For weeks I have been debating whether to talk about “the magic coin.” Since
there are still people talking about it, perhaps it is worth a comment. Earlier in the month,
Paul Krugman (a Nobel-winning economist) writing in the New York Times suggested
that President Obama should mint a $1 trillion platinum coin if the debt ceiling debate
breaks down.
His argument is that the raising the debt ceiling has become too political and will
force the government to make bad choices and ultimate destroy the credit rating of the
United States government. I might interject that politicians have hurt our credit rating by
spending more each year than they take in through various forms of revenues.
But let’s get back to the issue at hard. Krugman and others have suggested a
simple solution. There is a legal loophole that would allow the Treasury to mint platinum
coins in any denomination the secretary chooses. Create a $1 trillion coin, and then
deposit it in the Federal Reserve. That would create enough cash to bypass the debt
ceiling.
The few people suggesting this believe it would solve our economic problems and
allow the executive branch to bypass the political gridlock in Washington. Opponents
think it is a gimmick that challenges the right of the legislative branch to have any power
over the federal purse.
Most of you, I would assume, would agree that it sounds like a gimmick and an
invitation for Congress and the president to spend as much money as they want without
any constraints. Is that really a serious suggestion for how to address the problem of
spending? Sure, some have openly rejected the idea. But remember that it was advanced
earlier this month by a Nobel laureate economist in the pages of the New York Times.
You might also wonder if creating a magic coin (or a whole bagful of magic
coins) would eventually result in inflation. The money in your pocket, wallet, or purse
would be worth much less in the future.
It is a sad commentary on the state of our national debate over spending and the
federal budget when one serious solution put forward is to mint a magic coin. I’m Kerby
Anderson, and that’s my point of view.