The latest issue of In These Times is a special, extra-length issue devoted entirely to the subject of socialism in America today. This special issue is available now. Order your copy today.
Kevin McCarthy won the gavel for Speaker of the House through a desperate and power-hungry agreement to manufacture the debt ceiling crisis. Rep. Ralph Norman (R-S.C.) told reporters that in order to earn the vote of the Freedom Caucus, it was “non-negotiable” that McCarthy promise he would “shut down the government rather than raise the debt ceiling.” Now they’re holding McCarthy to his word.
In a recent article for In These Times, Max Sawicky laid out a compelling case for why the Biden administration needs to hold firm against the GOP. The programs Republicans are attempting to cut are popular, and it’s important to protect them as worthwhile in their own right. Sawicky also briefly mentioned one idea of several creative paths to bypass the Republican game of chicken and stave off global economic disaster: the minting of a trillion-dollar platinum coin. As X-date — the date at which the country can no longer meet its obligations — gets even closer, it may be time for us to begin considering this option as the most reasonable and viable course of action.
Keep in mind that the debt ceiling is entirely arbitrary. The limit has been raised 78 times since 1960. And the limit is not a blank check for more spending. In reality, it is payment for spending that is already committed by Congress. Ninety-seven percent of these obligations were things agreed upon before the Biden Administration ever took office.
And Republican handwringing is, of course, entirely hypocritical. Congressional Republicans barely think of the budget when the GOP holds The White House. They only play this game of chicken when they are the opposition party.
Radical Republicans organize their domestic agenda around cuts to vital social services like Medicare, SNAP and Social Security. After regaining the House majority in January, they see a default on the country’s debt as their path to victory. They also hope to score political points ahead of the 2024 election. Their proposals to lift the ceiling roll back almost all of the Biden Administration’s signature achievements and push the next debt ceiling decision right in the middle of the final stretch of the presidential race.
In 2011 and 2013, Congressional Republicans pushed the country to the brink of debt ceiling crisis to score political points against former President Barack Obama. In 2011 they brought us so close to default that credit rating agencies for the first time downgraded the U.S. credit rating from AAA to AA+. This time, they seem even more at odds with the White House, with both sides reluctant to compromise and upset important sections of their base. Progressive Democrats have shown signs of alarm at Biden’s opening of negotiations with McCarthy this week.
An economically catastrophic default is a real possibility. Extraordinary times call for extraordinary measures.
That’s why minting a trillion dollar platinum coin may not be quite as ridiculous as it seems. We’re in a game of chicken about an arcane limit on the mechanism we use to pay our bills. Why not take unilateral action to end this dangerous game? Biden could, today, instruct U.S. Treasury Secretary Janet Yellen to mint that trillion dollar coin and deposit it in the country’s account. The legal authority to do so is crystal clear in 31 US Code 5112 section 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.”
Was the intention of the law to stave off a potential financial crisis? Certainly not. That doesn’t mean it wouldn’t work.
“This is a gimmick,” says Willamette University Assistant Law Professor Rohan Grey. ”The major difference is that this is a gimmick that the public can understand, that is so simple that children can get it, which will have a significantly positive public educational impact in addition to ending the destabilizing spectacle of recurring debt ceiling crisis once and for all.”
Right now, Democrats are dancing with another option: a procedure called a discharge petition that would force a House vote. It’s not a terrible idea, but it’s a complicated move and a million things can go wrong.
The beauty of the trillion dollar coin is that it’s unilateral and instantaneous. Once the coin is deposited, the country’s ledgers immediately reflect it, reducing the deficit by the amount of the newly minted coin. The coin is then essentially destroyed and we can continue with the business of agreeing on a budget and maintaining an economy.
Congressional Republicans would be foiled, and they (likely along with many others in Congress) would probably move to make sure this could not happen again. Grey, who is a proponent of Modern Monetary Theory, predicts the episode could “cause Congress to reform the budget process permanently and get rid of the debt ceiling, or at least modify it significantly. But even if it doesn’t, there is nothing wrong with using the coin as a regular mode of deficit financing, indeed it actually simplifies things considerably.”
Even though Biden administration Treasury Secretary Yellen has been reluctant to endorse this idea in the past, as the clock ticks closer, she might not have a choice. Republicans seem content to have the alternative, the U.S. defaulting on its debts, come to pass.
To say a default would be catastrophic would be a tremendous understatement. The shockwave would almost certainly push the country into a recession, threatening any gains made by non-wealthy people in the years since the pandemic began. Positive signs in the economy like low unemployment or the shrinking gap between Black and white unemployment would surely be obliterated. Government services and the jobs that support them would have to be cut as cash dries up. Other specific issues will surely arise that are impossible to predict in advance of such an unprecedented event. But we know it will be painful.
“The past three years have been trying, with a pandemic and a war in Ukraine,” notes Claudia Sahm, an independent economist and founder of Sahm Consulting. “The last thing we need is another harmful event. We have made much progress, which is now at risk. We have much to lose now.”
Allowing us to fall over the cliff would indeed put all the progress at risk. And we know that, as usual, the pain will be felt extremely hard for Black folks: “When America catches a cold, Black America gets pneumonia,” says Jeremie Greer, co-executive director of Liberation in a Generation, quoting an old saying. “From postal workers to people who rely on food stamps to survive racial capitalism, failing to lift the debt ceiling will cause catastrophic economic pain to millions of Black people across the country. Unfortunately, this pain is too familiar and will once again be thrust upon us by lawmakers who care nothing for our well being.”
Defaulting on the U.S. debt would truly plunge the global economy into a black hole, and we are approaching the event horizon. If minting the coin is our only path out, it may be time to take it.
Celebrate 47 years of In These Times in style! Get your raffle tickets today for your chance to win a vacation for two to Cascais, Portugal!
One lucky raffle winner will receive a $3,000 gift card to cover the costs of two flights, as well as a stay in a 5-star boutique hotel, housed in a 17th century fortress with medieval architecture and décor. You can schedule the trip on your timeline!
All raffle ticket sales support ongoing In These Times reporting, just like the article you just finished reading. Get your raffle tickets now.
The winner will be selected on the night of September 30, at the In These Times 47th Anniversary Celebration. You do not need to be present at the drawing to win.
Maurice BP-Weeks is an economic and racial justice organizer and the co-founder of the national racial and economic justice organization ACRE.