I had a bit of fun with the platinum coin plans on MSNBC Monday night:
Tuesday morning, I got an e-mail from Philip Diehl, the former Mint director and Treasury chief of staff who, with Rep. Mike Castle, wrote the platinum coin law and oversaw the minting of the first coin authorized by the law. It's worth publishing in full:
I’m in a unique position to address some confusion I’ve seen in the media about the platinum coin proposal so I've provided a brief that I hope might be helpful.
* First, the law is not “poorly written”. The language accomplishes precisely what was intended, though it also had unforeseen consequences; but then how many other laws have had unintended consequences?
* In minting a $1 trillion platinum coin, the Treasury Secretary would be exercising authority that 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 is that it gives the Secretary discretion regarding all specifications of the coin, including denominations.
* 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 could ship the coin back to the Mint where the accounting treatment would be reversed and the coin melted. The coin would never be “issued” or circulated and bonds would not be needed to back the coin.
* There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the $1 trillion dollars would be taken off the books, and the coin would be melted.
* This does not raise the debt limit so it can’t be characterized as circumventing congressional authority over the debt limit. Rather, it delays when the debt limit is reached. Those who claim otherwise are misinformed or pursuing an agenda.
* This preserves congressional authority over the debt limit in a way that reliance on the 14th Amendment would not. It also avoids the protracted court battles the 14th Amendment option would entail and avoids another confrontation with the Roberts Court.
* Any court challenge is likely to be quickly dismissed since (1) authority to mint the coin is firmly rooted in law that itself is grounded in the expressed constitutional powers of Congress, (2) Treasury has routinely exercised this authority since the birth of the republic, and (3) the accounting treatment of the coin is entirely routine.
This story originally appeared in The Washington Post by Ezra Klein. View article here.
