How The White House Should Bring Back The Platinum Coin: Secretly

There are two strategic problems the White House needs to deal with on the debt limit.

One is that House Republicans might be so disorganized, or so radicalized, that they fail to provide a reasonably clean debt limit increase to the President before Oct. 18, at which point the government will be unable to pay some bills when due.

It would be good for the White House to have a Plan D to prevent any missed payments if that happens.

Minting platinum coins is such a Plan D, one that is legally sounder than other options, such as invoking the 14th Amendment provision against repudiation of the United States' debt.

But if Republicans know the White House has a viable Plan D, they'll be more willing to attach insane demands to any debt limit increases. Republicans are afraid of causing a default for which they'll be blamed. If they know the White House will be able to stave off a default on its own, they'll be less likely to back down.

That's why killing the platinum coin, annoying as it was for me, was a key part of the White House's strategy to engineer Republicans' last cave on the debt ceiling, in January. With the coin option off the table, Republicans were left staring default in the face, and they blinked. They agreed to a months-long increase in the debt limit for basically nothing.

Reviving the coin could make a crisis more likely by emboldening Republicans to put the White House in a position where they feel compelled to mint it.

Fortunately, there is a way to thread this needle. Bring back the coin, but don't tell anybody.

For all we know, the coin proofs are already sitting in Treasury Secretary Jack Lew's desk, ready to be sent to the mint on a moment's notice. If they were, he certainly wouldn't be telling anybody.

In January, the Treasury said that not only did they think the coin was a viable option, but the Federal Reserve would not accept it for deposit. But I don't think the threat to refuse the coin for deposit is credible. Federal law authorizes Treasury to mint platinum coins in whatever amount it pleases, and also obligates the Federal Reserve to accept valid cash deposits from Treasury.

As Matt Yglesias points out, a Federal Reserve that declines the coin deposit would be acting illegally:

@LorenAdler In the joint release they seemed to be just promising to break the law. If they refuse, they should be arrested.

- Matt Yglesias (@mattyglesias) September 27, 2013

Of course, it's not going to come to that. If Treasury comes to the Fed on Oct. 17 with platinum coins for deposit, the Fed is not going to refuse the deposit, because they don't want to take the blame for a default any more than anyone else does.

The coin option is still viable. But it's most useful if nobody in Washington talks about it too much.