U.S. Treasury Secretary Janet Yellen warns Tuesday that she will likely run out of resources by October 18 to avoid an unprecedented default on the nation’s debt if Congress does not increase the debt limit — the maximum amount of money the government can borrow.
According to the Treasury Department, the U.S. government will run out of money to pay all of its debts on October 18, and economists apprise without congressional action to extend the debt curb — a recession will ensue. Though legislators acknowledge the severity of the situation, they have yet to reach a consensus on how to handle it, with Republicans demanding that Democrats increase the debt ceiling using their thin majority in Congress.
Minting A $1 Trillion Platinum Coin Might Solve The Default
One possible solution is for the United States Mint to produce a $1 trillion platinum coin, a concept that initially appeared during a previous debt-ceiling battle in 2011 and gained popularity among some left-leaning policy wonks. The proposal was even considered by the White House for a time.
With Congress engaged in a partisan dispute that may last weeks, there has been speculation that the Treasury Department could temporarily halt the coming US debt ceiling crisis by sanctioning the minting of a trillion-dollar platinum coin. If that happens, the coin will span the gap between when the money runs out and when Congress raises the debt ceiling.
Janet Yellen Rejected The Proposal
Treasury Secretary Janet Yellen flatly rejected the proposal as a gimmick on Tuesday, stating that policymakers should not consider it a genuine option. She contended that minting the coin would jeopardize the Federal Reserve’s independence and undermine trust in Congress and the Biden administration to pay the nation’s bills.
Using the platinum coin is the equivalent of asking the Federal Reserve to issue money in order to pay off the debt, she explained. She stated that what has to be done is for Congress and the administration to demonstrate that they can be depended upon to pay the nation’s liabilities.
President Joe Biden warned on Monday that he couldn’t guarantee the US government wouldn’t default on its debt, as he tried to put further pressure on Republicans to quit opposing a Democratic move to increase the debt ceiling.
Senate Majority Leader Chuck Schumer, D-N.Y., has stated that he intends to approve legislation to extend the debt limit before the deadline but that Republicans in the Senate must agree not to obstruct the initiative.