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The United States government has been dealing with a debt problem for years. As of 2019, the federal debt stood at more than $22 trillion. To put that in perspective, that’s more than $67,000 for every man, woman, and child in the country. The current debt limit of $28.5 trillion is a legal cap on the amount of debt the government can borrow to pay its bills. When the debt reaches the limit, Congress must act to raise the limit or risk defaulting on its debts.
But what happens when Congress can’t agree on a debt limit increase? In the past, the government has used a variety of workarounds to keep paying the bills. One of the most controversial of these workarounds is the use of a trillion-dollar coin.
The Coin
The idea behind the trillion-dollar coin is simple: the Treasury would mint a coin worth $1 trillion and deposit it at the Federal Reserve. The Fed would then credit the Treasury’s account with $1 trillion, which the Treasury could then use to pay its bills.
The argument for the trillion-dollar coin is that it is legal. The coin would be legal tender, just like any other coin, and the government has the authority to mint coins of any denomination. Some legal scholars argue that the debt limit is actually unconstitutional because it undermines the government’s ability to pay its bills, but the legality of the coin would likely be challenged in court if it were ever used.
The coin would also be a one-time fix, and the government would still need to address the debt limit in the long-term. But it could buy some time for Congress to come to a more permanent solution.
The drawback of the coin is its perception. Minting a trillion-dollar coin would be seen by many as a gimmick or a cheat. It would likely be seen as a sign of the government’s inability to manage its finances and could harm the country’s reputation.
The Constitution
Another potential workaround is for the government to argue that the debt limit is unconstitutional. The argument goes like this: the Constitution gives Congress the power to borrow money on the credit of the United States. By setting a debt limit, Congress is effectively taking away its own power to borrow money. The debt limit, therefore, violates the separation of powers clause in the Constitution.
This argument has been made in court before, but it has never been successful. The courts have generally held that the debt limit is constitutional because it does not prevent Congress from borrowing money, it simply creates a cap on how much can be borrowed.
Furthermore, even if the courts did find the debt limit unconstitutional, it would not solve the immediate problem of the government running out of money to pay its bills. It would take time for the courts to rule on the issue, and in the meantime, the government would be in a state of financial crisis.
Premium Bonds
A less controversial alternative to the coin and the constitutional argument is the use of premium bonds. Premium bonds are a type of savings bond that is sold at a price higher than its face value. For example, a $100 premium bond might be sold for $110. The buyer gets the $100 value of the bond when it matures but also gets a chance to win a prize in a periodic drawing.
The idea behind using premium bonds to address the debt limit is that they would be purchased by people who want a chance to win a prize, not by people who want an investment. The government could sell premium bonds to raise money to pay its bills without increasing the national debt. The bonds would not count toward the debt limit because they are not debt; they are savings bonds that are eventually paid back.
The advantage of premium bonds is that they are a legitimate way to raise money without increasing the debt. They are also a voluntary purchase, so there is no risk of the government running into debt problems if they don’t sell enough bonds.
The drawback of premium bonds is that they are not a long-term solution. They would only be a temporary fix to buy time for Congress to act on the debt limit. They are also not a reliable source of income, as the government would have to rely on people buying the bonds for the chance to win a prize.
In Conclusion
The national debt is a serious issue for the United States government. The debt limit creates a legal cap on the amount of debt the government can borrow to pay its bills. When Congress can’t agree on a debt limit increase, the government has used workarounds like the coin, the constitutional argument, and premium bonds to buy time to find a more permanent solution.
The use of a trillion-dollar coin is a controversial workaround that could be seen as a gimmick or a cheat. The constitutional argument is a long shot that would not solve the immediate problem of the government running out of money to pay its bills. Premium bonds are a legitimate way to raise money without increasing the debt, but they are only a temporary fix.
Ultimately, Congress needs to find a long-term solution to the debt limit problem. The government can’t keep using workarounds forever. The debt is a symptom of a deeper problem with government spending that needs to be addressed. Until Congress can agree on a solution, however, the government will continue to face the prospect of defaulting on its debts.
