THE administration of US President Barack Obama ruled out on Saturday calls for minting a $1 trillion (R8.7 trillion) platinum coin to avert a crisis over the US debt ceiling amid partisan bickering.
The US Treasury officially killed the idea, leaving Congress with the responsibility to increase the government’s borrowing limit.
“Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” Treasury spokesman Anthony Coley said.
The notion had already been put forward during the 2011 debt ceiling debacle, and was revived this year amid fears that Congress will not clinch a deal and thus risk causing the US to default on its bills and financial obligations.
The US hit its $16.4 trillion debt ceiling on December 31.
The Treasury said it would adjust its handling of civil service pensions to keep operating below the borrowing limit without slashing federal spending, suggesting it could do this at least until the end of February.
But Obama’s Republican foes are seeking spending cuts in exchange for a long-term deal on the debt ceiling.
Obama has warned Republicans against playing a “dangerous game” with the debt ceiling, arguing that raising the borrowing limit to pay the country’s outstanding bills should not be a political football.
White House spokesman Jay Carney put the Republicans on notice.
“There are only two options to deal with the debt limit: Congress can pay its bills or it can fail to act and put the nation into default,” Carney said.
“The president and the American people would not tolerate congressional Republicans holding the American economy hostage again simply so they can force disastrous cuts to Medicare and other programmes the middle class depend on while protecting the wealthy. Congress needs to do its job.”
He recalled that the last debt ceiling drama had put the US economy on the edge of default, hurt economic recovery and caused a downgrade of the US credit rating.
Supporters said the platinum coin would have helped avert a repeat of the 2011 crisis, when the US came perilously close to defaulting on its debts as Republicans sought deep spending cuts in return for more government borrowing.
Had the Fed recognised its worth, the Treasury could have minted the coin to help fulfil debt obligations if legislators failed to come to an agreement.
Although US laws regulate the amount of paper, gold, silver and copper currency the government can circulate at any given time, there are no such limits for platinum.
But one of the drawbacks of the idea was that it could have jeopardised the central bank’s independence.
Nobel economics laureate Paul Krugman had dismissed the proposal as “silly” but “benign”, although giving it some publicity by doing so.
Democrats had made a plea in support of the $1 trillion coin, a proposal quickly denounced by Republicans.