Ezra Klein has big news.
That’s the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today. ”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,” he said.Parsing and speculation below Jack Lew's signature.
31 USC 5112(k) grants the Secretary of the Treasury broad authority to mint and issue proof platinum coins with any specifications and in any denomination he chooses in his "discretion".
Laurence Tribe, eminent constitutional scholar and professor at HLS, believes that this provision of the US Code authorizes Treasury to fund the US Government's operations via seigniorage, in an emergency, even if that requires the minting of mega-denomination proof coins like the famous trillion dollar coin. I tend to agree with Professor Tribe.
Note that Treasury Department's spokesman does not say that the law prohibits the minting of large-denomination coins to fund the government, though that's probably what the statement means. Instead, he says Treasury cannot do it "for the purpose of avoiding an increase in the debt limit." Well, that is not the purpose of the trillion dollar coin. Treasury can't increase the debt limit. It would not be minting the coin in order to avoid increasing the debt limit, it would be minting the coin to prevent the government from running out of money and eventually defaulting on T-bills and all that follows from that.
So now what? I fear that the President will negotiate. Chained-CPI could be back on the table. I don't know what other path the government has. The idea of issuing "scrip" like California did seems like a legal loser. The scrip would be obligations that are subject to the debt limit, wouldn't they? Public finance experts please chime in.
1:09 PM PT: UPDATE:
Joseph Weisenthal, one of the heroes of this episode, writes
"Via Email, coin supporter Paul Krugman says: 'So, are they planning moral obligation coupons / scrip, are they willing to court disaster, or are they just hopeless negotiators? I guess we'll find out.'"
Read more: http://www.businessinsider.com/...
3:19 PM PT: New White House statement
"There are only two options to deal with the debt limit: Congress can pay its bills or they can fail to act and put the nation into default," said Press Secretary Jay Carney. "When Congressional Republicans played politics with this issue last time putting us at the edge of default, it was a blow to our economic recovery, causing our nation to be downgraded. The President and the American people won't tolerate Congressional Republicans holding the American economy hostage again simply so they can force disastrous cuts to Medicare and other programs the middle class depend on while protecting the wealthy. Congress needs to do its job."