The federal government spent $6.6 trillion in 2020, according to the Congressional Budget Office. But it only brought in $3.3 trillion. It had to borrow the other $3.3 trillion. In November 2020, the government was $20.3 trillion in the hole, and if you take a look at this graph that projects the federal deficit as a percentage of the US gross domestic project, the debt will increase. That's why congress has periodic pretend fights over raising the debt ceiling. Eventually, bad deals are made and the government bills can get paid.
One way to prevent the catastrophe of hitting the debt ceiling (i.e., the US government defaulting on its loans) would be to mint a $1 trillion coin. And it would be legal to do so, thanks to a 23-year-old loophole in the law. The US Mint is allowed to mint coins in denominations of up to $100. If you aren't a coin collector or precious metals investor, you probably haven't seen $100 US coins, but they exist. The Mint makes $100 coins that contain an ounce of pure gold, and they sell for about $2,600. But a law passed in 1997 allowing platinum coins to be minted in any denomination. Nothing is stopping the Mint from minting a few trillion-dollar platinum coins (each of which contains a single ounce of platinum worth about $800) and depositing them in the US Treasury, instantly negating the federal deficit.
In 2011, House Republicans threatened to force the US to default on its obligations. A commenter on the Pragmatic Capitalism website proposed a $1 trillion platinum coin that would "sidestep the debt ceiling this afternoon."
What would the downsides be to issuing a $1 trillion coin? Inflation? When economist Paul Krugman wrote about the coin in 2013, he didn't seem to think so: "It would be economically harmless — and would both avoid catastrophic economic developments and help head off government by blackmail."
While President Obama didn't order the Mint to make the magical debt-vanquishing coin, the idea arises from time to time, most recently in 2020 when Rep. Rashida Tlaib of Michigan introduced the Automatic BOOST to Communities Act (ABC Act), which would "immediately provide a US Debit Card pre-loaded with $2,000 to every person in America. Each card would be recharged with $1,000 monthly until one year after the end of the Coronavirus crisis." To fund the program, the Act calls for the minting of "two $1 trillion platinum coins, under the legal authority provided by 31 U.S.C. § 5112(k)." A website called Mint The Coin has news and resources about the ABC Act.
[This first appeared in a 2020 issue of my newsletter, The Magnet]
