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The President should “take any lawful steps to ensure that America does not break its promise and trigger a global economic crisis”

From the top four Democrats leaders in the US Senate:

“In the event that Republicans make good on their threat by failing to act, or by moving unilaterally to pass a debt limit extension as part of an unbalanced or unreasonable legislation, we believe you must be willing to take any lawful steps to ensure that America does not break its promise and trigger a global economic crisis — without Congressional approval, if necessary.”

Senate Democrats letter to Obama

The two options: the 14th amendment and the option of minting a trillion-dollar platinum coin.

The 14th amendment states that “the validity of the public debt of the United States, authorized by law…shall not be questioned.” Since the debt cannot be questioned, the debt ceiling itself is unconstitutional. But litigating that point, and relying on the Supreme Court to issue a non-political legal decision, create problems of their own.

The other option has been discussed at length:

Paul Krugman 1

There’s a legal loophole allowing the Treasury to mint platinum coins in any denomination the secretary chooses. Yes, it was intended to allow commemorative collector’s items — but that’s not what the letter of the law says. And by minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling — while doing no economic harm at all.

So why not?

It’s easy to make sententious remarks to the effect that we shouldn’t look for gimmicks, we should sit down like serious people and deal with our problems realistically. That may sound reasonable — if you’ve been living in a cave for the past four years.Given the realities of our political situation, and in particular the mixture of ruthlessness and craziness that now characterizes House Republicans, it’s just ridiculous — far more ridiculous than the notion of the coin.

So if the 14th amendment solution — simply declaring that the debt ceiling is unconstitutional — isn’t workable, go with the coin.

Paul Krugman 2

Charles Plosser of the Philadelphia Fed is against the platinum coin, which he says “doesn’t solve any real problem” and would hurt our credibility. Actually, it solves a very real problem: attempted extortion by the GOP.

Lawrence Tribe:

The statute clearly does authorize the issuance of trillion-dollar coins. First, the statute itself doesn’t set any limit on coin value. Second, other clauses of 31 USC §5112 do set such limits, but §5112(k)—dealing with platinum coins—does not… It’s also quite clear that the minting of such a coin couldn’t be challenged; I don’t see who would have standing.

Bottom line: This is a situation where the political and economic considerations, not the legal considerations, have to drive the decision-making about this option. It’s certainly a lot better from just about every perspective than having the nation stuck on either horn of the very real dilemma you outlined below, which I agree offers no plausible way out as long as enough leaders in Congress insist on playing Russian Roulette with our economy and risking our full faith and credit by using the debt ceiling as a bargaining chip as they are threatening to do.

And see Joe Weisenthal for a comprehensive discussion.

The trillion dollar coin is clearly legal. In fact, the 14th Amendment requires it.

The only real objection is that it’s silly, demeaning, beneath the dignity of the U.S., etc. It’s a lot better than defaulting, however.