Professor Calling For The IOU Solution To The Debt Ceiling Says The Platinum Coin Is An 'Embarrassment To The Country'

USC

Edward Kleinbard, the former Chief of Staff of the U.S. Congress’s Joint Committee on Taxation, said today that the option of minting a trillion-dollar coin to work around the debt ceiling was "far-fetched and an embarrassment to the country as a first-world power."

Instead, he advocated a different work-around strategy: give out "IOUs" to existing claims holders like federal employees, defense contractors, Medicare service providers, and Social Security recipients. It's a strategy that has precedent from California's budget crisis in 2009.

Kleinbard's problem with the platinum-coin option is its legality. Both Republican and Democratic members of Congress have argued that it would be a legal interpretation of a 1997 law that says the Treasury can "mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the secretary, in the secretary’s discretion, may prescribe from time to time."

But that law was intended for commemorative coins. Kleinbard said that a strict, "hyper-literal interpretation" would not hold up in court.

"It's taking a statute ... that has one very small, narrow purpose for which everybody agrees — minting commemorate coins — and reading it in a hyper-literal way," Kleinbard said this morning on a conference call.

Kleinbard said that kind of interpretation ignores the context and is not consistent with the law's original purpose or intent — something the court would look to in determining its legality.

"We're all reading it out of context," he said.

Kleinbard outlined a different proposal in which President Barack Obama could avert the ceiling today in The New York Times — issuing scrip, "registered warrants" or "IOUs" to exi siting claim holders.