On Constitutional Monetary Moments

by Eric Schliesser on January 18, 2023

Earlier today,  after I tweeted out that “Proposals to mint $1tn platinum coin are designed to circumvent the US constitution’s “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts,” I got lectured by Nathan Tankus for “not grasping the most elementary legal issues in the topic you’re pontificating on.” This turns on the interpretation on the authority granted by Section 31 U.S. Code § 5112. Advocates of the platinum coin naturally like to quote the plain meaning of the text: “(k) 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.” The plain meaning interpretation of (k) has been supported by Philip N. Diehl, former director of the United States Mint, who helped write the bill. But Diehl was not in Congress (and in virtue of his former office has obvious incentives to exaggerate its power and his former achievements).

However, the official author of the original bill, Representative Michael Castle, denied this interpretation, and suggested (quite plausibly in my opinion) that the provision was intended to cover collectibles (and not to provide the Treasure with the power to do an end run around any debt limits). I would be amazed if the original legislative record suggested otherwise. The law as we have it was inserted as a provisions into H.R. 3610, the Omnibus Consolidated Appropriations Act for 1997. It would be interesting if the congressional leadership recorded any views on the matter at the time (and that would change my view!) But the revisionary (‘plain meaning interpretation’) wasn’t voiced until May 2010. Even Diehl has admitted at one point that (the ‘plain meaning interpretation’) would constitute an “unintended consequence” of the bill. [Quoted in Grey (2020) op. cit, p. 261.] So, I don’t think this is really in doubt.

Eventually Tankus, who himself has become a high-profile advocate of minting the $1tr coin, referred me to Grey’s very interesting law review article from which I quoted above (and also a fascinating interview that Grey did with Diehl.) Grey (a law professor at Willamette University) meticulously goes through the pros and cons of reading (k) literally (and also provides arguments for the opposing views that anticipate my own), but his main interest is not, I think, in gaming how a constitutional court would rule on using (k) to do an end-run around the fiscal debt limit (also authorized by Congress), but in thinking about the “new possibilities for fundamental monetary reform.”* Grey, correctly, notes that in various crises the FED has gone well beyond the Federal Reserve Act. As I wrote last week here at CrookedTimber (in the context of discussing Lev Menand’s recent book (2022) The Fed Unbound: Central Banking in a Time of Crisis) the “effect of this process is the development of a super-government-agency that tries to do too much without sufficient accountability and that undermines the legislative process.” So, I am at least consistent in worrying about treating this as precedent!

But this also gets me at the underlying theoretical-political issue that I want to discuss here. And I quote a key passage from his law review article:

I argue that in “constitutional monetary moments” like those generated by debt ceiling crisis, it is important—not only positively but also normatively—to recognize that contemporary operational constraints on money creation are self-imposed, institutionally contingent, and ultimately legal rather than material in nature. It is important to do so because in such instances it may be not only appropriate, but socially optimal, to subject existing legal constraints to creative interpretation, or even ignore them outright, in order to challenge and disrupt the social myths they uphold, as well as the political dynamics that they produce. As noted legal realist Thurman Arnold argued: “You judge the symbols [upon which society is built and depends] as good or bad on the basis of whether they lead to the type of society you like. You do not cling to them on general principles when they are leading in the wrong direction.”
By denying from the outset the possibility that debt ceiling crises are, in fact, constitutional monetary moments in which it may make sense to abandon outdated monetary symbols, we close off the full range of political possibilities and legal options available to us to improve fiscal policy administration, and with it, our economy more broadly. In other words, it was not sufficient then, and it is not sufficient now, to merely assert as a positive matter that our current social myths about the nature of money preclude exotic or even “radical” legal solutions such as HVCS from serious consideration. Rather, it is incumbent on us to question whether the social myths in question are in fact worthy of preservation, or at the very least, how sure we are that the alternatives that would likely emerge to take their place would lead to socially inferior outcomes.–Grey, Rohan. “Administering Money: Coinage, Debt Crises, and the Future of Fiscal Policy.” Ky. LJ 109 (2020): 289. [HT Nathan Tankus]

For Grey a constitutional monetary moment occurs when “partisan disagreements over proper exercise of the “money power” pushed monetary issues to the forefront of the popular and legal imagination.” (p. 288) Now, let’s grant Grey this stipulation.

Interestingly enough, as Grey recognizes political battles over the deficit limit need not become constitutional debates over money power. In fact, as Grey recognizes in the last few decades, the Democrats have tended to win the battles over the deficit limit by sidestepping “the deeper constitutional questions.” (p. 288) That is, rather than using the debates over deficit limits, the threat of default, and annoyance at legislative gridlock as an occasion to debate changes in the constitutional arrangement — that is, the proper exercise of the money power –, the Democrats have played ordinary (non-constitutional) political hardball. And even if they did this merely based on opinion polling and without any fundamental respect for the constitution, the significance of  this fact is that fights over the deficit limit are not necessarily constitutional monetary moments by definition. I would hope that Grey agrees with me about that.

Of course, performatively, Grey would like it if a fight over the deficit limit were to be constitutionalized because for various reasons Grey rejects the contemporary status quo.* And, in fact, I can imagine that some kind of debt ceiling crises might well make me agree with Grey. Once the US defaults on debts and market turmoil starts hitting the real economy or the acrimony over the debt ceiling leads to street turmoil or even a revolutionary moment as bad or worse than January 6, that would quite rightly be treated as a constitutional monetary moment. But one shouldn’t wish for being in such turmoil, and one should recognize that debates and even games of chicken over the debt ceiling have been normalized in Washington, DC. (The US –and I will grant the MMT folk this much –has a lot more monetary sovereignty for such games than, say, the UK government (as was revealed in 2022) or most Euro member states, which lack any such sovereignty.)

Now, I am no friend of the current practice of setting a debt ceiling while simultaneously authorizing expenditures and borrowing that go beyond it. I don’t mind a demise of this status quo. And I also don’t mind ways of poking the irresponsible Congressional Republicans in the (proverbial) eyes. But I notice that Grey (and the proponents of minting such special coins) are not really worried by the Imperial presidency and the lack of checks on its power.+ That they lack this worry even after experiencing a Trump presidency and near usurpation (as well as the various ways in which courts were not a check on the Trump presidency) is something I cannot fathom.

But I view the tax and coin [sic] power of Congress as one of the few would-be-effective checks on the risks of the very real and ongoing erosion of liberty from an imperial presidency. If anything, while I dislike Republican control of the House, it is high time if Stateside the pendulum returned to the post-Watergate situation of the 1970s, and re-established Congressional authority. So, in so far as I offer a political-theoretical argument against seeing the situation as a constitutional monetary moments that is ripe for monetary innovation, I do so because the US needs a considerable restoration of the power of the legislative branch — which after all is also, despite everything (and yes that includes quite a few sins), still the most democratic element of the US constitutional arrangement — not a further strengthening of the Executive branch. And while one may not reasonably hope that this Congress would use such power reasonably or for noble ends, it is to be hoped that such enhanced power would attract better legislators and more effective citizen participation in the future.




*In fact, from reading the law review article, and Tankus’ enthusiasm for it, I suspect that Grey is a proponent of MMT (Modern Monetary Theory).

+I am much more sympathetic to arguments that view section 4 of 14th amendment as a reason to reject constraints of budget deficit limits if (and only if) these lead to default. But it is surprising to see left-wing commentators defend the sanctity of public debt!



MisterMr 01.18.23 at 8:26 pm

So the question overall is whether economic policy is to be mainly a matter for the executive or for the legislative; on the one hand I understand the argument about the greater representativeness of the legislative and the check on the executive, but on the other it seems to me that the concept of the “executive” implies that the response to economic cycle is matter for the executive, while the legislative should think in terms of laws and long term.
Is the legislative actually equipped (in the USA) with the structures to react to an economic crisis?


TM 01.19.23 at 10:39 am

If the possibility of averting a potentially global economic crisis is an “unintended consequence” of some obscure law passed for other reasons, maybe we should take it ;-)

The real question is: what is the logic behind the debt limit supposed to be? What is the logic of Congress authorizing spending but not authorizing the funds? What is the “intended consequence” of that supposed to be?


gregory 01.19.23 at 11:02 am

Not so sure as currently constructed (gerrymandering, voter sorting etc) the House is closer to the ideal of representative government than the Presidency and the Executive. Although I fully accept the dangers of the imperial presidency, it is a double-edged sword as executive power seems to be an important instrument for combating undemocratic power structures in the House and Senate. That said, your argument against the legality of minting the coin is quite convincing.


Tim Worstall 01.19.23 at 11:41 am

“seems to me that the concept of the “executive” implies that the response to economic cycle is matter for the executive, while the legislative should think in terms of laws and long term.”

Sadly, that’s not quite the way the American system works. The President’s Budget, for example, is really a nice little document of what the Pres would like Congress to consider.

The actual budget is, supposedly at least, something emergent from the varied House committees. Ag writes up what the Ag part of the budget should be, Def the Def and so on. Those then get debated (Ha!), voted upon and collated and that then becomes the budget, off to the Senate and then the Pres it goes.

The incentives there don’t particularly work toward restraining spending. To be mild about it. For there is no central point or person with the responsibility for the overall shape nor balance of said budget. Unlike, say, a British Chancellor.

That’s very simplistic, of course it is, but much of the complexity is about how Congress has tried to impose some sort of system concerning that overall order.


Tra James 01.19.23 at 6:55 pm

You mentioned section 4 of the 14th amendment in your footnotes. I think this is the more compelling argument to constitutionalize the debt ceiling argument while also testing the executive branch’s powers. The last time the debt ceiling argument was in play, section 4 was the main counter-argument from the left against the possibility of default. I’m not sure why that argument has shifted to gimmicks such as minting the coin, “Matt Yglesias’s high yield bond idea”, or even the Republicans trotting out “payment prioritization” which is just a cute way to default on the debt while attempting to narrow the inflicted pain to their regularly targeted groups.

I’m personally not a fan of the push to “mint the coin” mainly because I don’t believe a nation should operate on such legal gimmicks or loopholes and, like you, I’m dubious of the constitutionality of it all. I also suspect many of its proponents support it simply because it’s a novel way to publicly poke the Republicans in the eye. This is a question that needs a definitive answer because the political points that are up for grabs are not worth the real turmoil that can be caused. POTUS should simply instruct the Treasury to pay the bills Congress has already authorized claiming that failure to do so would cause the validity of the nation’s debt to be questioned, then let the matter play out in courts.


Thomas P 01.19.23 at 8:27 pm

There is another possible trick. The debt ceiling created by Congress is based on the nominal value of the bonds. The Federal Reserve can create bonds with a nominal value of $1 000 000 but a high interest rate and then sell them for $2 000 000. Technically the debt is then just $1 000 000.


Trader Joe 01.19.23 at 8:52 pm

I would have thought that the biggest argument against minting the coin would be that if they mint it and then someone challenges the constitutionality of it (which is about 100% likely) then you sit around for 6-9 months while we wait for the SC to decide.

Meantime, you’ll have to do something to raise the ceiling while you wait. If so, why not just do that something in the first place?

It all seems pretty arbitrary or artificial anyway – either lenders of the world believe in the credit of the US government or not. If the answer is not its not like you can send creditors one of these coins to calm them down. Besides who would make change for it – hey can anyone break a trillion?


Zach 01.19.23 at 9:12 pm

Your legal argument is wrong, the power of the mint in no way undermines congressional powers to tax and spend. Your political argument is undermined by gerrymandering and given the growing disfunction with each congress naive at best.


Eric Schliesser 01.19.23 at 9:20 pm

The purportedly discretionary power to mint gives the executive the power to spend without any congressional consent. The rest becomes irrelevant.


UserGoogol 01.19.23 at 10:01 pm

No it doesn’t. Minting money puts money in the Treasury but the money isn’t allowed to be spent without “appropriations made by law.”


Zach 01.19.23 at 10:02 pm

No, the power to mint doesn’t allow the executive to spend on whatever it wants it still has to comply with the budget that has been approved by congress, and that is both on the spending and taxing side, the only thing the trillion dollar coin does is free up space in the Treasuries federal reserve account to avoid the debt ceiling.


J-D 01.19.23 at 11:01 pm

The real question is: what is the logic behind the debt limit supposed to be? What is the logic of Congress authorizing spending but not authorizing the funds? What is the “intended consequence” of that supposed to be?

There is a Wikipedia article specifically on the subject of the US debt ceiling, which I read and found informative on aspects of the history, even if it doesn’t give an explicit direct answer to your exact questions.

At least part of the problem here is one of the most fundamental and important design features of the US Constitution. The people who wrote it obviously thought it made sense to create two institutions separate from and (mostly) independent of each other, the Presidency and the Congress, on the basis that one would be assigned ‘executive’ functions and the other ‘legislative’ functions. They weren’t, of course, the people who came up with the idea of this basic distinction between ‘executive’ and ‘legislature’–it had been written about by more than one political philosopher before them–but that doesn’t mean it makes sense.

The US Constitution contains an explicit statement that ‘the executive power’ is vested in the President. Why? Is this ‘executive power’ supposed to consist only of the specific powers vested in the President by more specific constitutional provisions? In that case, why add the general reference to the executive power, if it adds nothing in practical effect? On the other hand, if the executive power is supposed to extend beyond those specific provisions, how are its limits supposed to be known? What if, for example, the President announced that borrowing money was an executive function and therefore included in the President’s executive power, and instructed the Treasury to borrow money in excess of the limit authorised by Congress? If this action were challenged in court, I’m sure it would be argued that the framers of the Constitution made clear that borrowing money was to be treated as a legislative and not an executive function by assigning to Congress the power to borrow money, and for whatever my personal opinion might be worth I would find that highly persuasive; but it’s not an obvious contradiction to argue on the other side that even if the text gives Congress the power to borrow money, it’s still inherently an executive function, and therefore the President (as well as Congress) has the power to borrow money. Setting aside the explicit textual reference in the US Constitution, given the more general concept of a distinction between executive and legislative powers, is borrowing money an executive function, a legislative function, both, or neither? For that matter, given the general concept of a distinction between executive and legislative powers, is budgeting an executive function, a legislative function, both, or neither? The answer (to my way of thinking) is that this kind of distinction between executive and legislative powers is not helpful and it doesn’t make sense to structure a constitution around it: but the US Constitution is structured around just such a distinction, and here we are. If I were writing a constitution from scratch, that’s not how I’d write it; but the US has to work with the constitution it has.


marcel proust 01.20.23 at 12:30 am

@Eric Scholiesser @ 9:

I don’t follow your argument. All the “purportedly discretionary power” gives to the executive is the power to fill the Treasury with dollars. It does not convey the authority to disburse the dollars. That requires an act of Congress. The Fed emits dollars that are backed by other assets: some gold, mostly government debt, banking assets (a form of private debt) pursuant to the Fed’s responsibility for preventing bank panics and in extraordinary circumstances like 2007, various non-bank corporate assets. In even more unusual circumstances, a $1T platinum coin, perhaps. None of these emissions is directly connected to an act of government spending.


Guy 01.20.23 at 2:22 am

The idea of a legislature that reins in the Imperial executive is a nice idea, but I think partisan polarization has already killed it, and preserving Congressional power over the debt ceiling isn’t going to bring it back. After all, during the entire period when the Imperial presidency developed, Congress had the debt ceiling power.

Legislative oversight requires a legislature that is interested in performing oversight, including doing so when the president is of the same party, and doing so in good faith when the president is of the opposing party. The U.S. no longer has that.

The debt ceiling thing seems mostly to be an opportunity for members of Congress to grandstand in bad faith (having already authorized the spending that will cause the debt, they can now stand up and pretend to be gravely concerned about the national debt), and for the Republicans to play their usual card of “We’re crazy enough to burn the country down, so we’ll try to get concessions out of the Democrats because they have to be the responsible ones who put out the fires”.

That said, isn’t the spending that would be funded by the platinum coin already authorized by Congress? My knowledge of U.S. government financial budgeting is not a lot, but the descriptions of this issue I’ve read have usually noted that the spending necessitating the debt ceiling is stuff already budgeted by Congress.


Quill 01.20.23 at 2:27 am

@Eric Schliesser #9:

That’s not correct. Spending needs to be authorized by law. Minting the coin gives the executive a way of borrowing which is not constrained by the debt limit. It does not permit any additional spending.


JimV 01.20.23 at 3:03 am

The proposed coin-minting might circumvent the original meaning of the code it is based on, or not, but it does not logically circumvent the constitutional statement you quoted. Stating that Congress can pay off the debt does not mean no one else can also. (It does not say the sole power.) For example, in my will, a portion of my estate will pay off my share of the national debt, by direct transfer to the USA Treasury. My lawyer does not consider this unconstitutional.

No one, to my knowledge, e.g. Dean Baker or Duncan Black, who advocates the platinum coin does not realize that it is a ludicrous solution to a ludicrous problem.


Murc 01.20.23 at 5:01 am

The purportedly discretionary power to mint gives the executive the power to spend without any congressional consent.

Wait, what?

You’re going to have to explain that.

The executive requires Congressional authorization to spend. It literally cannot spend without a law passed by Congress directing it to do so. So it could mind all the platinum coins it wants, in whatever denomination it wants, mind-boggling amounts of money, but can’t spend a dime of it without authorization to do so.

The executive minting those coins and then saying “hey, we have all this money, we’re going to go on a spending spree” would be nakedly illegal.

As far as everything else goes… this post sort of baffles me. We are literally on the brink of a credible implosion of global finance which would lead to massive and untold human suffering… and your priority is to tut-tut at the people who are looking to the plain text of duly passed laws to opine that what we really need is for Congress to assert its authority.

This seems to ignore a fundamental problem; this is an assertion of Congressional authority.

Everyone is talking about this upcoming crisis as if it were, somehow, an abdication of Congress, or more specifically of the House. With respect, this is absolutely the wrong way of conceptualizing it. The House is in fact asserting its authority; to use its power to cause destruction in the hopes that stopping said destruction will be seen as so desirable to their ideological foes that said foes will make enormous policy concessions to stop the pain.

This is absolutely an assertion of Congressional authority. It’s just as much an assertion and use of Congressional power as passing laws is.

So rather than considering the supposed “problem” of power accruing to the executive from Congress, we should perhaps consider the actual problem, which is what happens when Congress decides the proper use of its power is to deliberately immiserate people in the hopes that it can cause so much pain that their foes dismantle the social safety net? Because this seems like a much more immediate issue.

Indeed, while you say “A more powerful Congress would attract a higher caliber of legislature,” I would suggest the precise opposite; our current Congress is the result of very skilled, very adept ideological coalition recognizing the immense power Congress wields and going to great lengths to stock it with people who will use that power robustly. We already have a powerful Congress. This is what they’re choosing to do with that power.


John Q 01.20.23 at 6:45 am

The platinum coin idea has been rejected, correctly, because it is a gimmicky way of exploiting a loophole.

The premium bond solution now being advocated is much better. Auction bonds with an interest rate well above the current market rate. They will sell for much more than their face value. The proceeds can be used to repay existing debt, with the result that the net face value of debt outstanding falls, while the actual obligations of the government are unchanged.

This solution isn’t based on a loophole. It reflects the fact that the debt ceiling is itself an arbitrary construct. What matters is the expenditure and revenue that has already been legislated.

The great thing is that the Repubs will find it very difficult to criticise: anyone financially sophisticated enough to understand the bond will also understand that the debt ceiling is nonsense.

It’s no different from the string of emergency measures which came into operation when the debt ceiling was reached a day or two ago. The only difference is that this measure will work indefinitely, so that the crisis phase with government shutdowns never happens.

The best thing to do would be to introduce it right now. It might be sharper to get to the shutdown phase where non-essential services are closed (ideally focusing on services needed by rural Republican voters), then use the premium bonds to ensure that default is never reached. The Repubs would then have to decide how long to let the shutdown drag on. That wouldn’t be good policy, but it would be good politics.


rogergathmann 01.20.23 at 7:19 am

“The great thing is that the Repubs will find it very difficult to criticise: anyone financially sophisticated enough to understand the bond will also understand that the debt ceiling is nonsense.”

Liberals sometimes astonish me. You can substitute for “financially sophisticated” say, “biochemically sophisticated”, and predict Repubs would never criticize the vaccine. Or “historically sophisitcated” to predict Repubs would never criticize teaching the facts of the extensive racism characterising U.S. history. Right wing popularism gains its strength from the idea that its opponents are “sophisticated” and thus pulling tricks. But rightwing popuularism’s opponents, unfortunately, keep thinking the same thing. Hence, Obama’s nudgery, of infamous memory.


Felix 01.20.23 at 1:46 pm

Have to agree with Roger Gathmann. I’m not financially sophisticated enough to understand the bond, but it seems to amount to a increase in interest rates, so I don’t get why it won’t be a political disaster even if financially it’s exactly equivalent to removing the dead ceiling.

Is the nominal value of a bond completely arbitrary? If you can do that, why not give all the bonds a nominal value of one cent? Why do they even have nominal values? Do they have nominal values in non-debt ceiling countries? Why would Congress write a law that says you can have a debt up to a certain meaningless nominal value but without constraining the amount the government is obliged to pay?

And how is it different than a trillion dollar coin? Both of them seem to be getting around the rules the Congress intended to write by following the rules the Congress actually wrote. If the Congress wanted to ban either of them, it could, just by acting. I personally see no reason to say the current government is bound by the alleged intentions of a former Congress, when there’s a current Congress there that could clarify exactly what rules it wants the government to follow.


AnthonyB 01.20.23 at 3:04 pm

Matt Levine (always worth reading) explains premium bonds (noted in #6 above) as a financial-engineering way out of the debt ceiling crisis:



bobbyp 01.20.23 at 9:40 pm

A couple thoughts….
The wringing of hands about undue executive power is, I would posit, an unwarranted evasion of directly taking on the increased political polarization we currently see (cf Guy and others above). It is also a “problem” going back to Jefferson’s purchase of Louisiana. The political problems we face are, in fact, POLITICAL problems, the solution of which is not found in appeals to curbing overarching executive power.

As for the approach the Biden administration should take in the face of GOP intransigence, I’m with Tra James above. See also Jamelle Bouie in today’s Times. The Treasury should be told to continue to issue bonds as needed. The House should be told to do their job and work with the Senate and the President to craft and agree to a budget as mandated by the Constitution. The GOP would sue, but even it it came to issuing an injunction, which law is the Court going to direct the President to ignore? I believe there are good reasons to believe they would hesitate if presented that stark choice. They’ve weaseled out before (cf gerrymander).


bobbyp 01.20.23 at 9:47 pm

I believe there are good reasons to believe they would hesitate if presented that stark choice.

….to continue-what is the Court going to do? Tell the executive to stop spending that has been lawfully passed? Tell them to “cut here” but not “there”? Tell the to renege on the debt and the devil take the hindmost? Tell them to just do whatever it is the House tells them to do?

Maybe they would just say its a problem best left to the States to decide (LOL, LOL).


John Q 01.21.23 at 1:53 am

Roger G. The problem for the Repubs is that you need a criticism people can imagine they understand. That’s easy with vaccines, much more difficult with bond premiums.


  1. There won’t be any effect on interest rates, as long as the money raised by selling premium bonds is used to repay existing debt (which trades at a variety of discounts and premiums to face value).

  2. The nominal value isn’t completely arbitrary since the principal has to be repaid at the end of the term. But it can be very different from the face value, which depends both on the principal and on the stream of interest payments.


politicalfootball 01.21.23 at 3:26 pm

And, in fact, I can imagine that some kind of debt ceiling crises might well make me agree with Grey. Once the US defaults on debts and market turmoil starts hitting the real economy or the acrimony over the debt ceiling leads to street turmoil or even a revolutionary moment as bad or worse than January 6, that would quite rightly be treated as a constitutional monetary moment.

Leaving aside the error in 9 that seems foundational to this whole exercise, I’m trying to figure this bit out. Preventing inevitable economic damage is unconstitutional, but street turmoil caused by that damage would make the matter constitutional? What changes, fundamentally, when people take to the streets?


politicalfootball 01.21.23 at 4:01 pm

The platinum coin idea has been rejected, correctly, because it is a gimmicky way of exploiting a loophole. … This solution isn’t based on a loophole.

I agree that the bond solution is easier to sell publicly, but it seems no less gimmicky, no less based on a loophole.

The role of seigniorage at a mint is well-understood and deeply traditional, but certainly the platinum coin stretches the concept of seigniorage to the point of unrecognizability. Does anybody argue that the platinum coin was a contingency that Congress entertained when it passed the law?

Likewise, the terms of the issuance of government bonds are a well-established tradition,* and it seems unlikely that Congress was pondering a face-value gimmick when it limited that issuance.

As JQ notes, public acceptability counts for a lot, and superficially, the wild inflation of seigniorage seems sillier than manipulating a bond’s face value. Most folks don’t really have a grip on how bonds work and are uninterested in learning. But it’s still a gimmick.

*Like the rest of the lay public, I don’t know much about bonds either. I will cheerfully accept correction if I am wrong on this point.


Seekonk 01.21.23 at 5:48 pm

A factor against those who want a shutdown is that among the functions of the US government is that it acts as gendarme and ATM for some very powerful actors who have paid good money to get that arrangement, and they presumably won’t want to jeopardize it or interrupt it for too long.


John Q 01.22.23 at 3:42 am

PF@26 As Josh Barro points out, the “emergency measures” currently in place (such as temporary raids on various off-budget accounts), were considered highly dubious when they started in the 1980s, and are now just a routine part of the process, like the shorts that used to run before the main feature at the movies.

As regards “gimmicks”, it’s gimmicks all the way down. The debt ceiling wasn’t meant to facilitate the exercises in blackmail that have now become routine. Congress was supposed to exercise the power of the purse by deciding whether to spend money, not by refusing to pay the bills for expenditure that it had already authorised.


J-D 01.22.23 at 9:53 am

The role of seigniorage at a mint is well-understood …

… by what percentage of the population?


reason 01.22.23 at 10:16 am

I was wondering if the government could do what people would do in a similar circumstance, get a private loan. For instance if some democratic friendly billionaires brought forward some tax payments (or just overpaid there provisional tax).


steven t johnson 01.22.23 at 3:59 pm

Premium bonds bear a mild resemblance to postdated checks. And even worse, they seem to me likely that political conservatives will insist they really are the equivalent. Not paying into retirement accounts is exactly the sort of thing political conservatives like, though. Furloughing civil service workers is also kind of nice for them, the only objection being popular resentment. The thing is of course in US politics how much does majority opinion really count for? As opposed to donor opinion and the private opinions of serious (i.e., wealthy) people, that is? It may be objected that premium bonds aren’t really, but we live in a country where people tend to automatically assume private bankers should have powers to create money that the elected governments should not. Once you start believing stuff like that, when can you expect people to come to their senses?

The constitutionality of the debt limit seems entirely dubious to me. The injunction against any law impairing contracts seems to me to imply the same constraint on the federal government as on states. And the money power seems to me to require that spending authorized by the Congress should be done. Given these, the true debt limit is that borrowing required by the spending authorized by Congress. Setting an arbitrary number figure is an incompetent refusal to delegate the necessary authority to carry out the laws.

But of course the Supreme Court is flirting with destroying the “administrative state” by arbitrarily revising delegation of powers.

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