Section (k) of 31 USC § 5112, “Denominations, specifications, and design of coins” plainly states that the Treasury Secretary can create arbitrary quantities of new legal tender as long as it’s made out of platinum:
(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.
Why did Congress draft a statute that doesn’t specify what denominations the platinum coin may be? I have no idea. But it’s a gaping loophole in the basic monetary framework of the United States, and pretty clearly allows Secretary Geithner to at least temporarily evade the debt ceiling by financing the government through seigniorage. The administration officials to whom I’ve raised this point generally respond by chuckling. Kevin Drum offers what amounts to an incredulous stare argument that this is undoable, “no way an actual president would ever try anything so obviously childish … so wildly contrary to the intent of the law … banana republic territory.”
Maybe so. But such is the stuff of which great leaders are made. And there is precedent for it. In 1933, Franklin Roosevelt essentially broke the back of the Great Depression by taking the United States off the gold standard. As a matter of substantive policy that was much more radical than evading the debt ceiling. And as a procedural matter it was tricky. Did Roosevelt have the authority to do that?
Sort of! He issued Executive Order 6102 under the terms of the World War I Trading With the Enemy Act. Is that what congress intended? Clearly not. FDR’s Depression-era gold policy had nothing whatsoever to do with World War I or any other war. But it was on the books. And Roosevelt felt that it was the right thing to do and that the job of his lawyers was to find a way for him to do the things that he thought he needed to do. Note that for better or for worse when it comes to counterterrorism policy, this is precisely the Obama administration’s attitude. FDR said explicitly that he wanted to wage war on the Depression as vigorously as he would wage an actual war. And it worked. I don’t think it would be a good idea for the government to be routinely financed by coin gimmicks, but it’s a much better option than the alternative of default or endless debt ceiling crises. Putting the platinum coin on the table is a good way of clarifying that whatever House Republicans say or do, default is not an option and no concessions will be made so they ought to save face and embrace the McConnell Principle.