President Obama: Stop Breaking the Law; Use Coin Seigniorage
Yesterday, we actually ran over the debt ceiling of $14.294 Trillion by $50 Billion or so, which means that the Treasury has issued $52 Billion more in debt instruments than is allowed by Congress's debt ceiling, which, in turn, means that the current Administration stands in violation of the Law. In reply to this, some will say that the debt ceiling is unconstitutional so the President doesn't need to observe it. However, in the present context, I don't think that's true. Here's my argument.
1) Congress mandates a debt ceiling that Treasury has now exceeded by $52 Billion. So Treasury is currently in violation of the law unless the law in question is unconstitutional.
2) Congress also mandates that all deficit spending must occur after bonds are issued to "make room" for the spending.
3) Congress also prohibits the Federal Reserve from letting Treasury run a negative balance in its account, which is probably just a function of 2).
4) The Constitution (14th Amendment section 4) prohibits anyone from questioning the validity of debts of the United States. In Perry v. United States (1935) the Supreme Court ruled, based on section 4, that voiding a United States government bond is beyond the power of Congress.
Yet another argument that might be applied in this case is based on the idea that the Congressional appropriations providing for Treasury's spending were passed after the current debt ceiling. Since later laws supercede earlier ones, it follows that legislation appropriating Treasury spending supercedes Congress's earlier passage of the debt ceiling.
5) If only 1-4 applied, then 1) would be either unconstitutional or supercede by later law, and the Executive could ignore 1), continue issuing debt and wait for the Courts to tell Congress that the debt ceiling is unconstitutional or superceded.
6) However, the context includes more than 1) -- 4). It also includes the authority for the Executive to employ jumbo coin seigniorage to replenish the Treasury General Account at the Fed and pay all of the obligations of the United States without issuing more debt or even, technically, any more “deficit spending.” As beowulf puts it:
The Secretary has rather broad authority to mint coins, Congress was apparently feeling generous when it authorized platinum coins in 31 USC 5112(k) (“with such specifications, designs, varieties, quantities, denominations, and inscriptions and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe…”). If deficit spending was paid for (eliminated actually) with miscellaneous receipts revenue generated by selling the Fed jumbo denomination coins, and since the Federal Fund Rate can now be pegged with Interest on Reserve payments in lieu selling Treasuries to drain excess reserves, Tsy could fund govt operations indefinitely without ever raising the statutory debt limit.
Beowulf might also have pointed out that national debt can eventually reduced to near zero with the constant use of coin seigniorage. Details of how coin seigniorage would work with citations to legal issues involved are in beowulf's post; and an outline of steps in a procedure is in my recent post.
7) So, since the Executive has a way of paying all obligations without deficit spending by using coin seigniorage and its Constitutional duty is to uphold both the Constitution and the laws of the United States, it follows that the Executive must immediately end its violation of the law, and use coin seigniorage to replenish the TGA as necessary to implement all the spending appropriations passed by Congress and all the previous obligations of the United States.
What else is there to say? The President has no choice in this matter. Congress has appropriated money for particular purposes. It has also passed a debt ceiling, and passed a law providing the Administration authority to engage in jumbo coin seigniorage to get revenue necessary to spend appropriations in the presence of the debt limit. The President is also bound to uphold the Constitutional prescription that no one may question the validity of the debts of the United States, which certainly also implies, in the context of the debt ceiling, that it is the obligation of the President to remove any basis for such questioning by using the authority granted to him to raise all revenue necessary to spend Congressional appropriations. So, what is he waiting for? He should move back into compliance with the Law by immediately using jumbo coin seigniorage, while ignoring the inevitable teeth gnashing by those holding the nation hostage!