According to US Treasury Secretary Janet Yellen, the national news and fiscal watchdogs, unless the United States Congress takes immediate action, the nation will hit its debt ceiling on or before Oct. 18, 2021. By all accounts, this would be a bad thing as it would result in recession and the US defaulting on its ability to pay back its creditors, which would trigger a cascading series of events resulting in … you guessed it … a midnight visit by “recovery specialists” who stop by to remove Uncle Sam’s shiny new Buick hybrid.
At this point I hear literally no one asking, “What is the debt ceiling,” although I think I heard Congressional Democrats and President Biden say, “Debt ceiling? Debt ceiling? We don’t need no stinking debt ceiling!” The Republicans are not exempt from this, but they are not the party in power this go round. Give them time, though. Give them time.
The debt ceiling, according to that unassailable fount of human knowledge known as Wikipedia, “is a legislative limit on the amount of national debt that can be incurred by the U.S. Treasury, thus limiting how much money the federal government may pay on the debt they already borrowed.” In other words, it is the self-imposed limit on the percentage of the federal budget that can be used to pay for previous obligations.
In order to avoid default, Congress must take action to address the issue. While the best long-term solutions would be limiting recurring obligations, balancing the budget, and paying off old debts before incurring any new ones, that does nothing to stop the imminent default. While there are a few options available for Congress, the best-known and most widely-used is to vote to raise the limit.
Since the debt ceiling was implemented in the US in 1917, there have been approximately 90 instances of Congress raising it to prevent the country from going into default.
Coincidentally, there have been approximately zero instances of Congress learning its lesson and taking steps to prevent this from ever happening again.
The upside of raising the limit is that the country avoids default. The downside is that it takes time and may not be the most politically expedient solution in a year of bad decisions by the party-currently-in-power-by-the-narrowest-of-margins. In other words, a year much like this one of 2021. So what is an insincere and deflecting politician supposed to do to perpetuate the problem while trying to make it appear like they care about the underlying issue?
There have been a few ideas bantered about over the years. One novel – novel in the same way that COVID-19 is a novel coronavirus – approach that is gaining attention again is the idea of a “trillion-dollar coin” to be minted at the direction of the Treasury Secretary and deposited with the Federal Reserve. Like quantitative easing (QE), it is largely a book-keeping trick available only to the federal government to make it look like there is more room in the budget than actually exists. It is akin to a person writing themselves a check for $1000 to avoid overdraft, with the check being written from the same account that is facing overdraft. Try it sometime. I am sure the bank and the local District Attorney will understand.
According to Axios, this process has a quick turn-around, so it could be done at the last minute to bridge the gap between default and raising the debt ceiling. While the idea of minting a trillion-dollar coin is far-fetched and is questionable in its legality, it accomplishes two politically expedient objectives:
1. It focuses the debt debate on the wrong issue. We should be discussing how to stay away from the ceiling, not how to keep raising it, and;
2. It demonstrates the desperate measures that politicians will embrace in order to push through their pet spending projects. While the party in power at the moment are Democrats (by a margin so narrow that Kate Moss would consider it too thin) the Republicans did not demonstrate much fiscal restraint under Donald Trump’s presidency, especially the last two years.
The danger of actually minting such a coin is the precedent it sets: once that action has been taken, it will become easier to justify next time there is an impasse over raising the debt ceiling. I can easily imagine a future where the Treasury Secretary will mint trillion-dollar coins so frequently that they will be passed around like tokens at a birthday party at Chuck E. Cheese’s. Why not also task the White House kitchen to send over-cooked pizza with cardboard-like crust to the Rose Garden as the president announces the minting of coin after coin? Afterwards, animatronic animals can sing tinny sounding songs and the members can retire to the East Room for a round of skee ball and whack-a-mole.
Fortunately, this recourse has been avoided for now. On Thursday, Oct. 7, by a vote of 50-48, the Senate passed an extension to the debt ceiling. This would only be a temporary solution, though, as it would expire on December 3.
Ultimately, minting a trillion-dollar coin as a recourse to raise the nation’s debt limit through bypassing Congress will leave a bad taste in the public’s mouth. Which is a shame, because I love minty things. Peppermint chocolate chip ice cream? Yes, please. Peppermint Patties? I am all for getting that minty sensation. Minting a trillion-dollar-coin? Tastes like compromise and defeat. I’ll pass.