming deadline. Senate Majority Leader Chuck Schumer (D-N.Y.) is expected to hold a vote for a House-passed measure to suspend the debt limit through next December on Wednesday, though Republicans have pledged to block it. Additionally, the Senate parliamentarian, who advises lawmakers on chamber rules, said Monday that Democrats would be able to use a special budgetary process called reconciliation to pass a debt ceiling measure without Republican support.
Further Reading
Yellen Warns Treasury Stands To Run Out Of Cash On October 18, Causing ‘Serious Harm’ To Business (Forbes)
Comments