I kind of, sort of, understand Democrats who are pushing the platinum coin gambit as a kind of tit-for-tat madman rejoinder to the Republicans’ threat to default on our debt. If the idea is that we’ll act just as crazy as the GOP is acting and force them to back down, then I kind of get it. But anyone who seriously suggests that the courts would uphold the platinum coin stunt or that it is legally justified by a plain reading of the statute, is either a moron or they are lying to you. The Constitution is clear that the Treasury Department cannot mint money and, if you want to get technical, it is potentially unconstitutional to allow the Treasury to mint even “commemorative” coins. Congress delegates minting to the Federal Reserve, but they retain their right to authorize it or not to authorize it. The president has no say in the matter. Beyond that, the Courts do consider legislative intent and statutory construction whenever a law has an obviously unintended consequence. A small part of a bill that allows the minting of commemorative coins does not intend to allow the Treasury to mint trillions of dollars against the will of Congress. I cannot imagine a judge seeing it otherwise, and the Congressional Record on the matter is clear about both the intent of the law and the fact that Congress considered it to have no budgetary impact. Paul Krugman knows this and he is bullshitting you when he says, “at least as I understand it, the letter of the law would allow Treasury to stamp out a platinum coin, say it’s worth a trillion dollars, and deposit it at the Fed — thereby avoiding the need to issue debt.”
Only by completely ignoring the principles of legislative intent and statutory construction, and the likely rulings of the Courts, could anyone consider those comments to be true. I suppose we could quibble about what “the letter of the law” means, but I think it should mean what any reasonable judge would say that it means.
When it comes to the 14th Amendment, the argument is on surer footing. Section IV of that amendment states:
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.
Of course, that language was offered in the context of the government’s announcement that it would welsh on all Confederate debts. But it nonetheless establishes the principle that the United States must pay its debts. We owe it, we pay it. That places a responsibility on both the Congress and the President of the United States. If Congress won’t pay its debts, the president is justified in defying them and paying our debts anyway. But, how?
He could, as people are suggesting, respond by saying that if Congress is going to go crazy and break the law, then he is going to break the law, too, to defend the Constitution. That is a defensible position as long as we’re being honest that the law is being broken all around.
Dude, this is so wrong. Congress doesn’t do anything directly. It instructs the Executive branch to do things, and the Executive does it. Exactly like this law.
Can you name even one example where the courts rewrote plain language with no Constitutional issues because the legislators didn’t like the result of the law?
Yup. I agree Boo is wrong on this.
As you say, Boo, this has been beaten to death. But lots of people have made good arguments that the courts wouldn’t get involved because nobody would have standing to bring a case.
The Congress has to figure out what it wants to do. If they don’t, and the President has been given contradictory things to do, then he’ll have to act.
But I don’t expect it to come to a choice between a $1T coin and default. I expect that if Geithner says there’s no more money, then grandma won’t get her Social Security check on time and will raise holy hell with her congressman. Then the GOP will fold and the limit will be raised. But if not, then I expect a 14th Amendment solution – Obama wants a permanent fix and the $1T coin isn’t.
My $0.02.
Cheers,
Scott.
But we’ll see.
You enjoy begging the question.
Congress doesn’t lose a power by delegating its execution. They alone have the authority to coin money, and they have the power to prosecute counterfeiters. They have delegated that power to the Fed, subject to their approval and oversight.
There is a very clear Constitutional question here, and you are pretending that there isn’t.
Furthermore, the Courts have examined legislative intent for more than 200 years, and they have concluded that it can be used to avoid coming to an absurd result. We will not find a case where the difference between the intent and the execution is one-trillioneth as large as it would be in the platinum coin gambit so, no, I cannot site to you a comparable case.
However, there are many cases on the state and federal level where an absurd result was avoided by referencing the legislative record.
If you must have an example, {here http://web.law.duke.edu/publiclaw/supremecourtonline/certgrants/2006/zunvusd] is a recent one, although I promise it will hurt your cranium to understand it.
Why would the courts need to get involved in this hypothetical fight between the other two branches in the first place? If Congress doesn’t want the Executive minting trillion dollar platinum coins, why can’t it just pass legislation saying, “Don’t mint trillion dollar platinum coins?”
And who would have standing to sue, for that matter?
Congress would have standing.
Congress as in the House and Senate acting in concert, or Congress as in the House acting alone? The House may have budgetary authority, but it cannot pass laws without the Senate. Would a Dem. senate act against the President in this way?
You misunderstand the very nature of money if you thing the trillion dollar coin option is intrinsically absurd. It is no more absurd than printing on a piece of paper and saying it is worth $100 or whatever. Most money is nowadays created in the form of bank credit and never achieves any physical form whatsoever. Krugman gives other examples of how the debt ceiling can be circumvented by the creation of money in the form of credit without ever having to mint a $trillion coin to “create” additional money.
Ever since currencies left the Gold standard – for very good economic reasons – all currencies have been fiat currencies, worth whatever the relevant issuing authorities say they are worth. Of course, under certain conditions investors and consumers can lose confidence in a currency and be reluctant to ascribe much value to it – resulting in devaluation relative to other currencies and inflation within the currency zone.
But inflation simply hasn’t been an issue in recent decades – in fact the opposite, deflation, has been the greater problem, not to mention unemployment and under-capacity utilization in the economy more generally.
Krugman is actually pretty mainstream on this, arguing that issuing Trillion $ coins won’t be inflationary under current “zero bound” conditions where real interest rates are negative. Modern Monetary theorists are much more radical on this and argue that issuing additional currency need never be inflationary provided taxation is adjusted to mop up excess liquidity at times of rapid economic growth.
Monetary theory and policy is an areas where there is a huge disconnect between “Austrian” or Chicago economists and the rest – not just the MMT, Keynesians and neo-keynesians, and all the empirical evidence points to the Austrians being radically wrong.
But there is an even bigger disconnect between MMT and Keynesians and “liberal” and progressive politicos who in fact still cling to very outdated and empirically incorrect notions of what money is, and what monetary policy can and should do.
Many libruls don’t seem to realize they have been indoctrinated in Austrian economics as the only real world school of economics when in fact it is quite the opposite.
The legal/constitutional argument I will leave to others to debate, but the issue of standing seems to me to be crucial. If the dispute is between the Congressional and Executive branches of Government, must not the law making authority – i.e. both houses of Congress – bring the case?
Public unease could be minimised by minting coins only to the value of previously authorised but unfunded expenditures – e.g. on the Afghan and Iraqi wars – to commemorate the dead but also to remind the living of the real cost of such wars. It would help to remind the public that most of the debt was wracked up by previous congressional actions and Administrations, and thus not Obama’s responsibility alone.
Obama could even propose a “war tax” to retrospectively fund those expenditures – say in the form of a Tobin tax, a carbon tax, a tax on gambling, or the closure of certain corporate welfare loopholes – with the revenues used to “buy back” the $trillion coins from the Fed in due course. He would thereby place the responsibility on Congress itself to fund it’s past actions and highlight when and where past fiscal irresponsibility has occurred.
The bottom line is that the 14th. Amendment is non-negotiable, and Congress cannot welsh on it’s responsibility to fund its own actions, past, present and future. Anything the President does to enforce that reality – however absurd it may seem to some – is in fact nothing more than the President doing his job and upholding the Constitution.
Right now, the House is suing the Executive over their lack of enforcement of DOMA. The idea that they don’t have standing is absurd. The harm is that their power of the purse has been seized from them. It is true that courts don’t like to settle political disputes between the other branches, but we’re talking about trillions of dollars here. Congress very deliberately did not give away the power to mint money to the Treasury Department. An oversight in some stupid commemorative coin clause cannot change that fact under the law if our law is worth anything.
Still, the president could do it. I wouldn’t be so sure that the Democrats in Congress wouldn’t go ape, but he could do it. A better way to deal with this might be to threaten to do it and then to offer a deal where he doesn’t do it and agrees to fix the law so he can’t do it, in exchange for getting rid of the debt ceiling once and for all.
The harm is that their power of the purse has been seized from them.
How is the debt limit constitutional to begin with? It isn’t. The debt limit deals with spending Congress has already authorized.
The debt limit is probably in some quasi-Constitutional locale where it is perfectly legal to make the law but it is a violation if, and only if, it is violated.
I have to note, also, that the interpretation of the 14th Amendment that we’re using here (and that I agree with) is not a slam dunk, either.
Personally, I think there was a specific context but that the nature of the specific context warrants a broader connotation. Specifically, because the government was welshing on the Confederacy’s debt, they were unnerving creditors. By making an amendment to the effect that the Union’s debts would be honored, they were working to preserve our credit rating. I see no reason why we wouldn’t continue to preserve our credit rating in perpetuity.
As you imply, much of this may just be kabuki on all sides. The House may have the power of the purse, but it doesn’t have all the power. To enact a law to enforce it’s will it requires the consent of the Senate. A court would be undermining the constitutional role of the Senate if it decided that, on the Courts authority, the House could enforce it’s will with or without Senate approval.
The DOMA case is different (as I understand it) as here the Executive has decided, unilaterally, not to enforce a law duly passed by BOTH Houses of Congress. That seems to me to be a legitimate complaint, even if there is some asymmetry in that the House (and not the Senate) in taking the lead role in seeking to have it enforced. The Senate is not empowered, on its own, to repeal DOMA, and so it doesn’t need to be a party to the action for the house to have standing. The law is the law until it is changed by both Houses.
But the DOMA precedent is potentially instructive. Suppose Obama stopped paying (say) pensions because the debt ceiling had been breached. Then (according to the DOMA precedent) the Senate could sue the President for NOT implementing previously passed pensions legislation in accordance with the law. A Court would have to decide which legislation took precedence: Pensions legislation or the Debt ceiling.
I have read somewhere that the Court might give precedence to the more recently passed legislation as over-riding previously passed legislation. But there is no sense in which the debt ceiling AMENDS previously passed pensions legislation and so the question of WHICH previously passed legislation should not be implemented in order to comply with the debt ceiling legislation is moot. Clearly the President could have a lot of discretion, and those who complain he has unfairly targeted pensioners (who could then sue the President for not paying them their pension) would also have a case.
The bottom line is that the 14th. Amendment requires all Congressional acts to be funded, either by taxation or debt, and Congress is acting unconstitutionally if it seeks to prevent the President from meeting those fiscal obligations. Obama would be doing Congress (and the American people) a favour by giving them a way out of this conundrum by minting a few coins or some other stratagem for circumventing the disaster. If the House wants to reduce expenditure, it has to persuade the Senate and the President to pass and sign some laws doing so. Otherwise the House simply doesn’t have the power to change existing law.
No. “Congress” would not have standing. The courts would not get involved in a dispute between the Executive and Legislature when the Legislature has the power to enforce its will other ways (e.g. by changing the clear text of the law). It’s a political question and courts don’t like those. See, e.g., Goldwater v. Carter.
Also – thunderlizard at Balloon-Juice:
HTH.
Cheers,
Scott.
Raw Story
Connect the dots for me. I fail to see how that’s relevant.
As I understand it, the Executive declined, within his prerogative, to defend DOMA cases in court any more. The Republicans decided they were going to do so instead.
How does that argue against the courts getting involved in this political question that the Congress can resolve on its own?
Thanks.
Cheers,
Scott.
The point is that if Congress thinks that the administration is not following the law, they have standing to argue that in Court. It could be because they think the administration is not enforcing the law or because they think they are breaking it (which amounts to the same thing).
And yet when some in Congress think they have standing that often doesn’t turn out to be the case. As in Goldwater v. Carter cited earlier.
It’s not self-evident that Congress would have standing.
Cheers,
Scott.
One of the main arguments is that no one would have legal standing to dispute the coin. I’m not a lawyer and don’t fully understand the issue, but I’ve read a number of lawyers saying that judges would be reluctant to weigh in on the case because of the issue of legal standing.
Think you’re wrong about the first bit. Congress exercises its powers by enacting laws, which usually authorize a part of the executive branch to do something. In this case, the law authorizes the treasury to mint platinum coins. Of course, congress could always change the law. But until they do the treasury can mint a platinum coin. There is no constitutional question, just a question of interpreting the law (I agree with you there).
Yeah, right.
I can sign a contract with you allowing you to debit my bank account in order to buy stamps to reply to my fan mail. And if you debit my account for a trillion dollars because I didn’t specify that you couldn’t debit me more than the cost of the stamps, you’d totally get away with it.
Yglesias at ThinkProgress in 2011:
The value is at the Secretary’s discretion. End of story.
If your contract didn’t specify an amount, you wouldn’t have much cause to complain when someone picked an amount you didn’t like.
HTH.
Cheers,
Scott.
actually the denomination is distinct from value in a commemorative coin. but anyway, the purpose of the coin is commemorative not covering debts – ii understand correctly, prez cannot mint coins for purpose other than commemorative. “damage” Frank is looking for would be infringement/ undercutting of authority of congress [?]
More begging the question.
“End of story.”
The whole point is that the language of the bill creates a ridiculous and unintended consequence, which is why the courts would read the whole legislative history of the clause and conclude that only a moron would believe that Congress intended to turn over their power of the purse to the Executive Branch.
Why is this so hard for people to understand?
By personalising the issue you make the same mistake popular economics makes when it (say) compares the prudent management of a national economy to a thrifty housewife managing the household budget. There is simply no comparison between a state which creates money and a family which must balance its books with pre-existing money, any more than there is a comparison between a Congress which makes laws, and you, as a private individual, who must abide by them.
If every family tries to “balance their books” at the same time in a time of recession, the result is an ever deeper deflationary spiral, so the state has to actively pursue countervailing measures. If loads of individuals, like yourself, enter into unwise or unsustainable contracts (e.g. sub-prime mortgages), the state has to take countervailing measures (e.g. bailouts, debt jubilee, or debt restructurings) to counter-act the aggregate effect.
My point wasn’t economic. My point was contractual and legal. The law isn’t bound by absurd implications of poorly crafted contracts or bills. Judges have the ability to step in and say that one party has clearly acted in bad faith, despite the fact that the legal language “technically” permitted them to do what they did.
Congress already has all the powers it could possibly need to resolve the issue. Why are the Courts going to involve themselves in the dispute when Congress could settle it decisively on its own?
because we’re talking about trillions with a T.
Trillions which have already been spent on wars duly authorized but not funded by congress. Private banks and organizations in the “shadow banking sector” “create” trillions of “money” in the form of credit every year too, with minimal Fed oversight. That is what (in part) created the bubble and crash in the first place because it was unrelated to real and potential economic activity. Now we have the opposite problem – a liquidity trap which prevents the economy from operating anything close to capacity or potential. Far better for the President to create money to fund specific and real past obligations than to create an even bigger pile of illusory debt that will never, in practice be repaid. The Government SHOULD be funding itself through printing money, not debt, and reigning in inflation, when required, through increased taxation and interest rates. That is MMT orthodoxy.
That’s a policy question, not a legal one.
So you are saying, in answer to pillsy, that because the amounts of money involved are very large Congress doesn’t have all the tools it needs to resolve the issue? Congress routinely approves Trillion $ budgets.
Congress does not get to approve what the Fed does, nor have meaningful oversight. The delegation is much more complete than that. This is the Fed’s vaunted independence.
Am I right in thinking that, in the scenario under consideration, minting the platinum coin would be an action of the Treasury Department, not the Fed?
Yes – the Treasury would mint the coins and use them to pay off some of the debts it owes to the Fed. What the Fed then does with the coins is its own business.
There is nothing absurd about it. The central argument of the pro-coin crowd is that Congress already authorized such payments by law. The Treasury is merely following Congress’s orders to spend two trillion more than it takes in in taxes, plus the constitution’s orders that the US government must make good on its debts. Both of these are presently contradicted by another order of Congress which limits the amount of debt outstanding.
The trillion dollar coin is just a solution that works for all constraints. It in no way contradicts congress’s orders to spend that amount of money, and it in no way contradicts congress’s orders to cap the debt. And it in no way prevents congress from coming up with a better solution. There is just no legal absurdity here that you seem to be imagining. If it would help you, just coin more pieces of a smaller amount to meet the debt obligations, if the trillion dollar coin amount is what has you incredulous.
Thanks Boo. I thought this whole coin business was malarkey, though I wasn’t sure why. You laid out the case persuasively.
Besides, what if Biden accidentally uses it to buy a pack of cigarettes?
I can’t imagine the coin gambit standing up in Court either, but the Fed routinely monetized government debt before 1951, and the only thing that stops it from doing so not is its own policy, not the law. That is where we should be putting our pressure, To be clear, its recent purchase of Treasuries is temporary monetization, but it does not write off the debt, and it is assumed those bills will be resold later. It could just destroy them – it used to do this regularly – and that would reduce the debt. After all, surpluses at the Fed are due to Treasury anyway.
How does the debt ceiling — which certainly has its own “legislative intent” — stand when Congress is ignoring its own “intended purpose.”
Frankly I see no need to do this in the first place, but I do not see it as shaky as you do. And you can bet your ass that I would do it before ever negotiating over the debt ceiling.
Isn’t another option available to President Obama to just go on national television and say:
1 – the U.S. is at the debt ceiling limit;
2 – Congress passed one law authorizing a certain level of spending;
3 – Congress passed another law authorizing a certain (lower) level of borrowing (the debt ceiling);
4 – with these conflicting laws, and under the obligations of his sworn Constitutional duty, he as president is ordering the Treasury secretary to ignore the debt ceiling limit and continue paying the legally authorized debts incurred by the executive branch under the orders of the legislative branch?
(Keep calm and carry on.)
The problem with this is that the T-bills issued to cover these expenses would be accompanied by loud braying from the House that they are meaningless and will not be honored. This is likely to affect their worth and the credit of the country adversely.
But will it hurt as much as a default on our debts would hurt?
Probably not, but Fed monetization would be a better solution.
In the absence of other remedies, the 14th amendment to the Constitution almost requires a gambit like the minting of a trillion-dollar coin if Congress cannot or will not act to prevent default.
Remember the issue is the fact that Congress has already spent the money.
Or do we get picky about the 14th amendment just applying to Civil War debt and close off that avenue too.
The fact is the Congress is placing two contradictory instructions on the executive. Spend this money, pay for the bills and don’t default, on the one hand. And don’t exceed the debt ceiling on the other. Litigate that one in court.
I think the Constitutional nicety argument against the minting of a trillion-dollar coin is overdrawn. I think the popular relief at not having a crisis would deter the courts, if not the Congress from raising the Constitutional issue you assert.
Any way you look at it the failing, the contradiction, and the nasty politics comes back to Congress and the fact that it has not put the US financial system on a footing that allows the government to set wise economic policy.
Shorter BooMan: the courts wouldn’t let the President technically follow the letter of one law, so the President should just explicitly break another law.
All of this concern for Constitutional issues with the trillion-dollar coin. If I was more prone to conspiracy theories, I would be arguing that the White House wants to close off all options but default in order to politically back down the GOP. That might be a good strategy, but folks outside the beltway are getting worn down with the drama. And classic ropa-dope always ends with a knockout punch, which most folks think is way overdue.
And the economic argument is that we have to start moving from financing by issuing currency instead of financing through debt if the economy is going to avoid boom-and-bust cycles. We can’t depend on the business sector to act in the best interests of the entire economy even when it is dramatically in their interests to do so.
ii understand you, Trillion dollar coin wouldn’t constitute a knockout punch, though closing off all options but default could lead to one. even if T coin could be made to work Constitutionally (which I don’t think it can unless we want to render our economy commemorative which seems to be the Rs idea anyway, especially those who will profit by its collapse [I mean you, Cantor]) T coin is only a bandaid not a resolution
“He could, as people are suggesting, respond by saying that if Congress is going to go crazy and break the law, then he is going to break the law, too, to defend the Constitution.”
If I understand things correctly, the President could argue congress has placed him in a position where he is forced to break the law. The President does not have the authority to selectively ignore spending instructions by congress.
Yes, I would agree with that.
Which is why Congress is suing him for not enforcing DOMA.
The trouble with being locked in the same room with the crazies we call the GOP and being subjected to their constant barrage of illogic is that eventually one begins to ponder fighting on their level.
If the Right dropped the obstruction we’d be having a conversation about how many light rails were on the agenda.
Trouble is, we’re getting accustomed to pushing the limits of creativity to get around the obstruction. What a waste of a civilization.