Conventional wisdom holds that the 2022 midterm elections went surprisingly well for Democrats. They defended all of their US Senate seats and even picked up Pennsylvania’s vacant seat, won back some governors’ mansions, and defeated the extreme election deniers who tried to take control of several key states’ election apparatuses. They even limited their losses in the US House to historically minimal levels, given that the incumbent President’s party almost always loses dozens of seats in the midterm election after he takes office.
Minimal, however, is not trivial. It would have taken only five seats changing hands for Republicans to become the majority party in the House, and they took a total of nine. As soon as Republicans secured the 218th seat in the House, our hearts sank, because we knew that the die was cast. No matter how much Democrats want to focus on good news from that night, the unavoidable reality is that the Republicans recaptured the House majority, even if narrowly.
And that, in turn, guaranteed that the debt ceiling, which has been the bane of our professional existence for the past twelve years, would soon be back on the agenda. Surely, the Republicans would again try to extort concessions from a Democratic President by threatening to refuse to increase the debt limit, thus crashing the global economy.
The disaster rapidly approaches. In early January of this year, the country formally reached the debt limit, but because of a quirk in the law, the Treasury Department is able to recharacterize some debt as non-debt through what are now called “extraordinary measures,” temporarily delaying a constitutional and economic crisis. The Treasury’s ability to take such measures is limited, however, and the latest estimate indicates that the true limit—the drop-dead date—will arrive between July and September of this year.
That could all be avoided if Republicans would act responsibly and stop playing with legal dynamite. Because they show no signs of waking up to reality, however, it is clear that, at best, we will face another round of 11th-hour brinkmanship in a few months. When that happens, some people in the center and on the left will claim, as they did during the Obama administration, that there is a “perfectly legal” and seemingly magical workaround that the Biden administration should exploit: minting a platinum coin of a sufficiently large denomination to allow the US to continue to pay its bills, sidestepping the debt ceiling entirely.
We have long thought that this idea is lunacy. Today, however, we are not here to argue against the platinum-coin option on prudential grounds but purely as a matter of whether it would be, as advertised, fully within the law. It is not. Minting a platinum coin to circumvent the debt ceiling would be illegal, and because proponents of the coin gambit sell it as a clever exploitation of a statutory loophole, it very much matters that that loophole does not in fact exist.
When the time comes, therefore, the President will have nothing but illegal options. And because the platinum-coin gambit continues to be a terrible idea on every other ground, its illegality should remove it from the conversation. Here, we will explain why minting the coin would be unlawful, and what the President should do if the Republicans try to crash the economy.
The Coinage Act and the Purported Platinum Coin Loophole
Federal law authorizes the government to mint coins in the familiar denominations: pennies, nickels, dimes, and quarters. It also sets out rules that allow the government to mint platinum coins, with the notable absence of statutory language specifying the values of such coins. A naïve reading of the law might thus lead a person to think that because the law is silent, the government can do anything that it likes when minting platinum coins.
If that were true, the federal government could never be limited by the debt ceiling, because it could always mint another platinum coin in whatever amount was needed. Even interpreting the statutory authority so broadly, however, the coin-based circumvention ploy is more difficult than it sounds. At a minimum, for it to work would require the Federal Reserve to accept the coin as a deposit into the Treasury Department’s checking account—a necessity because, of course, the Treasury cannot pay its bills by mailing literal platinum coins.
Yet even if a trillion-dollar (or multi-trillion-dollar) platinum coin were legal, the Fed would not be obligated to accept it and thus risk entering the political fray. A federal statute says the Fed “may,” not “must,” accept various forms of lawful money. Nonetheless, advocates of the platinum coin gambit have said in essence that the Fed should want to avoid a crisis, so of course it should allow the Treasury to sidestep the debt ceiling with one or more platinum coins.
Yet the Fed can accommodate the platinum bugs only if their claim to have discovered a magic loophole is correct. They have found a seeming gap, to be sure, but statutory gaps are common, and it is almost never true that the beginning and end of a gap-filling legal analysis will amount to: anything goes. Imagine a zoning code that specifies maximum heights for houses in a residential neighborhood and that also includes rules allowing treehouses to be built in backyards. If the treehouse rules do not include a height limit, does that mean that a treehouse can be of any height—or better still, could a family call their house a treehouse and build it to the sky?
That absurd question reminds us that interpretations of the law must be responsive to context and purpose. What are the relevant factors in the case of the platinum coin gambit?
Writing separately, we have suggested that a platinum coin that was deposited with the Fed would count as “debt” and thus would not even achieve the goal of keeping the US below the ceiling (Buchanan) and that advocates’ overly broad reading of the Coinage Act is likely a violation of the reasonableness requirement for agency interpretations that aim to fill statutory gaps (Dorf). We continue to believe that each of those analyses answers the question of the gambit’s illegality. Even so, how would we respond to those who would say that reasonableness is a subjective inquiry and that, at the end of the day, the statute still has that loophole?
There Is No Loophole
In researching our latest law review article, we looked closely at the relevant statutory language, and it turns out that the text of the law rules out the platinum-coin option as a “perfectly legal” possibility. We write in footnote 107 (p. 48) that, “[e]ven if the Federal Reserve wanted to play along with an attempt by Treasury to deposit a platinum coin, it can only do so if the coin is ‘lawful money,’ as it clearly does not fall within any of the other statutory categories of acceptable deposits.”
Is a trillion-dollar platinum coin lawful money? As an initial matter, courts might endorse the most obvious objection to the gambit, an objection rooted in the statute’s purpose—not as derived from the sort of tendentious legislative history that textualist jurists eschew but from the background context, which even the late Justice Scalia endorsed as consistent with textualism. Here, the context speaks for itself. Put simply, it is beyond implausible to imagine that a Congress that did not directly repeal the debt ceiling statute nonetheless hid an Easter Egg in a different statute that would authorize the Treasury to avoid the debt ceiling by writing the words “one trillion dollars” on a hunk of platinum (but not on other metals or physical objects).
What was Congress’s purpose in authorizing the minting of platinum coins? The statutory provision to date has been used only for the minting of commemorative coins, which makes sense of the Act’s omission of any limitation on denominations. After all, commemorative coins are not used in transactions, and thus their nominal denomination bears no relation to their value. For example, the Mint currently sells platinum coins with “a $100 nominal face value” and commemorating the First Amendment for $1,595 each.
Might a hyper-textualist nonetheless point insistently to the absence of any numerical cap on the value of platinum coins? Well, sure, but only unpersuasively. As we explain in our article:
[The key] provision, 31 U.S.C. § 5112(k), does not itself state that it permits the minting of only commemorative coins, but it was enacted as part of the same omnibus statute that also limited the number of ‘commemorative coin programs’ that the Secretary of the Treasury may annually invoke ‘under this section’ of the statute—i.e., under the section that includes the authorization to mint platinum coins.
We thus need not go through the exercise of trying to read the collective mind of a previous Congress, because the statute clearly (if indirectly) limits the Treasury’s ability to mint platinum coins to commemorative programs for sale to the public. And because the coins are commemorative and valid only when sold to the public, the Federal Reserve is prohibited by law from accepting them on deposit to prevent the government’s checks from bouncing.
It may, however, be worth saying a few more words here about our parenthetical comment above that the statutory limitation is “indirect.” We can imagine a devotee of the platinum-coin option responding: “Well, you’re parsing the language a bit close, aren’t you?” And it is true that we are pulling together a reference to “this section” with a non-contiguous description of that section as limiting the provision to commemorative coins. Seems a bit lawyerly, right?
The only answer to any such objection, to put it a bit tartly, is: “We’re being picky and technical?” The very basis of the gambit is a supposed technicality, a loophole that is found by comparing the existence of denominational limits on non-platinum coins in one provision of the law with the lack of limits in another. Because that other provision is itself part of an authorization to use platinum in the minting of commemorative coins, the technical meaning of the law itself is as clear as Congress’s original purpose in passing it.
Where Do We Go from Here?
Although we were heartened to see that the relevant statutory language did not in fact create a gap that we already thought could not be filled by minting a platinum coin, this is a Pyrrhic victory indeed. After all, our conclusion merely means that one silly option is just as illegal as all of the other options, silly and serious alike. Our analysis here forecloses a purportedly legal path out of the debt-ceiling crisis that Republicans seem hell-bent on fomenting.
Some Republicans in the House are on the record as saying that they will simply not increase the debt ceiling under any circumstances. For example, former Vice President Pence’s brother Greg represents an Indiana district, and he responded loudly and repeatedly, “No!” to a reporter’s question about whether he would vote to increase the debt ceiling, even when that reporter asked whether Pence’s answer would change if the White House agreed to everything that Republicans demanded of him.
And it is worth remembering that even a back-bencher like Pence (who is hardly alone in his extremism on this issue) can exploit the agreement that Kevin McCarthy made in January to become Speaker of the House, allowing any member of his caucus to demand a vote to boot him out at any time. Every Republican member, no matter how extreme, has the power to take away McCarthy’s dream job, and McCarthy knows it.
Meanwhile, in the real world, the Biden administration seems to think that they can “win the politics” and force the Republicans to back down. Back in January, one White House aide said: “If we can’t win on that, we can’t win on anything.” Although we admire such optimism, the evidence tells us that the Democrats truly cannot “win” the debt ceiling fight. Republicans cannot even agree among themselves what they want, or if they simply want to say no to everything and burn it all down. And that has put all of our necks in the noose, as we noted above, ever since the Republicans locked down that 218th seat.
What next? Even well-meaning analyses of the debt ceiling mess continue to get a key point tragically wrong, as this entry from a member of The New York Times editorial board put it earlier this month: “If Congress doesn’t raise [the debt limit], the government goes into default and can’t make payments on its obligations, including interest on Treasury bonds, Social Security payments and other essential spending, which would quickly crash the U.S. economy.”
Although the last assertion in that sentence is most definitely accurate—because an unprecedented failure to pay the nation’s obligations in full and on time would indeed be disastrous—what goes before it is not. If the President defaults by failing to make payments on the government’s legal obligations, he will be violating the law. The problem is that every other thing that he could do—including purporting to do nothing—would also violate at least one law, as well as the Constitution. But it is simply wrong to presume that the President will have no choice but to allow the government to default.
That is why our advice has always amounted to a version of the now-overused mantra: “Keep calm and carry on.” The best thing to do in a debt ceiling crisis is to continue to raise the money necessary to pay the government’s bills. If Republicans block action on the debt ceiling, the President would indeed break the law by issuing new debt. But among his options at that point, all of which would be bad, that would be the closest thing to a plain-vanilla response. We would not have to endure a platinum-coin circus, and we would not see the government stiff its creditors.
Instead, the Treasury Department would do what it always does: go into the financial markets and raise funds from willing lenders. Those lenders would almost certainly demand higher interest payments than otherwise, which would offer the irony that the Republicans’ vows to “do something about the debt” will result in more debt, not less. But in a world of their making, where even the odd loophole of the platinum-coin option is rightly seen as illegal, borrowing money as it is needed, in as close to the normal way as possible, will be President Biden’s best (and least unconstitutional) option.