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S. 185: Cancel the Coin Act

It probably wouldn’t be accepted in your nearest vending machine.

The coin

Legally, the Treasury Department may mint a platinum coin in any value it chooses, through the U.S. Mint. It uses this power to create collectible coins for numismatists, such as this $100 coin featuring the Statue of Liberty. But, some ask, why stop at a coin worth $100?

Through a concept called seigniorage, the difference between the cost of producing legal tender and the value assigned to it, the government can create a coin in any value and keep the profit for itself. For example, if a coin costs a dollar to make and is assigned a value of $1 trillion, then the government “profits” $999,999,999,999.

Nothing in current law prevents them from doing so. Indeed, a 1982 law gives the Treasury Secretary authority to “mint and issue coins … in amounts the Secretary decides are necessary to meet the needs of the United States.” If anything, forget a mere trillion dollar coin; theoretically, the entire national debt accumulated over the course of 200+ years could be eliminated with a single $28 trillion coin. (If anyone would be willing to be paid with it.)

The debt ceiling

The last time the federal budget ran a surplus was in 2001. Ever since then, whenever Congress passes revenue and spending laws that together direct the government to spend more than it brings in, every so often they also have to increase — or temporarily suspend — a number called the debt ceiling. Also known as the debt limit, it allows the government to borrow money to make up the difference. It’s a dollar amount put into the law by previous Congresses specifying how high the national debt can go.

Whenever the debt itself comes close to approaching the debt ceiling, Congress has always raised it — whether under complete Democratic, complete Republican, or split party control. Failing to do so would mean that some government programs would run out of money. But perhaps more importantly, it would cause a first-ever U.S. default on its debts, which many economists project would cause catastrophic economic effects, both domestically and globally.

In 2011 and 2013, the Republican-controlled House threatened not to raise the debt ceiling, using a potential global economic catastrophe as leverage to reach an agreement with other legislators to reduce future government spending. The first time it worked: a deal reached in 2011 forced government spending cuts that lasted until this year. In 2013, a deal was reached at the last minute to suspend the debt ceiling for several months.

Yet the very fact that both votes came down to the wire has led some to consider an alternative.Instead of having the legislative branch (Congress) perpetually enact deficit spending and then avoid a default crisis, how about the executive branch (the Treasury Department) preclude a default crisis by minting new money, enough that the country doesn’t even run a deficit in the first place?

Some fiscal conservatives say that idea is too preposterous and dangerous, and must be prevented by law before it could actually be realized.

What the bill does

The Cancel the Coin Act would eliminate the Treasury Secretary’s current ability to mint a coin of any denomination or value above $200.

It was introduced in the Senate on February 2 as bill S. 185, by Sen. Mike Lee (R-UT).

What supporters say

Supporters argue the bill ensures the power of the purse remains with the legislative branch where it belongs, instead of the executive branch. The presumed implication is that the budget deficits created in laws passed by Congress should continue to be tackled primarily by Congress, either by cutting out-of-control spending or by raising taxes, or some combination of the two, rather than creating new money.

“If the current budget resolution shows anything, it is that this administration does not see the ballooning federal deficit as a problem,” Sen. Lee said in a press release. “A modern monetary theory-inspired spending spree would be disastrous for the American economy and the American way of life.”

The bill “removes a legal loophole that allows the Treasury Secretary to bypass the statutory borrowing limit by minting platinum coins of any denomination,” Sen. Lee continued. (The statutory borrowing limit is the formal name for the debt ceiling.) “In doing so, this legislation ensures the powers to coin money and regulate the value thereof remain firmly in the branch of government in which the Constitution bestows them: Congress.”

What opponents say

Opponents counter that the trillion-dollar coin hypothetical is a technical panacea, solving the debt ceiling problem without contributing significantly (or perhaps at all) to other economic problems such as inflation.

“There’s a legal loophole allowing the Treasury to mint platinum coins in any denomination the secretary chooses,” Nobel Prize in Economics winner and New York Times opinion columnist Paul Krugman wrote. “[B]y minting a $1 trillion coin, then depositing it at the Fed[eral Reserve], the Treasury could acquire enough cash to sidestep the debt ceiling — while doing no economic harm at all.”

What’s the basis of the “no economic harm at all” claim? The primary concern when printing or minting significantly more money, in denominations small enough to be used for transactions, is a high inflation rate resulting from the sudden increase in buyers’ spending power. Krugman’s theory is that a trillion-dollar coin would cause little to no inflation in the real world because it wouldn’t actually enter circulation for ordinary Americans. After all, even the highest-end retailers are unlikely to make change for $1 trillion. And the “cash” that the Treasury gets for it might just be an accounting trick.

Odds of passage

The bill has not yet attracted any cosponsors. It awaits a potential vote in the Senate Banking, Housing, and Urban Affairs Committee.

Odds of passage are low. In the near term, it seems exceedingly unlikely that Janet Yellen, or any other Treasury Secretary in a relatively centrist Joe Biden administration, would actually attempt to mint a trillion-dollar coin.

GovTrack Insider was unable to locate any statement or comment from Joe Biden’s Treasury Secretary Janet Yellen on the subject, either currently or in previous years, so there’s no indication about her thinking on the topic.

Last updated Mar 16, 2021. View all GovTrack summaries.

The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress, and was published on Feb 2, 2021.

Cancel the Coin Act

This bill prohibits the Department of the Treasury from minting or issuing any coin, including platinum bullion coins and proof platinum coins, having a nominal or face value exceeding $200.