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- The government could run out of money to pay its debts as soon as June 1, and Congress hasn't acted.
- One potential solution: Minting a trillion-dollar platinum coin to pay off debts and avert disaster.
- The coin is unlikely to fly, but Biden aides are looking at other legal workarounds.
The US is hurtling towards an entirely preventable economic crisis, and a trillion dollar coin could solve all of its problems — if the Biden administration decides to take it seriously.
Treasury Secretary Janet Yellen said that the government could run out of enough money to pay its debts as soon as June 1, triggering a never-before-seen debt ceiling crisis. Even a short default could cost the country nearly a million jobs and trigger a recession.
But Republicans and Democrats are still waiting for the other to blink. The House GOP narrowly passed a bill last week that would tie massive budget cuts to a one-year increase, which Senate Democrats have proclaimed dead on arrival. President Joe Biden has said he'll veto that legislation, and continues to insist upon a clean raise.
Enter the coin.
Some economists say that means it's time for a break-the-glass option: A trillion-dollar coin.
The coin — which doesn't need to be bigger than your average purse change, and can be made quickly — is part of a potential debt ceiling loophole. The Treasury Department can mint platinum coins of any denomination. That's led to a school of thought that says Yellen should simply mint a trillion-dollar platinum coin and deposit it to pay off the debts until a more permanent solution can be found.
"At this point, if any of the other solutions, the so-called more serious solutions would work, then they would've been used by now. But they keep not actually being strong enough. The coin's the only one that's strong enough," Rohan Grey, an assistant professor at Willamette University College of Law, told Insider.
To be sure, Biden's administration has not been so accepting of using a $1 trillion platinum coin to avoid an economically catastrophic default. Yellen, for example, dismissed the idea back in January, saying that it "is not by any means to be taken as a given that the Fed would do it, and I think especially with something that's a gimmick."
"The Fed is not required to accept it, there's no requirement on the part of the Fed," she added. "It's up to them what to do."
Brian Riedl, a senior fellow and economist at the conservative-leaning Manhattan Institute, told Insider that "the first problem with the trillion dollar coin is they would have to get past their own Treasury Secretary."
"There is a large chance the courts would shoot it down," Riedl said. "There's a large chance the Treasury Secretary would not be on board. The Federal Reserve may not be willing to accept the trillion dollar coin."
Grey said that the coin is a type of "messaging symbol." At the end of the day, he argued, it helps break through the noise, and show that a simple solution can be the best one. Yes, a trillion-dollar coin is silly, but would Biden "rather not look silly and hurt seniors and hurt Medicare than the other way around?"
A constitutional workaround could also solve the problem
Calls for the coin come as Biden aides reportedly look into whether the debt limit itself is constitutional, according to The New York Times.
Even if the coin isn't on the table, there could be yet another way to avoid a default while avoiding congressional drama. The New York Times reported on Tuesday that, according to people familiar with the discussions, officials in the White House, Treasury, and Justice Departments have floated invoking a clause in the 14th amendment that could take care of the debt ceiling without lawmakers' approval.
The clause states that "the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." Some experts suggest that this could mean a default — and thus the debt ceiling — would be unconstitutional.
"Of course, the Biden administration is not only going to look into these constitutional options, but more importantly they're gonna signify to Republicans that they're looking at these extra legal and constitutional options as a threat to undercut the legitimacy of the Republican position," Riedl said.
Yellen has been critical of that route as well, saying in 2021 that she believes it is Congress' job to raise the debt ceiling.
"It's Congress's responsibility to show that they have the determination to pay the bills that the government amasses," she said. "We shouldn't be in a position where we need to consider whether or not the 14th Amendment applies. That's a disastrous situation that the country shouldn't be in."
And yet, here we are. Biden is meeting with McCarthy, House Minority Leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer, and Senate Minority Leader Mitch McConnell on May 9 to discuss raising the debt ceiling. A White House official told Insider in a statement that Biden "will stress that Congress must take action to avoid default without conditions."
With just 12 legislative days left in the House before June 1, the clock is ticking.
"I think in this instance there probably will be a deal," Riedl said. "It will probably come from a few scraps of the House-passed plan and no one will come away happy, but everyone will come away thinking they got something that they can sell back home."