Of course, there’s a hitch or two in the plan to mint The Coin. For one thing, numismatizing the debt by striking trillion-dollar debt discs is not exactly what former representative Mike Castle (R., Del.) had in mind in 1995 when he introduced the legislation that turned into the provision in public law 104-208. Dylan Matthews of the Washington Posttracked down this “unsuspecting godfather” of the platinum gambit, and Castle confirmed as much. “That was never the intent of anything that I drafted or that anyone who worked with me drafted,” Castle told Matthews. Indeed, the legislation was designed to give the Treasury flexibility to create more affordable platinum coins for collectors. To use that authority to backdoor the 17th and 18th trillion dollars of the national debt would be, according to Castle, “so far-fetched and so black helicopter-ish a type of methodology of trying to resolve something like this that I think the public would totally scoff at it.”
Some on the left understand this. Take, for instance, Kevin Drum of Mother Jones, who flatly titles a post on the subject “No, a $1 Trillion Platinum Coin Is Not Legal.” Drum, doubting there is enough of the requisite straitjacket brand of strict constructionism in the U.S. court system to uphold such a tortured reading of the statute, dismisses the ploy as “the kind of thing that Herman Cain would come up with” (the dread reductio ad Hermanum, a conversation-stopper in progressive circles).
Second, printing The Coin would send dark and foreboding economic signals. As Washington Research Group analyst Jaret Seiberg recently put it:
The $1 trillion coin would expand the money supply by a considerable amount, which could spark serious inflation. And it seems like something out of a Simpson’s episode. So we are not even sure anyone would take this as an actual solution. All of this economic chaos could worsen the economic downturn, which would further weaken credit conditions and impose higher losses on banks.
Its serious supporters think The Coin would work the same way a trillion dollars in Treasury securities does, except instead of moving paper to the Fed, the Treasury would move an ounce of the finest platinum, Pt-78. Never mind that if this is true, it’s unclear why the debt-ceiling statute doesn’t already cover such a transfer. It remains the case that, as Seiberg implies, the Fed would have to rationalize the money supply or risk inflation, meaning this is at best a kind of bee sting from the executive to the legislature — the kind of trick you can pull off only once.
Of course, by some accounts, the absurdity of The Coin solution is the whole point of it, a Swiftian modest proposal meant to put the Republicans off their intransigency. As Barro’s fellow platinum bug Timothy B. Lee put it on Twitter: “The stupid and harmful character of the debate is precisely why a gimmick is an appropriate solution.”
This is sorely misguided. I doubt there is a Republican on the House side of the Capitol who is kept awake nights fretting over how bad it will be for the party if the president puts twelve zeros on a fancy nickel and uses it to pay for green-energy subsidies. If the president minted The Coin, it might win him a few cheers from the same folks on the professional left who have called him a wuss for four years. But it would convince just about everybody else that he’s back on the Choom Gang. That’s why it won’t ever happen unless the luck of the GOP is as good in 2013 as it was bad in 2012.
Of course, there’s a tongue-half-in-cheek character to the calls to mint The Coin. But the half of the tongue not in the cheek suggests that the ploy’s proponents are missing the obvious in the debt-ceiling debate. On the one hand, there is no compelling reason to think that the GOP will let the United States default. It didn’t in 2011, and it won’t in 2013. Moreover, the fiscal-cliff deal and Sandy-relief bill have shown that Speaker Boehner is newly willing to let Nancy Pelosi provide a bulk of yes votes on urgent matters.
On the other hand, the House Republicans want spending cuts, and the debt ceiling is the nearest and biggest lever. It’s in their interest to maximize political uncertainty ahead of the deadline. After all, it makes no sense for the White House to make any concessions to the Republicans if it knows the GOP won’t allow default. It’s called chicken, and its older than dirt, never mind platinum. If you’re sure the other guy will swerve, you don’t yield an inch; and if you’re sure he won’t, you don’t play the game. That the White House is playing the game once again is evidence that the GOP has hit the credible-threat sweet spot. Combined with the fact that raising the debt ceiling is even more unpopular than raising taxes on the middle class, the Republicans might not get much, but they’ll get something.
The pundit class might find this frustrating, but given the legal, economic, and political risks of its preferred alternatives, President Obama is better off minting a pair of wishing coins and tossing them into the Capitol fountain.