WASHINGTON -- The U.S. Treasury Department will not mint a high-value platinum coin to avert the debt ceiling, according to an official statement from the Obama administration obtained by the Huffington Post on Saturday.
"Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit," the statement reads.
Obama has never given any indication that he would be amenable to "the platinum option," but White House spokesman Jay Carney refused to rule it out in a press conference earlier this week.
A 1996 law permits the Treasury to mint platinum coins at any denomination it wishes, irrespective of the amount of platinum used in the coin. A $1 trillion coin could be deposited at the Federal Reserve, giving the Treasury the power to withdraw funds based on this account to meet government obligations. The coin would not grant any new spending powers to the administration, however, and as a result would be unlikely to cause inflation. It would only allow the Obama administration to pay bills already incurred by Congress. Refusing to raise the debt ceiling would prevent the government from making good on its existing commitments.
But the move sounds fantastical and has been met with derision by congressional Republicans, who hope to secure aggressive spending cuts by holding the debt ceiling hostage.
Treasury's decision not to use the platinum option comes after several Senate Democrats wrote Obama a letter urging him to make clear that the administration will not allow the full faith and credit of the U.S. government to be called into question by Congress. Politico was first to report on the letter.
"In the event that Republicans make good on their threat by failing to act, or by moving unilaterally to pass a debt limit extension only 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 promises and trigger a global economic crisis -- without congressional approval, if necessary," the letter reads.
During the 2011 debt limit standoff, Treasury Secretary Timothy Geithner publicly suggested invoking the 14th Amendment to the U.S. Constitution, which states that, "The validity of the public debt ... shall not be questioned." Obama, however, rejected the move, saying that the White House legal team did not believe that the 14th Amendment was a viable legal option for averting default.
Some congressional Republicans have been advocating a federal government shutdown in lieu of a debt default. The shutdown would, of course, have major ramifications for social services and basic day-to-day operations, and would not necessarily avoid default.
The government needs to issue new debt in order to meet prior obligations to which Congress has already agreed: Social Security payments, federal worker salaries, interest on existing debt and military operations. Without raising the debt ceiling, federal spending would need to be cut by about 40 percent immediately to avoid an instantaneous default on government debt. But because tax revenues and debt maturities are somewhat irregular, even a government shutdown might not prevent a default if tax revenues come in too low on a given day.
Treasury's rejection of the coin and the 14th Amendment leaves only one other non-traditional option for averting the debt ceiling: issuing IOUs instead of actual money to make good on obligations. The move would jeopardize confidence in U.S. economic policy and would not be immune to legal challenges. California was able to stave off its own budget crisis with IOUs in 2009, however.