Dewonkify – Trillion Dollar Coin

Word: “Trillion Dollar Coin”

Definition: An obscure law gives the Treasury Secretary the power to mint platinum coins in any denomination he chooses.  Recently, some have suggested that Treasury Secretary Geithner mint a coin worth a trillion dollars, deposit it at the Fed, and use that cash instead of raising the debt ceiling.

Used in a sentence: “Trillion dollar coin: Funny money or real solution?”

History: In 1996, the 104th Congress passed H.R. 3610, the Omnibus Consolidated Appropriations Act.  When H.R. 3610 became law, it included the following language:

“The Secretary may 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.”1

Though the law was originally intended to apply to the minting of commemorative coins, theoretically, there is no limit to the amount which the Secretary can mint.

What it Means: The idea of the trillion dollar platinum coin has been floated (by some, seriously, by others, not so much) as a potential solution to the debt ceiling.  Secretary Geithner minting such a coin would conceivably sidestep the debt ceiling debate altogether.  What started off as a joke has, in recent weeks, garned lots of media attention – New York Times economic columnist Paul Krugman has endorsed the idea; so has Rep. Jerrold Nadler (D-NY).  A petition in support of the coin is circling on the White House’s “We The People” website – with over 7,000 signatures.  And of course, a Congressional bill to ban the minting of the trillion dollar coin, calling it “absurd and dangerous,” has already been introduced.

So, is the Obama administration really going to mint a “trillion dollar coin” to save the country from default?  Probably not but unlike other proposed solutions to the national debt, such as the use of the 14th Amendment, White House press secretary Jay Carney has not ruled it out.

Regardless, the question remains… who should have the honor of having their face minted on the U.S.’s first trillion dollar coin?

1 http://www.gpo.gov/fdsys/pkg/PLAW-104publ208/pdf/PLAW-104publ208.pdf

Dewonkify – Fiscal Cliff

The Word: Fiscal Cliff

Definition: “Fiscal cliff” is the term used to describe the situation that the U.S. will face at the end of this year, when provisions of the Budget Control Act of 2011 are scheduled to go into effect. (Some use the word “austerity cliff”.) If no action is taken by Congress and the President, $500 billion of spending cuts and tax increases will automatically occur. For more on the specifics of the Fiscal Cliff, read our blog post.

Used in a Sentence: “[Congressional Budget Office]: ‘Fiscal Cliff’ Could Trigger Recession”

History: In 2011, legislators reached a bipartisan agreement to raise the debt ceiling. However, in exchange for raising the debt ceiling, the agreement mandated that Congress put forward a plan to balance the budget – by December 31, 2012- or automatic spending cuts of 10% across the board would go into effect. These automatic cuts are also known as “sequestration.”

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which extended the Bush tax cuts for two years, is set to expire on December 31, 2012. If Congress fails to take action, taxes will increase starting on January 1, 2013.

What it Means: Both sides of the aisle worry that the fiscal cliff could plunge the U.S. back into a deep recession. The bipartisan Tax Policy Center estimates that if no deal is struck by January 1, 90 percent of Americans would face tax increases, at an average of $3,500 in additional taxes by April 2013.*

Congress has not yet come up with a plan to balance the budget, so the combination of tax increases and spending cuts known as the “fiscal cliff” continues to loom. Neither party wants to see the U.S. go off the cliff, but serious negotiations will have to occur in order to stop this from occurring.

* http://www.nytimes.com/2012/10/17/business/financial-survival-in-a-time-of-fiscal-peril.html?pagewanted=all