Treasury secretary says it is not a viable option to raise the debt limit
Treasury Secretary Janet Yellen threw cold water on the idea of minting a $1 trillion coin as a way to raise the US debt limit to avoid default, calling the notion supported by many Democrats “a gimmick.”
When asked about the proposal on CNBC’s “Squawk Box,” Yellen said, “I oppose it, and I don’t think we should take it seriously.”
What if Congress fails to raise the debt limit?
“It’s really a gimmick,” the Treasury secretary explained, “and it’s essential for Congress to show that the world can count on America to pay its debt.”
“The platinum coin is the equivalent of asking the Federal Reserve to print money to cover deficits that Congress is unwilling to cover by issuing debt. It compromises the Fed’s independence, counteracting monetary and fiscal policy.” Instead of showing Congress and the administration can be trusted to pay the country’s bills. It’s actually the opposite.”
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The idea of creating a $1 trillion coin has been around since 2011 and has gained traction of late among progressive lawmakers, including Reps Rashida Tlaib of Michigan and Jerry Nadler of New York, as Republicans voted to raise the limit. refused to participate. Meanwhile, Democrats – who control both chambers of Congress and the White House – have so far refused to lift it themselves through reconciliation.
Left-wing economist Paul Krugman wrote an op-ed in The New York Times last week urging President Biden to “ignore the debt limit and create a $1 trillion coin,” but himself acknowledged in the piece that The proposal is a “gimmick”, arguing, “Given the bet, who cares if the approach sounds silly?”
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But the Biden administration has already rejected the $1 trillion coin plan. When asked about it during a briefing on Monday, White House press secretary Jen Psaki said, “We clearly look at a number of options and none of those options were viable, either because they had to be taken over by the Federal Reserve.” By, guidance will not be accepted by our Secretary of the Treasury or just by legal sanctions.”