The government cash countdown and novel solutions to the crisis

The debt ceiling has always been a tool for Republicans to force through measures that would otherwise never get legislative approval.

Naomi Klein’s Shock Doctrine book describes how conservatives in this country and abroad use a crisis — natural disasters and other unexpected calamities — to push through policies that would never win legislative support. What happened was, in the Obama administration, his Republican adversaries realized they could actually plan a crisis by refusing to increase the debt ceiling and then use the shock doctrine to push through their desired policy (spending cuts and, if they can get away with it, tax cuts too).

At the end of day on Thursday, May 11, the amount that the government had in its operating cash account to pay its bills was $143.314 billion. On Friday May 12th, the income was $15.982 billion and the outflow was $19.352 billion, leaving a reduced cash balance at the end of that day of $139.944 billion. As the days go by, the trend line for the closing balance is to keep dropping, though on some days the balance might rise.

The current debt ceiling limit was last raised on December 16, 2021 to $31.4 trillion. If you want to know the value of the US debt down to the last cent, as of May 12th, it was $31,458,532,169,329.81. How can it be larger than the limit by about $58 billion? It is because “under current law, [the Treasury] can take well-established “extraordinary measures” to borrow additional funds without breaching the debt ceiling.” But there is a limit to such extraordinary measures. The nominal limit of $31.4 trillion was reached back in January.

I am not sure how low the cash balance has to sink before it becomes a full-fledged crisis. Such a date is known as the ‘X-date’. This article discusses some of the known expenditures to come and who might get paid if the debt ceiling is not raised. But the Biden administration has ruled out paying some bills and not others.

If the U.S. defaults on its debt for the first time ever, tens of billions of dollars in Social Security benefits, federal salaries, payments to Medicaid providers, veterans’ benefits and more could all be at risk.

The Bipartisan Policy Center, a think tank that specializes in predicting the “X-date” for when the government officially can’t pay its bills, said Tuesday the U.S. could default on its $31.4 trillion debt between early June and early August, jeopardizing payments to millions of Americans and businesses.

While its far from certain how, exactly, the Treasury Department would handle a default — including whether it would prioritize certain payments or delay paying the government’s bills — the think tank noted that about $50 billion in Social Security benefits are set to go out in the first half of June, in addition to more than $20 billion in payments to Medicaid providers, $6 billion in federal salaries, $12 billion in veterans benefits and $1 billion in SNAP benefits, also known as food stamps.

The Biden administration has already dismissed the untested idea of paying some bills but not others, arguing that it would be unfair to average Americans, cause widespread economic disruption and prove logistically impossible. A more likely scenario, in the event of a default, is that Treasury would choose to delay all bills, waiting until there’s enough revenue to cover all payments for any given day, the Bipartisan Policy Center said.

If Treasury can hold off a default until the end of June, it would be able to tap into about $145 billion in new “extraordinary measures,” buying the government a little more borrowing power into the summer. The coming weeks will offer more clarity about whether Treasury can make it to mid-June and give Congress and the White House a longer ramp to negotiate a debt limit deal, said Shai Akabas, BPC’s director of economic policy.

As the X-date approaches, some more exotic suggestions are being floated. One is to argue that the government can use the 14th amendment to the Constitution to ignore the debt ceiling altogether.

Absent a deal, some people have urged the president to bypass Congress by invoking the 14th amendment of the constitution, which states that the “validity of the public debt of the United States… shall not be questioned”.

That section was passed after the US Civil War in 1866 to ensure that slave-holding states in the south paid war debts incurred by the north, and that the government would not be on the hook for reparations to slave-holders and others in the south.

President Joe Biden said he was considering it, but using the clause to challenge the debt limit law would almost certainly spark a legal battle – limiting its usefulness in the current crisis.

Treasury Secretary Janet Yellen has also downplayed the possibility, saying any attempt to invoke it would spark a constitutional crisis.

Yet another possibility is for the US Treasury to mint platinum coins worth a trillion or more dollars, because whereas printing of paper currency is subject to various restrictions, commemorative platinum coins are not.

The concept of striking a trillion-dollar coin that would generate one trillion dollars in seigniorage, which would be off-budget, or numismatic profit, which would be on-budget, and be transferred to the Treasury, is based on the authority granted by Section 31 U.S.C. § 5112 of the United States Code for the Treasury Department to “mint and issue platinum bullion coins” in any denominations the Secretary of the Treasury may choose. Thus, if the Treasury were to mint one-trillion dollar coins, it could deposit such coins at the Federal Reserve’s Treasury account instead of issuing new debt.

31 U.S.C. 5112(k) as originally enacted by Public Law 104-208 in 1996:

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.

In 2000, the word “bullion” was replaced with “platinum bullion coins”. According to the United States Mint: “A bullion coin is an investment-grade coin that is valued by its weight and fineness of a specific precious metal.”

Platinum bullion coins can, by this statute, be minted in any denomination, whereas coins in any other specified metal are restricted to amounts of $50, $25, $10, $5 and $1. The concept of minting a very high denomination coin relies on the platinum clause as a loophole for the executive branch to raise revenues without congressional oversight.

Philip N. Diehl, former director of the United States Mint and with Republican Congressman Michael Castle co-author of the platinum coin law, has said the procedure would be permitted by the statute. Castle says he never intended such a use. The platinum coinage provision was eventually passed by a Republican Congress over the objections of a Democratic Treasury in 1996.

Laurence Tribe, a constitutional law professor at Harvard Law School, said the legal basis of the trillion-dollar coin is sound and that the coin could not be challenged in court as no one would have standing to do so.

So how did this provision for platinum coins come about?

In 1997, Congress passed legislation that allowed the U.S. Mint to create platinum coins of any denomination — including $1 trillion or $31 trillion, explained Reilly White, an associate professor of finance at the University of New Mexico.

The purpose was to help the mint generate revenue from coin collectors through the sale of platinum coins, White noted. 

“It wasn’t perceived at that time as being a potential workaround to this debt ceiling crisis,” White said.

The idea for a $1 trillion coin began gaining traction amid the 2011 debt ceiling crisis, when Republicans similarly demanded spending cuts before agreeing to increase the debt limit. 

In theory, the mint would create the coin under the direction of the president and deposit it into the Treasury’s account at the Federal Reserve, according to White. And this coin could be any size. 

“It doesn’t have to be comically large. It’s not like somebody’s gonna roll it in,” he said. “It can be a nickel-sized coin that happens to be worth a trillion dollars.”

Currently the debt limit is $31.4 trillion dollars. So the idea is for the government mint to issue a $31.4 trillion coin, deposit it in the US Treasury and, voila!, the debt drops down to zero, leaving the government to borrow up to another $31.4 trillion.

As Dylan Matthews writes, advocates of Modern Monetary Theory (MMT) argue that fears over deficits are overblown. Republicans have known this for some time.

Here’s the thing. Republicans know that by and large Dick Cheney was right: Deficits don’t matter; Reagan taught us that. It’s possible that Reagan didn’t teach Cheney that but rather [Cheney’s] best friend in the DC power circle, Don Rumsfeld.

And where did Rumsfeld learn this? Warren Mosler. [Mosler has said he devised MMT after a discussion with Rumsfeld in the steam room of the Racquet Club in Chicago.]

So Republicans know deficit and debt fears are overblown, but Democrats do not. So we see Carter, Clinton, and Obama clean up the balance sheet and enable Reagan, Bush, and Trump to come in and cut taxes. Progressives have [now] caught on to the game, which is why the trillion-dollar coin (and big spending plans of Bernie Sanders and AOC) resonate with the Democratic base.

If the Republicans are allowed to get away with this kind of maneuver, they will do ti again and again. Desperate times call for desperate measures.

Here is an explainer about the debt ceiling and the options for dealing with it.


  1. says

    I strong recommend Stephanie Kelton’s “The Deficit Myth” for a clear take on modern monetary theory.

    The Republicans don’t care about the deficit in financial terms, they only care about it as a tool to get what they want, which is either a reduction in social programs or give-a-ways to the wealthy/corporations, or both. If they really did care about it, then they’d be pushing far different policies than they are. Unfortunately, most media take their claims at face value, and assume that the Republicans are being honest debaters.

  2. Pierce R. Butler says

    Deficits don’t matter; Reagan taught us that.

    I’ve thought, since the first time I heard that quote, that Cheney meant Reagan had shown how Republican politicians could get away with vast deficits politically (remember, RWR had run on an anti-deficit platform and then almost tripled the net debt accrued by all previous presidents) -- the economic consequences apparently didn’t factor in to his* thinking at all.

    *Cheney’s -- I doubt we should call what Reagan did as “thinking”…

  3. larpar says

    “Yet another possibility is for the US Treasury to mint platinum coins worth a trillion or more dollars,…”
    Wasn’t that a Simpsons episode? Of course, McCarthy would try to spend it in a coke machine.

Leave a Reply

Your email address will not be published. Required fields are marked *