Photo: Wikimedia Commons
Stunning news from WaPo’s Ezra Klein: The Treasury is ruling out the use of a trillion dollar platinum coin to break the debt ceiling impasse.Klein writes:
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.
With this, the White House has now ruled out the two best options for preventing a default in the event that the House GOP refused to life the debt ceiling. The White House has been quite adamant that the other alternative (invoking the 14th Amendment) is not acceptable.
So now the stakes are high, as The White House has refused to negotiate with the GOP on a debt ceiling hike.
What bargaining chips does The White House hold? Unclear.
Klein adds another incredibly salient point about the comment he receives:
The inclusion of the Federal Reserve is significant. For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don’t believe it’s legal and would not credit the Treasury Department’s deposit, the platinum coin would be worthless.
The good news?
The whole #MintTheCoin discussion has been very helpful for teaching people economics, as was evident today on Up With Chris Hayes.
UPDATE: Via email, coin supporter Paul Krugman gives his take: “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.” He also has a full post up here.
UPDATE II: The White House has issued a very strong followup 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.”
UPDATE III: On background, a Democratic aide in the Senate says: “it’s certainly a strange negotiating strategy to go out of your way to decrease your leverage by taking options off the table.”
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