Eric Posner on the Trillion Dollar Coin
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.