WASHINGTON, January 8 (By Maria Young for RIA Novosti) – Hey, have you heard the one about the guy who tried to buy a cup of coffee with a trillion dollar coin? His name was Barack Obama, so the joke goes, and it’s based on a semi-genuine proposal that has policy-makers in Washington wondering whether to laugh or cry.
“This is a combination of sleight of hand and the worst kind of sideshow hucksterism you can imagine,” said David John, a senior fellow with the Washington-based conservative think tank The Heritage Foundation.
The proposal he’s referring to is based on a deceptively simple idea: If America needs more currency to solve its latest budget woes, why not just make some more, say, a trillion dollars’ worth, in the form of a single, platinum coin?
Then President Obama can give it to the US Treasury, and zip-bam-boom! America has an extra trillion dollars in assets. Fiscal crisis diverted! Champagne for all! Very expensive champagne.
Such is the gleefully logical approach to a looming debt ceiling that promises to send Congress into yet another bipartisan catfight over whether to take on more debt or enact severe spending cuts.
The origin of the trillion dollar coin idea is a little murky.
It’s been floating around Capitol Hill for at least a couple of weeks – maybe that’s why Congress had such a hard time reaching a deal on the fiscal cliff.
There’s a petition on the White House “We the People” website asking the Obama administration to direct the US Mint to make the trillion dollar coin. The White House promises to respond to petitions that get 25,000 signatures, so far the platinum coin petition has less than 7,000 supporters.
There’s also an active Twitter campaign at #MintTheCoin, with a counter movement at #StopTheCoin.
But US Rep. Jerrold Nadler of New York gave the idea some credibility in an interview with the online news agency Capital.
“All you do is you tell the Federal Reserve to make a platinum coin for one trillion dollars, and then you deposit it in the Treasury account, and you pay your bills,” Nadler said. “I’m being absolutely serious.”
“It sounds silly but it’s absolutely legal,” he insisted.
Then influential financial columnist Paul Krugman chimed in with a New York Times blog this week, asking readers, “Why not?”
It was all serious enough that US Rep. Greg Walden of Oregon announced plans this week to introduce a bill to block the coin creation.
“Some people are in denial about the need to reduce spending and balance the budget. This scheme to mint trillion dollar platinum coins is absurd and dangerous, and would be laughable if the proponents weren’t so serious about it as a solution,” Walden said in a statement. “I’m introducing a bill to stop it in its tracks.”
At the heart of the issue is a looming fight over the debt ceiling – the maximum amount Congress will let the government borrow in order to pay its bills.
Since the limit was set in the early 1900’s, it’s been raised by Congressional vote from time to time in order for the country to meet its debt.
As they have on other recent occasions, some members of Congress are balking at raising the limit again, opting instead for deep automatic spending cuts or letting the US default on its debts.
“Should President Obama be willing to print a $1 trillion platinum coin? Yes, absolutely. He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous. The decision should be obvious,” Krugman wrote.
Despite the trillion dollars attached to this proposal, the platinum coin is not exactly unheard of.
Various governments including the US and Russia have over the years used some of their inventory of gold or silver to create and sell commemorative coins, stamping them with a design and attaching a nominal value.
Platinum wasn’t originally used because it was hard and therefore difficult to stamp, and in the 19th century wasn’t considered a precious metal like gold or silver, said John.
That changed a few years ago, he said, when the US passed legislation to allow the Mint to issue platinum coins, and decide whatever denomination it wanted to assign.
“What people have done now, with respect to the trillion dollar coin, is to find this very specialized law and say, ‘Well, since the US Mint can decide any dollar value, the president could get them to mint a single coin. So you take this trillion dollar coin and give it to the Federal Reserve,” John said.
Just mention the trillion-dollar coin proposal anywhere in Washington and chances are, there’s someone in the vicinity snipping and sputtering about how utterly un-funny it is.
“The trillion-dollar coin is the fiscal equivalent of the Flying Spaghetti Monster: a logical reductio ad absurdum designed to emphasize the silliness of an opposing position,” said Felix Salmon, a financial blogger for Reuters.
“The $1 trillion platinum coin is a desperate gimmick of questionable legality and doesn’t even come close to solving our fiscal problems,” said former US Mint director Edmund Moy in a column on the CNBC website.
Conservative radio host Rush Limbaugh was incensed at the idea, telling his audience, “Now, folks, you have to admit that this is the kind of stuff that banana republics do. I mean, this is absurd. But it has the support of leading leftist Democrat journalists and economists.”
In fact, said John, not only would the coin fail to solve the debt problems, but it would reduce US fiscal credibility abroad, really the only thing that backs US currency now.
More than anything else, he said, it’s another sign of just how divided America’s Congress has become.
“It’s an indication of gridlock,” he said. “And it’s more than a little bit sad. It’s actually very sad.”