What's the Deal with the Trillion Dollar Coin?

Later this year, for no good reason at all, the United States might enter a chaotic period of financial default. Once again, the country has hit its statutory debt limit, because Congress continues to spend more than the government receives in tax revenue. The Treasury has no more legal authority to issue new debt and is currently using a series of “extraordinary measures” to keep the government’s bills paid. Those extraordinary measures will last for only six months or so. At that point, either Congress will raise the debt ceiling or the full faith and credit of the country will be at risk.

Rohan Grey is a law professor at Willamette University, in Oregon, and a leading promoter of an arcane idea that could save the country from all that drama: The Biden administration could exercise its unilateral legal authority over U.S. currency to mint a trillion-dollar platinum coin and use it to pay the government’s bills. The idea seems peculiar—it first surfaced in 2010 in the comments section of a niche blog devoted to unconventional monetary policy—but Grey and others believe it would be less disruptive than many alternative scenarios.

Annie Lowrey: Let’s start with a simple question. What is the debt ceiling?

Rohan Grey: Before the debt ceiling existed, Congress would include a method of financing with each individual spending bill that it passed. Every piece of spending legislation would say The Treasury is going to issue a certain amount of securities of this duration and type or Congress will fund it with this tax or by seigniorage.

In 1917, during World War I, Congress consolidated different authorities into one and allowed the Treasury to issue bonds without its specific guidance; it created the debt ceiling. Then in World War II, in 1939, it said: As the U.S. government gets more complicated, we’re going to put more trust and discretion in the executive branch. We’ll give you a general limit on the amount of Treasury securities you can issue, and you can use those funds for all our spending commitments. The history of the debt ceiling—counterintuitively—is the history of giving the Treasury, the executive branch, more discretion.

Lowrey: And now?

Grey: As is often the case in politics, the minute you create something, it gets used in unexpected and counterintuitive ways. The debt ceiling has become a locus, a symbolic place, for politicians to fight over overall spending, overall budgeting. Every time people want to second-guess budget practices, every time they don’t like a certain social-welfare program, the debt ceiling becomes a way to object.

Lowrey: Right now, a handful of Republicans have said they won’t lift the ceiling unless Congress negotiates a new set of spending cuts. What happens if Congress does not agree to do that and does not lift the ceiling?

Grey: Right now, we’re using “extraordinary measures,” which is something we’ve done repeatedly once the Treasury exhausts its authority to issue more bonds. Many of those extraordinary measures are much more ridiculous than minting the coin.