With Republicans becoming increasingly entrenched with the idea of holding the debt ceiling hostage in an attempt to secure budget cuts, the idea of a statuary debt limit seems foolish and potentially destructive. However, one potential solution seems even more absurd - minting a $1 trillion coin.
I'll admit at first blush, it seems nonsensical. But the idea might actually have some merit, as Nobel Prize-winning New York Times columnist Paul Krugman explains:
"There’s a legal loophole allowing the Treasury to mint platinum coins in any denomination the secretary chooses... By minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling — while doing no economic harm at all."
More than just doing no economic harm, the coin shouldn't be inflationary, since it would never make it into circulation. It also leaves Congress in full control of the government purse while eliminating the need for their consent.
Barro explains his support of the idea:
"Hitting the debt ceiling isn't an option. It's no way to run the country, and Republicans know that. So, a debt-ceiling increase shouldn't count as a "concession," and it's nutty for Obama to have to give substantive policy ground to get one.
Monetizing deficits through direct presidential control of the currency, in lieu of borrowing, is also no way to run a country. It's silly, and it's perfectly legal. Agreeing not to do so is therefore the ideal "concession" for Obama to offer in return for Republicans agreeing to end the threat of a debt-default crisis."
Rep. Jerrod Nadler (D-NY) is also on board with the idea. "It sounds silly but it's absolutely legal," he told Capital NY. "[It] would normally not be proper to consider such a thing, except when you're faced with blackmail to destroy the country's economy, you have to consider things."
There is also a White House petition with nearly 5,000 signatures in support of the coin.
The idea comes as Democrats and economists search for ways around Republicans' stranglehold over the debt ceiling. As Steve Benen notes, Republicans are putting the President in an awkward position of being forced to follow the law that creates the debt ceiling while being legally obligated to protect the full faith and credit of the United States.
Another idea being floated around is for President Obama to use the power granted under the Fourteenth Amendment, which says the validity of the public debt "shall not be questioned." President Clinton has come out in favor of using the 14th Amendment option to combat Republicans and would dare the courts to stop him.
“I think the Constitution is clear and I think this idea that the Congress gets to vote twice on whether to pay for [expenditures] it has appropriated is crazy," Clinton said.