Amid the standoff between congressional Republicans and Democrats over whether to raise the national debt ceiling, and the Biden Administration’s refusal to agree to Republican demands for spending limitations as a condition of increasing the debt, some “top [Democratic] economic policymakers,” according to the New York Times, have come up with a magical plan that would “make the whole problem go away.” The solution is to have the federal government issue a new $1 trillion platinum coin with which to pay off its deficit, and more. While Treasury Secretary Janet Yellen has dismissed the idea as a “gimmick,” it still “has its fair share of supporters.”
According to proponents, Yellen could use her authority to direct the U.S. Mint to produce a platinum coin valued at $1 trillion, or any other denomination, and deposit it with the Federal Reserve. This would supposedly enable the government “to draw on the funds as needed and continue paying its bills until a deal [on raising the deficit limit] was reached or until the $1 trillion was spent and another coin must be minted.”
Those who followed the Democrats’ previous economic deliberations will recognize in the trillion-dollar-coin proposal simply another version of “Modern Monetary Theory,” advanced by left-leaning economists, which holds that there need be no limit to the federal budget deficit, since it consists largely of debt that Americans “owe to themselves” (i.e., own in the form of bonds), and that central banks’ only restraint on the creation of money is their own needless scruples. If the government could simply mint new coins to cover any approaching deficit ceilings, the effect would be the same: no-limit federal spending without a congressional majority’s even having the power to constrain it.