Updated Sunday, January 13, 2013 at 09:52 AM
WASHINGTON — Forget about the government minting a $1 trillion coin to solve its debt-limit crisis.
Treasury Department spokesman Anthony Coley said Saturday that neither his department nor the Federal Reserve believes the law can or should be used to produce such a coin to avoid a coming battle with Congress over government borrowing.
The government has reached its $16.4 trillion borrowing limit. By late February or early March, Treasury will run out of ways to cover debts and could begin defaulting on government loans.
White House spokesman Jay Carney says Congress has two options: Pay the tab for its spending or send the nation into default, which would have serious economic consequences.
The idea of minting a platinum coin to invalidate the debt ceiling comes from a few key sentences tacked onto the 1997 Omnibus Consolidated Appropriations Act. "Notwithstanding any other provision of law," it reads, "the Secretary of the Treasury may mint and issue platinum coins in such quantity and of such variety as the Secretary determines to be appropriate."
The author of those sentences was Mike Castle, a Republican congressman from Delaware. The intent was to help coin collectors who wanted the Treasury Department to mint cheaper platinum coins.
But in giving the Treasury Department the flexibility to mint platinum coins of little value, Castle accidentally gave it the flexibility to mint platinum coins of unlimited value. "That was never the intent of anything that I drafted," he said.
The idea of minting a trillion-dollar platinum coin was first floated in May 2010, in the comment section of "The Center of the Universe," a blog devoted to Modern Monetary Theory.
The idea gained some adherents during the debt-ceiling crisis of 2011, but it really developed traction after the 2012 fiscal-cliff deal.
A Twitter campaign by Joe Weisenthal, of Business Insider, and Josh Barro, of Bloomberg View, forced it into the conversation, and subsequent endorsements by Rep. Jerry Nadler, D-N.Y., Nobel Prize-winning economist Paul Krugman and former U.S. Mint director Philip Diehl gave it further legitimacy.
Others worried the coin would be seen as a power grab by the president, leading to a far more bitter standoff over the debt ceiling and a showdown in the courts.