Could a trillion-dollar coin really stop the next fiscal crisis?

Ryan Teague Beckwith, Digital First Media

Posted: 01/08/2013 10:36:48 AM EST

Updated: 01/08/2013 10:37:16 AM EST

In this June 15, 2007, photo released by Professional Coin Grading Service, shown is a new John Adams dollar coin that is missing the edge inscriptions. Hundreds of Adams dollar coins have been found without the edge lettering, according to the Professional Coin Grading Service based in Newport Beach, Calif., one of the country's largest rare coin authentication companies. (AP Photo/Professional Coin Grading Service) ** NO SALES ** (Anonymous)

View the story "Could a trillion-dollar coin stop the next crisis?" on StorifyCould a trillion-dollar coin stop the next crisis?Storified by Digital First Media· Tue, Jan 08 2013 07:27:26It's an old-fashioned standoff. Congressional Republicans hope to use the upcoming vote on the debt ceiling to force President Barack Obama to make unpopular spending cuts. The president says he won't negotiate over the debt ceiling. But if the debt ceiling isn't raised, America's credit rating could suffer - and so could the economy.In recent days, some outsiders have begun urging Obama to use a loophole straight from a James Bond movie: Minting a trillion-dollar coin. Here's an explainer of how it would work and why it's being talked about now.

The U.S. has already hit the debt ceiling.

DenverpostUnder the Constitution, Congress holds the power to tax and spend. The Treasury department, run by a White House appointee, can borrow money to pay the bills, but Congress has set a "debt ceiling" - basically a credit limit on the country's credit card. Congress has to either raise the debt ceiling or make massive

spending cuts immediately.Technically, the U.S. hit the debt ceiling on New Year's Eve, but the Treasury department moved some money around to extend the deadline to sometime between Feb. 15 and March 1.

The White House and Congress are at an impasse.

DenverpostFrustrated by the outcome of recent tax negotiations, House Speaker John Boehner has said he will no longer negotiate with the president one-on-one. Senate Republican Leader Mitch McConnell said he wants the president to agree to major spending cuts as part of a deal. For his part, Obama has said he won't negotiate on the issue.Economists disagree about what exactly would happen if the ceiling isn't raised. It's possible it could hurt the stock market, damage the U.S. credit rating, delay payments to members of the military and Social Security beneficiaries, and even trigger a new recession.

Enter: The trillion-dollar coin.

DenverpostIt would be unprecedented for Congress to fail to raise the debt ceiling. Some observers think the White House should respond by taking another unprecedented step and minting a coin worth $1 trillion. The idea, first proposed on an economics blog in 2011, is to simply mint the coin and then deposit it in the Federal Reserve.It's a workaround that would give the president the technical authority to keep paying the country's debts without getting Congress to approve the debt ceiling.

The coin has become the talk of the town.

Colbert Report: The Platinum Debt Ceiling SolutionColbert NationBusiness reporters are writing about it again. Nobel Prize-winning economist Paul Krugman called it a gimmick but said "there's a pretty good case for using whatever gimmicks come to hand." Rep. Jerry Nadler (D-N.Y.) has said it's "silly but ... absolutely legal." A White House petition has 6,000 signatures. And the hashtag #mintthecoin is popular on Twitter.It's even been the subject of a monologue by comedian Stephen Colbert: "We should have known that a coin was Obama's solution to everything. It was right there in his slogan ... change."

Can the government really do that?

DenverpostFormer Rep. Mike Castle (R-Del.) drafted the original legislation which gives the Secretary of the Treasury the authority to mint a platinum coin of any denomination. But he said the intent of the bill was to give the government more options for coin collectors, not to give the president leverage over the debt ceiling.Rep. Greg Walden (R-Ore.) said he plans to introduce a bill to prevent the move, though that bill would have to be signed by President Obama to become law, so it's kind of a moot point.

Obama is not likely to mint the coin.

DenverpostObama hasn't said anything about the trillion-dollar coin idea. But during the 2011 debate on the debt ceiling, he rejected a similar "escape clause" proposed by former President Bill Clinton to simply cite the 14th Amendment's language that the "public debt ... shall not be questioned."If Congress refuses to raise the debt ceiling, however, Obama may revisit that idea rather than mint a trillion-dollar coin, which is widely seen as gimmicky.

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