WASHINGTON (CBSMiami) – As Congressional Republicans and President Barack Obama begin to clash over the raising of national debt ceiling, a plan relying on one or two coins save the nation has started to gain momentum.
Some have dubbed it the “platinum coin option” or the “trillion dollar coin option.” The platinum coin option has been posed thanks to a legal loophole under a law passed to deal with commemorative coins.
It would work like this: The Treasury Department has the ability to mint platinum coins in any denomination the Secretary of the Treasury chooses. The Treasury would mint one or two platinum coins worth $1-$2 trillion each and then deposit them with the Federal Reserve.
With $1-$2 trillion in the bank, the Treasury Department could continue paying all bills associated with the national debt. Once the debt ceiling is finally raised, the coins would be destroyed and theoretically there would be no damage to the macroeconomy.
According to the Washington Post, a former Mint director and Treasury chief of staff said the platinum coin option, “would be exercising authority that Congress has granted routinely for more than 220 years.”
The Post reported that the platinum coin option wouldn’t take the power to raise the debt away from Congress, just delay when the debt limit is reached. The Post also quoted the former Mint director saying that “any court challenge is likely to be quickly dismissed.”
The other option that some have put forth is the so-called “14th Amendment option.” This plan would quote the first line of Section 4 of the 14th Amendment which reads: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
Some legal scholars have said this allows a president to simply state the debt limit ceiling is unconstitutional and ignore it. However, this plan has been expressly rejected by the White House several times in the last few years.
President Barack Obama has repeatedly said he won’t negotiate over the debt ceiling, while Republicans, especially younger Tea Party Republicans have shown interest in sending the nation into default and government shutdown to extract spending cuts they want.
It sets up a dynamic similar to the fiscal cliff deal. President Obama and Democrats have the public and big business behind them in the debt ceiling fight. Veteran Republicans are not prepared to default on the debt for the macroeconomic calamity that could ensue, as opposed to the younger Republicans.
During the fiscal cliff deal, Obama had the leverage and got more of what he wanted in some areas and was able to split the Republican caucus over what direction to take. With the platinum coin option and other plans available, plus the support of major business leaders, Obama again has the high ground in the fight.
But, that doesn’t mean he will win in the end. Even if Obama was able to get the debt ceiling raised without any problems, there’s still the matter of a continuing resolution to fund the government and the sequester with major cuts to both military and domestic spending.
Each one of the three elements still to be decided in Washington has the ability to drop a bomb on the still struggling U.S. economic recovery from the Great Recession. Whether any of them hit, will be determined by the end of February when the crises comes to a head.