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View Diary: Clarity on the Platinum Coin (214 comments)

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  •  US Constitution: Article I Section 8 (6+ / 0-)
    The Congress shall have the power ... to borrow money on the credit of the United States;
    The debt limit is not a fake, ceremonial ceiling. It's a Congressional power. The President can't usurp it by issuing debt on his own authority.
    •  Jack Balkin a prominent constitutional law prof (13+ / 0-)

      has a collection of articles on his blog Balkinization addressing three different options.



      Sovereign governments such as the United States can print new money. However, there's a statutory limit to the amount of paper currency that can be in circulation at any one time.

      Ironically, there's no similar limit on the amount of coinage. A little-known statute gives the secretary of the Treasury the authority to issue platinum coins in any denomination. So some commentators have suggested that the Treasury create two $1 trillion coins, deposit them in its account in the Federal Reserve and write checks on the proceeds.

      The government can also raise money through sales: For example, it could sell the Federal Reserve an option to purchase government property for $2 trillion. The Fed would then credit the proceeds to the government's checking account. Once Congress lifts the debt ceiling, the president could buy back the option for a dollar, or the option could simply expire in 90 days. And there are probably other ways that the Fed could achieve a similar result, by analogy to its actions during the 2008 financial crisis, when it made huge loans and purchases to bail out the financial sector.
      Assume that the platinum coin and exploding option strategies are not available. What else can the president do?

      Like Congress, the president is bound by Section 4 of the 14th Amendment, which states that "(t)he validity of the public debt of the United States, authorized by law . . . shall not be questioned." Section 4 was passed after the Civil War because the framers worried that former Southern rebels returning to Congress would hold the federal debt hostage to extract political concessions on Reconstruction. Section 5 gives Congress the power to enforce the 14th Amendment's provisions. This does not mean, however, that these provisions do not apply to the president; otherwise, he could violate the 14th Amendment at will.

      Section 4 requires the president not to put the validity of the public debt into question. If the debt ceiling is not raised in time, there will not be enough incoming revenues to pay for all of the government's bills as they come due. Therefore he has a constitutional obligation to prioritize incoming revenues to pay the public debt: interest on government bonds and any other "vested" obligations.

      A standing army is like a standing member. It's an excellent assurance of domestic tranquility, but a dangerous temptation to foreign adventure. Elbridge Gerry - Constitutional Convention (1787)

      by No Exit on Mon Jan 07, 2013 at 11:34:32 AM PST

      [ Parent ]

      •  the 14th is the key. I agree with the diarist (6+ / 0-)

        that the coin idea is totally fraught.  Even if it weren't deemed unconstitutional by the SCOTUS, it's very bad PR.  the GOP would be able to point to the coin, an object in the real world with a huge media footprint, and say

        "Obama just singlehandedly increased our debt by x trillion dollars."
        the visuals are devastating since we now have the GOP fully on the hook for trying to kill our economy.

        No, the best thing is to fall back solidly on the 14th amendment whose language is as clear as a bell.  The debt ceiling, even before it is broached, clearly calls the validity of the US's public debt into question.  The Debt Ceiling construct is unconstitutional.  Period.

        "Well, yeah, the Constitution is worth it if you succeed." - Nancy Pelosi // Question: "succeed" at what?

        by nailbender on Mon Jan 07, 2013 at 04:09:28 PM PST

        [ Parent ]

        •  The 14th Amendment is directive to all branches. (4+ / 0-)

          Including Congress. The 14th trumps Congress's third law on the subject - the debt ceiling law Congress passed sometime early in the last century; the other two being Congress's two steps of authorizations and appropriations.

          The 14th does it for all branches. Since the Treasury Department manages and "issues" the debt, it's the one which is responsible for abiding by that directive. (So is Congress, but if it uses one of its own laws to avoid it, it can safely be ignored on Constitutional grounds.)

          To keep Congress's feet to the fire - better said, to keep the House GOP's feet to the fire - Obama & Co. needn't implement this until it has to. It shouldn't do it early, for like the ridiculous Big Coin notion, it will look like it takes the House Crazies off the hook and give them something else to rant about. (They will any way and surely call for impeachment, but let's not let 'em off the hook.)

          For my money (!), it would rile the money markets across the globe far less for the President to step up with the 14th and keep paying the bills Congress has already legislated, than to issue that Big Coin, a cheap, much too easy and utterly unnecessary slick trick.

          2014 IS COMING. Build up the Senate. Win back the House : 17 seats. Plus!

          by TRPChicago on Tue Jan 08, 2013 at 05:21:19 AM PST

          [ Parent ]

        •  Err... (1+ / 0-)
          Recommended by:

          ...How does printing a trillion-dollar coin increase our debt?  It's not borrowed, it's money-ex-machina.  

    •  No (12+ / 0-)

      Congress has delegated that power to Treasury, it did so almost a century ago.

      Whenever Congress delegates one of the powers given for its sole use by the Constitution, it has to limit that delegation sufficiently to pass judicial review.

      Historically, the first such limit we used was the debt ceiling.  But more recently, we started limiting Treasury's use of its delgated authority to borrow by means of annual budget bills which consolidated all spending obligations under omnibus bills.  Treasury is now required by statute to borrow as much as is needed to meet all the current spending obligations specified in those bills.

      What would happen if the House refuses to allow a rise in that older limit, the debt ceiling, is that that limitattion would create an apparent contradiction in what Treasury is legally required to do in respect to borrowing.  In the face of an apparent contradiction in what the law requires of you, what you are supposed to do to is make every effort to intepret all these laws so as to resolve the contradiction.  Assuming that the lower debt limit applies, that Treasury has to stay under the old limit because it's lower, does not resolve the contradiction, because Treasury is still required to pay out each and every obligation to spend passed under the last set of budget bills.  The only assumption that allows the contradiction to be resolved is that the old debt limit has been superceded by the new, that the old limit is not in force.

      The president would not be usurping the power to borrow money if he instructs Treasury to ignore the old ceiling, because it is obviously no longer operative, and he still has delegated authority to borrow under the ceiling that is operative, the limit of however much has to be borrowed to meet spending obligations.  Further, the president is not allowed to instruyct Treasury to observe the old limit, because to do that would force Treasury to usurp the Congressional power of appropriatiion.  If Treasury were to fail to borrow the 40% of revenue now coming from borrowing, it would not be able to meet all spending obligations.  It would have to pick and choose which 60% of obligations to meet, and which 40% to fail to meet.  Treasury can't do that.   It's not Congress, it can't appropriate money to my pension and not to your salary.  It can only obey Congress's directions and pay us both, and to do that ti has to make use of its delegatrd authoruity to borrrow up to the new limit.

      It is not at all uncommon to have laws floating around that have no practical effect.  It's the law that it's now Reagan National Airport, but that doesn't mean you have to call it that, or that anyone has to call it that.  And a not uncommon reason for a law to have no actual effect to still be on the books, is that it's been superceded by new law, but nooone got around to repealing the old law.  In this case, the old limit was never done away with because deficit scolds love to use it as a soapbox, and it has seemed all these years harmless enough to indulge them.

      Of course it bothers reasonable people to enter into even the false appearance of lawlessness.  Of course you're reluctant to run up the Jolly Roger and take to a life of piracy.  The administration has the same reluctance.  We all hope that the real pirates in this scenario will cave, and Treasury will not have to actually deal with a breach in the old outdated limit.

      But they might not cave.  They are pirates.  We have to be ready to respond to whatever illegal insanity they throw at us, and that might include Treasury actualy having to ingore the old limit.  We need to be ready to explain that action if it happens.

      The states must be abolished.

      by gtomkins on Mon Jan 07, 2013 at 11:44:19 AM PST

      [ Parent ]

      •  Nice to see a responsible diary on this. (9+ / 0-)

        Minting a shady 'trillion-dollar coin' is not the solution, not now and not for the precedent it would set for the foreseeable future.

        Only think of giving Obama this power if you would be happy to see the next Dubya enjoy the freedom to add trillions to the Treasury at his sole pleasure, for whatever purpose he might have in mind.

        Join us at RASA: Repeal or Amend the Second Amendment. (Repeal will not ban guns, just help regulate them.)

        by Sharon Wraight on Mon Jan 07, 2013 at 02:00:05 PM PST

        [ Parent ]

      •  Incomplete (4+ / 0-)

        Congress gave the treasury to print reserve notes, true. But, in 1996 they delegated authority to the President to coin money. If dollar bills are constitutional, then so is the trillion dollar coin.

        Whether it's a good idea is a different issue.

        Show and don't tell. Demonstrate your point rather than explaining your point. -Rachael Maddow

        by galvarn on Mon Jan 07, 2013 at 03:32:21 PM PST

        [ Parent ]

      •  Even moreso..... (4+ / 0-)

        Congress has already clearly authorized the paltinum coin option.  

        So I think a good judge would likely rule not only that it's legal, but that the president is REQUIRED to issue coins in suffient denomination to fund the spending already passed by congress.  

        Not spending money which congress has already ordered spent is not a legal option when he has been already been given by congress the ability to finance that spending through coinage.  So long as he's permitted to issue the coins, there is no contradiction.  

        If the president doesn't issue the coin, someone should sue in order to force him to.

        •  The law was about commemorative coins (2+ / 0-)
          Recommended by:
          RUNDOWN, Nova Land

          It wasn't about giving the executive the power to add as much as he cared to the Treasury, whenever he cared to, without going to Congress.  It wasn't about high finance or the fiscal balance.  It was a law letting the the US get in on a bit of that Franklin Mint action.  Think late night cable telemarketing and you're in the same ballpark as this law

          Even if this law did actually inadvertently delegate to the president this Congressional power to generate revenue, a law that lets him mint trillion dollar coins does not sufficiently limit the delegation of power to pass constitutional muster.

          Take your choice: this law either doesn't let the president mint the trillion dollar coin, or it does and it's unconstitutional.  I really don't see a thrid possibility.

          The states must be abolished.

          by gtomkins on Mon Jan 07, 2013 at 06:01:59 PM PST

          [ Parent ]

          •  It's possible (4+ / 0-)

            that Congress passed an unconstitutional delegation of its own powers.  It has been known to pass unconstitutional laws.  However, until that law has been deemed unconstitutional by the Supreme Court, it would appear that the President is MANDATED by the 14th amendment to attempt to use it if necessary to pay the debts of the United States incurred by legal Congressional appropriations.  And so, he would have to do so, and then somebody would have to challenge the constitutionality in the Court, and it would have to wend its way through SCOTUS, which would take at least two years.  Meanwhile, the debt ceiling would be dead and the bills would be paid and the Republicans wouldn't be able to hold the entire government hostage for their pet cutbacks.

            But . . . just because the law was originally passed for the purpose of authorizing commemorative coins does NOT mean that it can't be used, ummm, "creatively".  Just think how the railroad corporations used the language of the 13th Amendment that was written to assure civil rights for black men, to create "equal rights" for Corporate "Persons".

            A Roosevelt (either one) would jump on this in a heartbeat.  All it takes is the balls to grab a tool that happens to be shaped like the hammer you need.

            •  and don't forget how (2+ / 0-)
              Recommended by:
              david78209, MPociask

              the NRA bastardized the 2nd Amendment.

              There is nothing new about using the letter of the law for purposes different than its intent.  

              •  Maybe you shouldn't, but you can. (2+ / 0-)
                Recommended by:
                Fair Economist, MPociask
                It's common sense that you can't use laws in ways that were not intended.
                It happens all the time, that laws get used in ways that weren't intended when Congress passed them.

                I think Obama should put this option "on the table," front and center, and dare the Republicans to pass a bill changing the law to limit the total amount of platinum coinage in the same way the amount of paper money is limited.  Such a change in the law might pass the House but not the Senate, and even if it did it could be vetoed.

                In a perfect world we wouldn't need gimmicks.  In the real world, we shouldn't unilaterally forswear their use.  

                We're all pretty strange one way or another; some of us just hide it better. "Normal" is a dryer setting.

                by david78209 on Mon Jan 07, 2013 at 10:42:46 PM PST

                [ Parent ]

                •  Using gimmickry in an imperfect world doesn't... (0+ / 0-)

                  ... sound sensible, either.

                  2014 IS COMING. Build up the Senate. Win back the House : 17 seats. Plus!

                  by TRPChicago on Tue Jan 08, 2013 at 05:25:38 AM PST

                  [ Parent ]

                  •  The Civil Rights Act of 1964 was upheld (2+ / 0-)
                    Recommended by:
                    MPociask, david78209

                    against a local barbecue using the commerce clause.

                    Ollie's barbecue had only one location and argued that it was not engaged in interstate commerce.  The Supreme Court ruled that the amount of food that crossed interstate lines was sufficient to for the commerce clause.  

                    I seriously doubt that the drafters of the commerce clause had intended for it to be used in this manner.

            •  Dick Cheney ... (0+ / 0-)
              But . . . just because the law was originally passed for the purpose of authorizing commemorative coins does NOT mean that it can't be used, ummm, "creatively".
              would umm, be "proud" , of that argument.

              If not us ... who? If not here ... where? If not now ... when?

              by RUNDOWN on Tue Jan 08, 2013 at 07:21:14 AM PST

              [ Parent ]

        •  He isn't required to do that particular thing. (0+ / 0-)

          It's as reasonable to say that the President can read the 14th Amendment, too, and implement it even if Congress passes - or doesn't pass, in the case of a continuing increase in its arbitrary debt ceiling - anything.

          2014 IS COMING. Build up the Senate. Win back the House : 17 seats. Plus!

          by TRPChicago on Tue Jan 08, 2013 at 05:24:40 AM PST

          [ Parent ]

          •  I don't see a 14th ammendment issue (0+ / 0-)

            The 14th ammendment only requires the president to honor all debts.  It doesn't authorize him to issue new debts, especially when congress has directly prohibited him from doing so.

            If there were a conflict between competing requirements of congress, maybe you would be able to get a court to overide one of them.  But here there is no conflict, since congress has clearly provided the president a means to finance spending without tax revenues or new debt.  

            Really, it's up to congress.  It's congress which has the power to collect taxes, borrow money, pay debts, and to coin money.  

            In this case though, congress has already authorized the spending and the coinage.  So that's all the president can do, until congress decides something else.  You can't choose whether or not to do what congress has decided.  

    •  They've *already* borrowed the money (6+ / 0-)

      They did that when they authorized the expenditure.

      Obama should issue One Million Dollar bills with Reagan's face on them. Rich Conservatives will buy them and frame them, just to impress their corporate office visitors . Or perhaps they can give them to their grandchildren, who would be told to save them for college.

      Either way, it's a way to get some purchasing power out of the hands of the wealthiest, and into Treasury coffers.

      They say "cut back" - we say "fight back"!

      by Louise on Mon Jan 07, 2013 at 01:15:12 PM PST

      [ Parent ]

    •  this is why I advocate suing Congress when it (0+ / 0-)

      abrogates its constitutional responsibility to hold all U.S. debt inviolate.

      I do not care if SCOTUS doesn't want to be involved -- take them by the collective ear, drag them down to the woodshed, force the switch upon them and tell them to get to work.

      It's clobberin' time.

      It seems curiosity has killed the cat that had my tongue.

      by Murphoney on Tue Jan 08, 2013 at 11:07:15 AM PST

      [ Parent ]

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