I’ve previously suggested that President Obama should try to end the stand-off over the debt ceiling dispute by invoking the 14th Amendment, Of course, if Obama he plays that card he will put this Supreme Court, widely criticized for being politically partisan, in the difficult position of bearing some responsibility for a default on the U.S. debt. The Chief Justice in effect put himself into this position by publicly commenting on the debt issue in a fairly partisan manner, so he can hardly complain.
But there is another alternative: As a legal matter the Federal government can’t just print money to pay its bills, with one peculiar exception. The peculiar exception is that clause allowing the Treasury to mint platinum coins in any denomination it chooses. Of course this was intended as a way to issue commemorative coins and stuff, not as a fiscal measure; but if one is to go by the letter of the law (which the Supreme Court’s strict constructionists always insist on), 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.
Now, it’s likely that the President doesn’t have the guts to play this card, but he has been rather firm in his insistence that he is not going to negotiate over the debt limit this time around. He ruled out invoking the 14th Amendment via his press secretary last December. So many of us are starting to wonder if he’s heard all this talk about the platinum coin.
Could this be the way to break the Republican deadlock? If they refuse to raise the debt limit, the President orders the mint to stamp out a couple of nice new shiny platinum coins—in denominations of $1,000,000,000,000. The money is then deposited with the Fed, which can then use the money to buy back national debt and thereby avoid breaching the debt ceiling.
Yes, it’s a gimmick, but so is the debt ceiling, and being used in effect to renege on bills for money which Congress has already SPENT and APPROPRIATED the funds, a fact that the President cited twice last week when he announced the compromise on the fiscal cliff negotiations. We already require that a budget is approved before Treasury can spend. That constraint is necessary to impose accountability over the Treasury and give a sense of the country’s political priorities in terms of how it wants to allocate its spending.. But once a budget is approved, why on earth would we want to prevent the Treasury from keystroking the necessary balance sheet entries in accordance with Congress’s approved spending?
In any case, the next few months should be very interesting, to say the least, if the President decides to go down this route.