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#Trillion-dollar coin: Fed Chair Jerome Powell calls it an unrealistic way to battle the debt ceiling

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Trillion-dollar coin: Fed Chair Jerome Powell calls it an unrealistic way to battle the debt ceiling

WASHINGTON – Paying the nation’s bills – and heading off the latest debt ceiling crisis – by minting a “trillion-dollar coin”?

Don’t even think about it, Federal Reserve chairman Jerome Powell told Congress on Wednesday.

“There are no rabbits to be pulled out of hats here,” Powell told the House Financial Services Committee when asked about the trillion-dollar coin. “That would be a rabbit coming out of a hat.”

A trillion-dollar coin?

The idea has been floating around among economists and lawmakers for years, at least since the debt ceiling crisis of 2011.

Powell expressed his misgivings about the trillion-dollar coin after a question from Rep. William R. Timmons, R-S.C., an opponent who is sponsoring a bill called the Cancel the Coin Act.

Debt battle:What happens if the US hits the debt ceiling? Here’s what to expect if we reach debt limit.

Under the theory, the government could simply mint a coin with a face value of $1 trillion, and deposit it with the Federal Reserve; the government could then draw on this injection of value to pay the government’s bills.

March 7, 2023: Federal Reserve Chair Jerome Powell arrives to testify before the Senate Banking Committee in Washington, DC. Powell spoke on the state of the U.S. economy and suggested that interest rates will need to stay higher for longer than expected in order to curb inflation.

Critics like Powell said the idea of “the coin” is an accounting gimmick that would trigger massive inflation and undermine faith in the nation’s financial system; it may also be unconstitutional.

The debt ceiling standoff

The revival of the trillion-dollar coin is related to the ongoing standoff over the debt ceiling, which limits the amount the government can borrow to pay its outstanding bills. The government is near the limit now, threatening a default on its debts that economists warn would roil markets worldwide and lead to a recession.

House Republicans say they will block an increase in the debt ceiling until the Biden administration and Democrats agree to a series of major spending cuts.

Democrats said the House GOP is playing with fire that could badly burn the nations economy.

In Senate testimony earlier this week, Powell said the best way to pay the nation’s bills is to raise the debt ceiling.

“At the end of the day, there is only one solution to this problem and that is Congress,” Powell said. “Congress really needs to raise the debt ceiling. That’s the only way out.”

This article originally appeared on USA TODAY: Jerome Powell: A trillion-dollar coin won’t solve debt ceiling crisis

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