Defaulting dilemma: the trillion dollar coin


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The US is in a lot of debt. There have been many questions posed about how to increase the debt ceiling, which legally limits how much debt the federal government can have. One potential solution to the debt ceiling problem is the Trillion Dollar Coin.

When the federal government runs out of money, in order to stay below the debt limit, they are only allowed to use their current funds, and that means they cannot spend more money. If the government runs out of money, the consequences are substantial.  

If the government defaults — surpasses the debt ceiling — debt rises, then all Americans would be affected. 

Default is the failure to repay a debt, including interest or principal, on a loan or security. The Coinage Act is a law passed by Congress in 1997, which enables the treasury secretary to mint and issue platinum coins as large as they want. 

Alternatively, think of defaulting as a government shutdown like the one that occurred in December 2018, just much worse. In 2018, all non-essential federal government employees were put out of jobs, but other than that, not much happened. With a default, even essential federal workers would go without pay. Social security checks would stop as well as food stamps, army pay and much much more. 

Financial firm Moody Analytics stated that if the government were to default, Americans would be paying for the consequences for generations. On top of that, nearly six million jobs would be lost and the unemployment rate would hit nearly nine percent. Additionally, stock prices would fall by a third overall, causing 15 trillion dollars in household wealth to be lost.

A solution to avoid the catastrophic effects of default is the minting of a trillion-dollar coin. Made of platinum and worth exactly one trillion dollars, this coin would be able to increase how much money the government would be able to loan. The trillion-dollar coin would help by adding one trillion dollars to the government’s off-budget spending amount, which would increase the debt ceiling. 

The idea for this trillion-dollar coin was first conceived in 2010, but it did not gain much attention until the recent federal budget problems due to COVID-19. Atlanta attorney Carlos Mucha is the one credited with this idea. 

The crowd on Warren Moslers’ website forum was brainstorming on how to avoid a default if Congress didn’t lift the debt ceiling and I came across the platinum coin subsection of the Coinage Act,” said Mucha to Dylan Matthews of Vox.

So if treasury secretary Janet Yellen wanted to, she could mint trillion-dollar coins to pay off the government’s debt. However, on October 5th, Yellen said that she did not intend to mint a trillion-dollar coin. 

“I’m opposed to it and I don’t think we should consider it seriously,” said Yellen in an interview with ABC. “It’s really a gimmick.”

Yellen then added that minting a trillion-dollar coin would be the opposite of showing the people that the Biden administration and Congress can be trusted to pay U.S. bills. 

There are in fact more solutions, such as continually raising the debt ceiling, or eliminating it altogether. 

However, Senate Minority Leader Mitch McConnell said that he will not vote to raise or eliminate the debt ceiling. Regardless of how people feel, the fact remains that if the US defaults on its debt, the country will undoubtedly be sent into economic turmoil.