The idea that President Obama could evade the debt limit by ordering the Treasury Department to mint a $1 trillion platinum coin started off as a joke, or a quasi-joke, but now, thanks in part to Paul Krugman as well as to many other influential commentators (even the former head of the U.S. Mint), is being taken seriously. And if serious people take it seriously, then the coin loses its fairy-tale quality, and why not go through with it? The answer is that the legal case for the platinum coin is not as strong as people think, and if the president gets this wrong, the consequences could be severe.
Matt Yglesias lays out the legal case. It’s based on 31 U.S.C. § 5112(k), which provides that Treasury may mint platinum bullion coins in accordance with specifications subject to the Treasury secretary’s discretion. So Treasury could mint a $1 trillion coin, deposit it at the Federal Reserve, and then pay government expenses with Federal Reserve notes. Treasury could even make lots of $1,000 coins or $1 million coins and directly pay its bills with them. Congress passed this law only to authorize Treasury to make a few bucks by selling commemorative coins, the legislative history makes clear. But, as Yglesias notes, a rule for interpreting statutes holds that a law’s clear language trumps contrary legislative history. In addition, courts customarily give regulatory agencies like Treasury some deference in interpreting statutes that they administer.
But run for the hills whenever anyone tells you that the law is clear. If you think the case is easy, consider FDA v. Brown & Williamson. The Food and Drug Administration sought to regulate tobacco products, citing its statutory authority to regulate “drug delivery devices.” Nicotine is a drug, and therefore cigarettes are drug delivery devices, the agency reasoned. But the Supreme Court ruled against the FDA.
The court cited a different rule of interpretation, one that says that “the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.” Also, “the meaning of one statute may be affected by other Acts, particularly where Congress has spoken subsequently and more specifically to the topic at hand.” Although the FDA statute by its terms authorized the FDA to regulate drug delivery devices like cigarettes, many other statutes indicated that Congress did not regard tobacco as a drug of the sort that FDA should regulate. In addition, the FDA had never tried to regulate tobacco before, so, the court said, Congress passed other laws under the assumption that it could not.
The debt ceiling statute, as well as all the other laws that regulate the budgetary and money-making processes, contemplates that Congress will determine the size of the debt and that the Fed will determine the money supply. Congress’ central role goes back to the Founding Fathers: The Constitution gives the borrowing, spending, and taxing powers to Congress, not to the executive. Debt ceiling statutes have played a role in budget negotiations for a century and have been renewed again and again, all on the implicit assumption that the president cannot evade them by minting coins. The 1990s-era commemorative coin law, never used for this purpose before, can hardly override that established practice. And the platinum coin clause appears among other provisions that more carefully circumscribe denominations and quantities, which provide a basis for believing that Congress never intended to give the president the unlimited power to mint coins.
Then there is the legislative history. As far as I can tell (and my half-hearted research is consistent with this account), the platinum coin clause originated in a bill called the Commemorative Coin Authorization and Reform Act of 1995, about which one member of Congress said:
This important legislation provides critical reform of our nation’s commemorative coin program. The reforms contained in this bill have been suggested and endorsed by the administration and the Mint’s Citizens Commemorative Coin Advisory Committee. … In summary, Mr. Speaker, in our vote today, we will ensure the financial integrity of the commemorative coin program.
So it is to the Citizens Commemorative Coin Advisory Committee to whom we owe the idea that the president can evade the debt limit by minting a $1 trillion coin? Actually not. The original bill restricted the price of the coins to their bullion value plus “a reasonable profit,” that is, um, somewhat less than $1 trillion. Somewhere on its way into law, the commemorative coin bill lost this restrictive language, perhaps thanks to a mischievous elf somewhere in the bowels of the Capitol. Still, even judges philosophically disinclined to give weight to legislative history will have a hard time converting a sloppily drafted law intended to augment the collections of numismatists into a license for the president to manufacture an unlimited amount of money.