I argue that in “constitutional monetary moments” like those generated by debt ceiling crisis, it is important—not only positively but also normatively—to recognize that contemporary operational constraints on money creation are self-imposed, institutionally contingent, and ultimately legal rather than material in nature. It is important to do so because in such instances it may be not only appropriate, but socially optimal, to subject existing legal constraints to creative interpretation, or even ignore them outright, in order to challenge and disrupt the social myths they uphold, as well as the political dynamics that they produce. As noted legal realist Thurman Arnold argued: “You judge the symbols [upon which society is built and depends] as good or bad on the basis of whether they lead to the type of society you like. You do not cling to them on general principles when they are leading in the wrong direction.”
By denying from the outset the possibility that debt ceiling crises are, in fact, constitutional monetary moments in which it may make sense to abandon outdated monetary symbols, we close off the full range of political possibilities and legal options available to us to improve fiscal policy administration, and with it, our economy more broadly. In other words, it was not sufficient then, and it is not sufficient now, to merely assert as a positive matter that our current social myths about the nature of money preclude exotic or even “radical” legal solutions such as HVCS from serious consideration. Rather, it is incumbent on us to question whether the social myths in question are in fact worthy of preservation, or at the very least, how sure we are that the alternatives that would likely emerge to take their place would lead to socially inferior outcomes.--Grey, Rohan. "Administering Money: Coinage, Debt Crises, and the Future of Fiscal Policy." Ky. LJ 109 (2020): 289. [HT Nathan Tankus]
Earlier today, after I tweeted out that "Proposals to mint $1tn platinum coin are designed to circumvent the US constitution's "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts," I got lectured by Nathan Tankus for "not grasping the most elementary legal issues in the topic you're pontificating on." This turns on the interpretation on the authority granted by Section 31 U.S. Code § 5112. Advocates of the platinum coin naturally like to quote the plain meaning of the text: "(k) The Secretary may mint and issue bullion 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." The plain meaning interpretation of (k) has been supported by Philip N. Diehl, former director of the United States Mint, who helped write the bill. But Diehl was not in Congress (and in virtue of his former office has obvious incentives to exaggerate its power and his former achievements).
However, the official author of the original bill, Representative Michael Castle, denied this interpretation, and suggested (quite plausibly in my opinion) that the provision was intended to cover collectibles (and not to provide the Treasure with the power to do an end run around any debt limits). I would be amazed if the original legislative record suggested otherwise. The law as we have it was inserted as a provisions into H.R. 3610, the Omnibus Consolidated Appropriations Act for 1997. It would be interesting if the congressional leadership at the time recorded any views on the matter at the time (and that would change my view!) But the revisionary ('plain meaning interpretation') wasn't voiced until May 2010. Even Diehl has admitted at one point that (the 'plain meaning interpretation') would constitute an “unintended consequence” of the bill. [Quoted in Grey (2020) op. cit, p. 261.] So, I don't think this is really in doubt.
Eventually Tankus, who himself has become a high-profile advocate of minting the $1tr coin, referred me to Grey's very interesting law review article from which I quoted above (and also a fascinating interview that Grey did with Diehl.) Grey (a law professor at Willamette University) meticulously goes through the pros and cons of reading (k) literally (and also provides arguments for the opposing views that anticipate my own), but his main interest is not, I think, in gaming how a constitutional court would rule on using (k) to do an end-run around the fiscal debt limit (also authorized by Congress), but in thinking about the "new possibilities for fundamental monetary reform."* Grey, correctly, notes that in various crises the FED has gone well beyond the Federal Reserve Act. As I wrote last week at CrookedTimber (in the context of discussing Lev Menand's recent book (2022) The Fed Unbound: Central Banking in a Time of Crisis) the "effect of this process is the development of a super-government-agency that tries to do too much without sufficient accountability and that undermines the legislative process." So, I am at least consistent in worrying about treating this as precedent!
But this also gets me at the underlying theoretical-political issue that I want to discuss here. For Grey a constitutional monetary moment occurs when "partisan disagreements over proper exercise of the “money power” pushed monetary issues to the forefront of the popular and legal imagination." (p. 288) Now, let's grant Grey this stipulation.
Interestingly enough, as Grey recognizes political battles over the deficit limit need not become constitutional debates over money power. In fact, as Grey recognizes in the last few decades, the Democrats have tended to win the battles over the deficit limit by sidestepping "the deeper constitutional questions." (p. 288) That is, rather than using the debates over deficit limits, the threat of default, and annoyance at legislative gridlock as an occasion to debate changes in the constitutional arrangement -- that is, the proper exercise of the money power --, the Democrats have played ordinary (non-constitutional) political hardball. And even if they did this merely based on opinion polling and without any fundamental respect for the constitution, the significance of this fact is that fights over the deficit limit are not necessarily constitutional monetary moments by definition. I think Grey agrees with me about that.
Of course, performatively, Grey would like it if a fight over the deficit limit were to be constitutionalized because for various reasons Grey rejects the contemporary status quo.* And, in fact, I can imagine that some kind of debt ceiling crises might well make me agree with Grey. Once the US defaults on debts and market turmoil starts hitting the real economy or the acrimony over the debt ceiling leads to street turmoil even a revolutionary moment, surely that would quite rightly be treated as a constitutional monetary moment. But one shouldn't wish for being in such turmoil, and one should recognize that debates and even games of chicken over the debt ceiling have been normalized in Washington, DC. (The US --and I will grant the MMT folk this much --has a lot more monetary sovereignty for such games than, say, the UK government (as was revealed in 2022) or most Euro member states, which lack any such sovereignty.)
Now, I am no friend of the current practice of setting a debt ceiling while simultaneously authorizing expenditures and borrowing that go beyond it. I don't mind a demise of this status quo. And I also don't mind ways of poking the irresponsible Congressional Republicans in the (proverbial) eyes. But I notice that Grey (and the proponents of minting such special coins) are not really worried by the Imperial presidency and the lack of checks on its power.+ That they lack this worry even after experiencing a Trump presidency and near usurpation (as well as the various ways in which courts were not a check on the Trump presidency) is something I cannot fathom.
But I view the tax and coin [sic] power of Congress as one of the few would-be-effective checks on the risks of the very real and ongoing erosion of liberty from an imperial presidency. If anything, while I dislike Republican control of the House, it is high time if Stateside the pendulum returned to the post-Watergate situation of the 1970s, and re-established Congressional authority. So, in so far as I offer a political-theoretical argument against seeing the situation as a constitutional monetary moments that is ripe for monetary innovation, I do so because the US needs a considerable restoration of the power of the legislative branch -- which after all is also, despite everything (and yes that includes quite a few sins), still the most democratic element of the US constitutional arrangement -- not a further strengthening of the Executive branch. And while one may not reasonably hope that this Congress would use such power reasonably or for noble ends, it is to be hoped that such enhanced power would attract better legislators and more effective citizen participation in the future.
*In fact, from reading the law review article, and Tankus' enthusiasm for it, I suspect that Grey is a proponent of MMT (Modern Monetary Theory).
+I am much more sympathetic to arguments that view section 4 of 14th amendment as a reason to reject constraints of budget deficit limits if (and only if) these lead to default. But it is surprising to see left-wing commentators defend the sanctity of public debt!
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