Former Mint Director Defends Issuance of $1-Trillion Coin, But Admits It Was Never the Intent of the Law

In conjunction with his first broadcast interview on this topic—on “Istook Live!”--this emailed statement was provided to Ernest Istook by Phil Diehl of Texas, former Director of the U.S. Mint from 1994 to 2000 (revising what he had earlier written).

 “I’m the former Mint director and Treasury chief of staff who, with Rep. Mike Castle, wrote the platinum coin law (Sec. 5112 of title 31, United States Code) and oversaw minting of the original coin authorized by the law, so I’m in a unique position to address some confusion I’ve seen in the media about the platinum coin proposal.

“* In minting a $1 trillion platinum coin, the Treasury Secretary would be exercising authority that Congress has granted routinely for more than 220 years. The Secretary’s authority is derived from an Act of Congress (in fact, a GOP Congress) under power expressly granted to Congress in the Constitution (Article 1, Section 8). What is unusual about the law is that it gives the Secretary discretion regarding all specifications of the coin, including denominations.

“* The accounting treatment of the platinum coin is identical to the treatment of all other coins. The Mint strikes the coin, ships it to the Fed, books $1 trillion, and transfers $1 trillion to the treasury’s general fund where it is available to finance government operations just like proceeds of bond sales. However, since no bonds are needed to back the coin, the $1 trillion now in the general fund does not push the debt over the statutory limit. This accounting treatment is the same as for a quarter dollar.

“* Once the debt limit is raised, the Fed ships the coin back to the Mint where the accounting treatment is reversed and the coin melted. The coin would never be “issued” or circulated and bonds would not be needed to back the coin.

“* This does not enable the President to spend money beyond what Congress has already authorized or mandated, so it does not represent a circumvention of Congress' "power of the purse". Rather, it simply allows the government to pay the bills for what Congress has already appropriated.

“* There are no negative macroeconomic effects. This works just like additional tax revenue or borrowing under a higher debt limit. In fact, when the debt limit is raised, Treasury would sell more bonds, the trillion dollars would be taken off the books, and the coin would be melted.

“* Concerns that the coin will spark inflation are misplaced. This is not like the Fed flooding the market with one trillion dollar bills. The trillion dollar coin would stay in the Fed vaults until the debt limit is raised and then melted.

“* Temporarily addressing the debt limit in this way will stabilize world financial markets by reinforcing confidence that, despite Congress's inability to raise the debt limit, the US will not default on its obligations.

“* This does not raise the debt limit, so it cannot be characterized as circumventing congressional authority over the debt limit. Rather, it delays when the debt limit is reached.

“* This preserves congressional authority over the debt limit in a way that reliance on the 14th Amendment would not. It also avoids the protracted court battles the 14th Amendment option would entail and avoids another confrontation with the Roberts Court.

“* Any court challenge is likely to be quickly dismissed since (1) authority to mint the coin is firmly rooted in law that itself is grounded in the expressed constitutional powers of Congress, (2) Treasury has routinely exercised this authority since the birth of the republic, and (3) the accounting treatment of the coin is entirely routine.

“* Once the debt limit crisis has passed and all parties understand that the platinum coin option can be used in any future debt limit standoff, an agreement is likely to be struck (eventually) in which the platinum coin law is revised in exchange to a reform of the congressional debt limit process.

“* Yes, this is an unanticipated consequence of the platinum coin law, but how many other laws have had unanticipated consequences? Countless. The fact that this use of the authority granted by Congress is unintended has no bearing on its legality or constitutionality. What matters is that it conforms with the strict letter of the law.”