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View Diary: Magic tricks, loopholes, government shutdowns and the debt ceiling (158 comments)

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  •  Congress has not given the President authority... (1+ / 0-)
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    ... to evade its debt ceiling law by minting ultra-valuable coins.

    Some argue Congress's seignorage laws could allow it. (Even a few respected scholars so argue, showing that with enough desperation, everything becomes arguable.) Some say that when the case reaches the Supreme Court, it will ignore the legislative history of coin-minting legislation, uphold The Coin Trick and abide by the strict language of the law. (I mention that only for the sake of fairness and advancing the argument, but I think that is ridiculous. This is an area where even J. Antonin Scalia will look to legislative intent, and rely on it!)

    Yes, the Magic Coin is one way of evading the consequences of Congress's artificial and irresponsible bargaining position. I believe it's likely that the markets will still react badly, ratings will go down and the cost of debt - looking for an excuse to rise! - will rise anyway.

    For me, it's responsible to go ahead and have the confrontation Congress seems to want if it doesn't address the debt ceiling. So, what are those choices?

    1. Cut-slash-and-burn budgeting for a while and hope the country puts the blame in the right place - the irresponsible Tea Party and its ilk. After all, this would accord with the will of a co-equal branch. To me, this is extreme in its own way.

    2. Ignore the debt ceiling. Regard it as incompatible with spending that Congress has authorized and appropriated. When challenged, point to the 4th Section of the 14th Amendment. Although it was passed to serve in a very different time, the circumstances (denial of debt obligations once validly incurred) are similar. Rely on being so very much more realistic and adult than many members of the Republican caucus in the House and the filiblusterated Senate.

    3. Let the sequester roll. Everyone dislikes it for their own reasons. A plague on both your houses, Congress, you passed that big plodge of stuff, too. What would you like to fix first? Now, the President can wait, watch and threaten a veto!

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

    by TRPChicago on Sun Jan 20, 2013 at 12:15:22 PM PST

    [ Parent ]

    •  "[T]he legislative history of coin minting..." (0+ / 0-)
      Some say that when the case reaches the Supreme Court, it will ignore the legislative history of coin-minting legislation, uphold The Coin Trick and abide by the strict language of the law.
      Note that coins are the only dollars that are not bank-issued interest-bearing money.  For those interested in that history, I strongly recommend this recent article by Ellen Brown.
      •  There's not much legislative history on this. (0+ / 0-)

        The provision is Title 31 U.S.C. Sec. 5112 (k):

        (k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary's discretion, may prescribe from time to time.
        It is in a section of the law dealing with the physical specifications of coinage. It and earlier provisions have been passed by Congress as part of commemorative coin legislation such as the US quarter series, so the US mint could get some of the value captured by commemorative  coinage issued by private mints (like Danbury). That specific provision was part of an act passed to authorize the Treasury to produce American Platinum Eagle bullion and proof coins.

        As Reuters reported last week, "'Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,' said Treasury spokesman Anthony Coley in a statement."

        And, it would not put market turmoil or a political confrontation to rest. Indeed, it is as likely to make them worse and escalate as much as any other alternative (e.g. relying on the 14th Amendment, which I prefer) other than starting to close down spending. Which Congress seems to want to pin on tis administration one way or another.

        I think the point is if all the Treasury needs to do to evade the debt ceiling is to mint a big valuable coin and put a lot more money in circulation, creditors will see it as a reactive ploy, just too easy an out. After all, President Obama wants to hold Congress's feet to the fire, a fire which Congress and Congress alone - with its predecessors - created.

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

        by TRPChicago on Sun Jan 20, 2013 at 02:20:27 PM PST

        [ Parent ]

        •  You've missed a couple of things. (0+ / 0-)
          It is in a section of the law dealing with the physical specifications of coinage. It and earlier provisions have been passed by Congress as part of commemorative coin legislation such as the US quarter series, so the US mint could get some of the value captured by commemorative  coinage issued by private mints (like Danbury). That specific provision was part of an act passed to authorize the Treasury to produce American Platinum Eagle bullion and proof coins.

          The bill's coauthor, Philip Diehl, claims that he intended it as a blank check.

          Also, your wrote:

          As Reuters reported last week, "'Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,' said Treasury spokesman Anthony Coley in a statement."
          But it is the GOP who have been "avoiding an increase in the debt limit."  

          The point is that  the Treasury has been paying a portion of the government's bills with coined money for over 220 years --- that can't be illegal.  And, 31USC5112(k) simply gives the Treasury permission to mint larger coins for the purpose of paying the government's bills, whether or not the debt limit gets raised.  

          Finally, Ellen Brown indicates that Congress did not impose limits on the amount of money the Treasury could mint until 1982, which she implies was a result of lobbying by the banks:

          That may have been true then, but in legislation initiated in 1982, Congress chose instead to impose limits on the amounts and denominations of most coins. The one exception was the platinum coin, which a special provision allowed to be minted in any amount for commemorative purposes.

          [...]

          Philip Diehl , former head of the U.S. Mint and co-author of the platinum coin law, confirmed that the coin would be legal tender:

          In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8).

          •  I can't find that Diehl was a member of Congress. (0+ / 0-)

            The quote about the debt limit was to the Treasury spokesman. And with respect, Ms. Brown's history, credible as I accept that it is, isn't legislative history, only lobbying history ... which would open a quagmire of analysis if courts started accepting that as part of the law.

            I respect your advocacy. But I don't think the Magic Coin is a viable legal, political or sensible idea (three potentially different things).

            I'd prefer straight out confrontation, with Congress being inconsistent with itself, based on the 14th Amendment (to continue spending) or the necessary cut back (so as not to save the willful GOP from itself).

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

            by TRPChicago on Sun Jan 20, 2013 at 04:47:18 PM PST

            [ Parent ]

            •  He was head of the Mint and "coauthor" of the bill (0+ / 0-)

              Diehl is commonly cited as "coauthor" of 31USC5112(k). Per Reid Pillifant:

              Diehl said ... he worked closely with Republican Rep. Mike Castle, who was chairman of the House Financial Services Subcommittee at the time, and eventually got the bill through the Republican-controlled House with what Diehl called a "blank check."
              That quote from that Treasury spokesman is the only thing  from the Obama administration that I've seen construed as a claim that minting platinum to pay the nation's bills would be illegal.  Maybe they said something more direct elsewhere.  If so, I'd appreciate a reference.

              I don't know about "viability."  What's clear is that for 220 years we have been minting money and paying bills with the proceeds.  And, although the denominations were specified, the quantities have been left to "the Secretary's discretion."  If I understand correctly, we minted about $10 billion in 2011.  For platinum coins, the denomination is also left to "the Secretary's discretion,"  and you're trying to tell me that Congress can't do that.  

              Now you may thing that the amounts defy all legality, but note that using powers delegated to him by Congress, Ben Bernanke loaned seven trillion U.S. dollars, which are a liability of the United States to various banks around the world.  Why is that "viable" and the minting of a high-value platinum coin is not?

    •  Either 31USC5112(k) is constitutional or it's not (0+ / 0-)
      Yes, the Magic Coin is one way of evading the consequences of Congress's artificial and irresponsible bargaining position. I believe it's likely that the markets will still react badly, ratings will go down and the cost of debt - looking for an excuse to rise! - will rise anyway.
      If 31USC5112(k) is constitutional, we have no further need to borrow and can ignore "the cost of debt."

      As to the intent of USC5112(k), the then-head of the Treasury and coauthor of 31USC5112(k), Philip Diehl, said recently that his considers the platinum-coin option to be legal and that he was seeking a "blank check" with that law.  As Harvard law professor  Laurence Tribe  put it:

      I don’t think it makes sense to think about this as some sort of “loophole” issue. Using the statute this way doesn’t entail exploiting a loophole; it entails just reading the plain language that Congress used. The statute clearly does authorize the issuance of trillion-dollar coins. First, the statute itself doesn’t set any limit on coin value. Second, other clauses of 31 USC §5112 do set such limits, but §5112(k)—dealing with platinum coins—does not. So expressio unius strengthens the inference that there isn’t any limit here.

      Of course, Congress probably didn’t have trillion-dollar coins in mind, but there’s no textual or other legal basis for importing this probable intention into the statute. What 535 people might have had in their collective “mind” just can’t control the meaning of a law this clear.

      It’s also quite clear that the minting of such a coin couldn’t be challenged; I don’t see who would have standing.

      Bottom line: This is a situation where the political and economic considerations, not the legal considerations, have to drive the decision-making about this option. It’s certainly a lot better from just about every perspective than having the nation stuck on either horn of the very real dilemma you outlined below, which I agree offers no plausible way out as long as enough leaders in Congress insist on playing Russian Roulette with our economy and risking our full faith and credit by using the debt ceiling as a bargaining chip as they are threatening to do.

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