Paul Krugman is arguing for a rather outlandish solution to solving the debt-ceiling crisis: Minting a $1 trillion coin.
The idea, which gained (ahem) currency in recent weeks, could prevent Congressional Republicans from holding the country’s financial health hostage in exchange for spending cuts, Krugman argued in a recent blog post.
“Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely,” Krugman wrote. “He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous.”
After a tough fiscal cliff battle, Republicans have said that they plan to demand major spending cuts in exchange for raising the country’s borrowing limit, according to the Financial Times. If Congress does nothing to deal with the debt limit, the country could lose its ability to meet its financial obligations by as early as Feb. 15, according to a report from the Bipartisan Policy center cited by CNBC.
But there is a loophole: The Treasury has the ability to mint a coin in any denomination, deposit it into its Federal Reserve account and use it to pay off its debts -- essentially getting rid of the debt ceiling threat for now. A petition to the White House to use the coin had more than 4,000 signatures as of Monday afternoon.
Still, opting for the trillion-dollar coin solution would be difficult. Rep. Greg Walden (R-Ore.) is introducing a bill to stop Obama and the Treasury Department from minting the coin, which ironically raised the profile of the out-of-the box idea.