House Republicans appear determined to play chicken over raising the U.S. government’s debt ceiling with the Democrats.
Global economic stability will be threatened if the U.S. defaults on its debt.
Treasury Secretary Janet Yellen warned of the massive risks taken on if the U.S. doesn’t fulfill its debt obligations.
With Kevin McCarthy (R-California) securing the speakership by granting right-wing members more power, the chance of the U.S. defaulting has increased dramatically.
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The federal government requires a separate vote of Congress on raising the debt ceiling. McCarthy has stated he will not vote for increasing the debt ceiling unless Democrats dramatically reduce spending, which they are unlikely to do.
Policymakers are throwing out ludicrous solutions to stop an impending default. One such idea is the minting of a trillion-dollar coin to cover all existing debts.
A 1996 law allows the minting of coins for sale in the U.S. government. An amendment to the law in 2000 gave power to the Treasury Secretary to determine the coin’s “specifications, designs, varieties, quantities, denominations, and inscriptions.”
The term “denominations” is key. The Secretary has the power to mint a single coin for as much money as they want. A trillion-dollar coin could be minted and then deposited into the Federal Reserve, thus giving the U.S. enough funds to maintain governmental obligations towards its debt.
Yellen has called the proposed idea “gimmicky” while President Joe Biden has stood by the standard practice of seeking congressional approval.
“It is one of the basic items that Congress has to deal with and that should be done without conditions. So there is going to be no negotiation over it,” White House Press Secretary Karine Jean-Pierre told reporters of Biden’s stance.
