The Razor’s Edge, John Carney and The Trillion Dollar Coin

“The path to salvation is narrow and as difficult to walk as a razor’s edge.”
Katha-Upanishad, 500 BC

John Carney, whose work ethic is admirable, has three (!!!) new CNBC columns out today about the trillion dollar coin and the debt ceiling (uno, dos, tres). John asserts that the trillion dollar coin would be unconstitutional and that even if the debt ceiling were eliminated, Congress could just as easily screw things up by refusing to authorize debt service payments. Leaving aside the folly of anticipating the next stupid thing Congress does while the current stupid thing has yet to be dealt with, debt service is actually one of the few unlimited, permanent appropriations in the US Code (31 USC 1305), its been on the books since 1874 so it would be a hard slog for Congress to remove that permanent appropriation (Wall Street lobbyists would not be pleased) AND then get it past a presidential veto. So in reality, to paraphrase Arthur Miller, interest must be paid!

But I digress. John’s main argument is that using the platinum coin statute to sidestep the debt ceiling is unconstitutional because its too vast a delegation of power by Congress to the Secretary of the Treasury.

“The statute authorizing the Treasury Secretary to mint platinum coins is very different. Here’s what the relevant section says:

    The Secretary may mint and issue bullion and proof platinum coins in accordance with such specifications, designs, varieties, quantities,denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.

There’s no intelligible principle here at all. Nothing to guide the Secretary of the Treasury about how to exercise this authority, no goal at which his discretionary decisions are aimed. This is just too broad to fit into our constitutional framework.”

I disagree, because, Congress has, in fact, left the Secretary walking on a razor’s edge with many burdens, and little discretion. His path is almost too narrow to fit into our constitutional framework, almost. But first, we must look to other sections of Title 31 to find the Secretary’s duties and powers.
The Secretary of the Treasury shall—
(2) carry out services related to finances that the Secretary is required to perform; *
(3) issue warrants for money drawn on the Treasury consistent with appropriations;
(4) mint coins, engrave and print currency and security documents [i.e. Treasury bonds], and refine and assay bullion, and may strike medals;**
(6) collect receipts…
31 USC 321
*“The Secretary of the Treasury may borrow on the credit of the United States Government amounts necessary for expenditures authorized by law…” [subject to debt ceiling] 331 USC 3101 & 3104,
**“The Secretary of the Treasury… shall mint and issue coins described in section 5112 of this title in amounts the Secretary decides are necessary to meet the needs of the United States…” 31 USC 5111(a)(1)

Now here’s where John is wrong, the Secretary has no legal discretion in this matter whatsoever. His path is laid out by Congress like he’s the mechanical rabbit at a dog race.
1. Congress tells the Secretary (as supervisor of the IRS) how much to collect in tax receipts and (with somewhat less effort) in miscellaneous receipts.
2. Congress tells the Secretary as signatory of every single appropriation warrant how much money to transfer to federal agency sub-accounts (called “appropriation symbols” for some obscure reason).
3. Congress tells the Secretary he MAY borrow on the credit of the United State to fund expenditures but not for one penny more than the debt ceiling.
4. Congress tells the Secretary he SHALL mint coins such coins as he decides are necessary to meet the needs of the United States.

When Congress orders the Secretary to spend appropriations in excess of the receipts they’ve ordered him to collect, the unavoidable budget deficit must be filled by the combination of the Secretary’s powers to borrow (debt limit-constrained) money and to mint (debt-free) money. If Congress refuses to increase receipts or cut appropriations or extend the debt limit, the Secretary has only one and only one path to comply with all of his legal duties. Maybe I’m naive, but I’m confident the path to salvation will never be ruled unconstitutional by any United States Court.


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55 Comments on "The Razor’s Edge, John Carney and The Trillion Dollar Coin"

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4 years 4 months ago

Hi Beo, New post of mine on legality and constitutionality: Also at Correntwire, FDL, Kos, and

Quotes you at length.

4 years 4 months ago

beowulf, here is Ryan Grim:

The simplest escape route out of the debt ceiling impasse is for the president to direct the Treasury to find a legal way to pay its debts. The Treasury then has a variety of options. One gaining particular attention relies on a law that allows the Treasury to mint a coin of unspecified value and deposit it with the Federal Reserve. Those funds could then be used legally to pay debts.

To which I appended “Exactly as beowulf had proposed when the 14th Amendment was brought wrt to the platinum coin.” when I posted it at MNE

4 years 4 months ago
“Congress tells the Secretary he SHALL mint coins such coins as he decides are necessary to meet the needs of the United States” It looks to me like the “shall” clause fully justifies and even mandates action due to an irrational debt ceiling constraint in the overall funding mix for a deficit whose elements have already been approved by Congress (taxes and spending). More than that, it would give the Fed legal cover to make efforts to enable platinum easing – by fully integrating it with the regular QE program – including tactical management of the interest rate sensitivity of excess reserves by issuing term deposits as appropriate (as you’ve alluded to elsewhere). I disagree with the logic of John Carney’s final post – in the sense of mathematical if not legal logic. The relevant logic IMO comes from this equation: Deficit = tax revenues minus budget expenditures If Congress determines the RHS of that equation, it determines the LHS. And if Congress already assigns funding responsibility for LHS=RHS to Treasury, then any additional restriction on funding (such as a debt ceiling) over-determines that equation. And if the equation is over-determined, it exposes the functioning of the system to purely political manipulation, which is what is happening now. The counterfactual in John’s post should not be executive approval of a debt limit, but rather the elimination of the debt ceiling itself. Regarding John’s comparison with the Fed, it would seem reasonable that if the Fed has been delegated the authority to conduct QE programs (among other things), that Treasury be delegated the authority to fund LHS = RHS in the equation above, given that Congress has already approved the RHS elements of that equation and that Treasury has a job to do in that context. Within the legal framework as… Read more »
Clonal Antibody
4 years 4 months ago
Beo, Did you see this? From A trillion-dollar-coin idea takes off, and a former head of the U.S. Mint doesn’t see why it shouldn’t But for what it’s worth, the guy who was in charge of the U.S. Mint when the original law providing for the minting of such a coin was passed told me he thinks Nadler’s proposal is perfectly legal. “My understanding of how this all works suggests that this is a viable alternative,” said Philip Diehl, a former chief of staff to the late Texas congressman Lloyd Bentsen, who was head of the U.S. Mint from 1994-2000. Diehl tried to make the Mint function more like a business, and saw an opportunity in the worldwide market for platinum bullion coins. (The gold bullion coins fashioned by the Mint are not produced at the preferred purity for the worldwide gold trade, Diehl said, making them a tough sell on the international market.) Diehl planned to conduct extensive market research, focusing in particular on the hot market for platinum in Japan, and wanted legislation that would allow him to react quickly to those results. The Treasury Department, wary of its bureaus making their own friends on the Hill, was “decidedly unenthusiastic” about the legislation, Diehl said, but he worked closely with Republican Rep. Mike Castle, who was chairman of the House Financial Services Subcommittee at the time, and eventually got the bill through the Republican-controlled House with what Diehl called a “blank check.” “One of the ironies in this story is that a G.O.P. Congress passed the legislation over the objections of a Democratic Treasury, and now, today, Treasury may well be in a position to use the law as leverage to neutralize the G.O.P.’s threat to hold the debt limit hostage,” he said. The legislation served its purpose;… Read more »
Philip Diehl
4 years 4 months ago
From Philip Diehl, Mint director who wrote the platinum coin law: The claim that minting a trillion dollar platinum coin is unconstitutional was no basis whatsoever. Congress has given Treasury broad discretion in minting coins since the founding of the republic, and its power to do so is rooted in the Constitution (Article 1, Section 8). Moreover, the accounting treatment of the coin would be identical to other coins produced by the Mint–no different from a quarter. Here’s a brief on the subject: I’m the former Mint director and Treasury chief of staff who, with Rep. Mike Castle, wrote the platinum coin law and produced the original coin authorized by the law. Therefore, I’m in a unique position to address some confusion I’ve seen in the media about the $1 trillion platinum coin proposal. * In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years. The Secretary’s authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8). * What is unusual about the law (Sec. 5112 of title 31, United States Code) is that it gives the Secretary complete discretion regarding all specifications of the coin, including denominations. * Moreover, the accounting treatment of the coin is identical to the treatment of all other coins. The Mint strikes the coin, ships it to the Fed, books $1 trillion, and transfers $1 trillion to the treasury’s general fund where it is available to finance government operations just like with proceeds of bond sales or additional tax revenues. The same applies for a quarter dollar. * Once the debt limit is raised, the Fed ships the coin back to the Mint, the… Read more »