how the $1 trillion coin minted by the United States and deposited into the treasury doesn’t help resolve the outstanding debt without ramifications.

Question

how the $1 trillion coin minted by the United States and deposited into the treasury doesn’t help resolve the outstanding debt without ramifications.

In: 141

Answer 1

This doesn’t resolve outstanding debt.

It solves the debt CEILING.

The debt ceiling is problem Congress created that only Congress can solve.

Congress during the Reagan/Clinton/Bush/Obama/Trump Era spending ran up the US credit card because no one wants to take out the political fallout for cutting programs or raising taxes.

But Congress ALSO passed a law, the debt ceiling, which is the credit card limit.

So Congress says “keep spending” but also caps the credit card limit. And luckily for them, because the President actually needs to execute on this, he gets the blame.

So what can the President do? He can stop paying federal employees, who will sue him for stolen wages. He can stop paying government contractors (default), who will sue him (furlough/sequestration). He can stop paying interest on existing bonds (default), who will sue him. Or he can beg Congress to solve a problem they caused by raising the credit card limit (raise the debt limit).

He can try to cook the books by printing $, and deposit it in the bank (the Federal Reserve). This technically reduces the credit limit by adding $1 trillion jn assets.

To hopefully avoid hyperinflation, he doesn’t actually spend this $, but instead continues to borrow $ through bonds.

This is legally questionable, but it’s fundamentally a way to cheat the books because it’s easier than getting Congress to do its job.

The only way to fix the budget is for Congress to actually cut spending or raise taxes. And the ultimately, this means cuts to Social Security, Medicare or the military, and raising taxes.