Monday, January 14, 2013

Post-Mortem Part 2: Zombie Big Coins, Chevron and the Quadrilemma

By Mike Dorf

Professor Buchanan's post yesterday explained why the "big coin gambit"--which the Obama Administration has now ruled out--would very likely have been unlawful anyway under the debt ceiling statute. Here, in a second post-mortem, I want argue why it would have also been unlawful under the statute that authorizes the minting of platinum coins. But first, kudos to Neil for his summary of our trilemma argument for the NY Times yesterday. Okay, now back to those coins.


Why a second post-mortem? Because, as with the Administration's ruling out of the "Fourteenth Amendment option," so too here, the conclusion that an option is illegal or even unconstitutional is not enough to rule it out if all of the other available options are also illegal or unconstitutional. So big coins are dead for now, but if Congress fails to raise the debt ceiling in time, they could come back to life as less unconstitutional than the other options--as "zombie big coins," if you will. For reasons I shall explain, I still wouldn't favor zombie big coins, but the journey to that conclusion is somewhat complex (and hopefully interesting).

My analysis here is inspired by a recent hallway suggestion from my colleague Jeff Rachlinski. Professor Rachlinski said that, from the perspective of administrative law, the problem with the platinum coin gambit is that minting the coins would exceed the scope of the delegation of authority to the Secretary of the Treasury, in light of the Ur-admin-case, Chevron, U.S.A. v. NRDC.  I think he's onto something.  Let's see how the proposed minting and depositing of two $1 trillion coins comes out under Chevron.

Chevron is now understood to require a two-step inquiry. First, does the statute speak directly to the question? If so, and it forecloses the agency's reading, that is the end of the matter. But if the statute is ambiguous, then the courts read that ambiguity as a delegation to the agency to fill in the gaps, so long as it satisfies step two: Is the agency interpretation reasonable?

Here's the relevant statutory language:
The [Treasury] 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.
As I read the argument that was made last week by Professor Tribe and others, this language contains no limit and therefore it is clear that the Treasury Secretary can mint and issue coins of unlimited denominations. I think that's wrong for two reasons.

First, silence is not clarity.  The post-Chevron cases ask at step 1 whether Congress has addressed the "precise" question at issue. Congress has not addressed the precise question of whether 31 U.S.C. sec. 5112(k) permits the minting and issuing of two trillion dollars worth of platinum coins, not to be offered to the public, but to be deposited in the government's account as a means of generating revenue.

Second, as Justice Scalia (relying in part on a 2009 article by Professors Matt Stephenson and Adrian Vermeule) observed in a recent concurrence in a case decided last Term, "'Step 1' has never been an essential part of Chevron analysis." The core of Chevron is deciding whether an agency interpretation of a statute is within the scope of the delegation of authority by Congress, and if the agency interpretation is unreasonable, then it falls outside the scope of the delegation, regardless of whether there is or is not ambiguity in the statute as an abstract matter.

So we come to the core question: Is it reasonable to read 31 U.S.C. sec. 5112(k) as having delegated to the Treasury Secretary the authority to mint two trillion-dollar coins as a means of evading the debt ceiling? In light of the overall context, the answer is surely no.

That overall context includes: (1) A limit on the face amount of paper currency the government can print; (2) limits on the Secretary's discretion to mint coins made of other metals; and (3) the debt ceiling. Professor Tribe says that the fact that Congress put limits on the executive's ability to create money using paper or metals other than platinum implies, under the expressio unius canon, that there is no limit on the executive's authority to issue platinum coins. But purposivism implies just the opposite. As Hart & Sacks famously put it, statutes should be construed with the assumption that the legislature consists of "reasonable people pursuing reasonable purposes reasonably." No reasonable person would legislate so as to constrain the executive's discretion to borrow or to create money, unless the executive mints super-high-value platinum coins, in which case all bets are off.  And thus, it is unreasonable under Chevron step 2 to interpret 31 U.S.C. sec. 5112(k) as authorizing the jumbo coins gambit.

Indeed, textualists as well as purposivists should embrace my reading. For one thing, textualists accept Chevron step 2, with its incorporation of a reasonableness constraint. For another, as Justice Scalia has repeatedly pointed out, textualism is not literalism. It includes a role for context in construing text, and that's really all I'm doing in the foregoing paragraph: locating 5112(k) in the overall statutory context.

One might object (as one commenter objected to one of Professor Buchanan's posts on the coins) that there is a line-drawing problem here.  If Treasury can mint $100 platinum coins--as I concede that it can--why not $200? Or $500?  And so on all the way up to a trillion dollars. This is what philosophers call the sorites paradox, typically attributed to Eubulides of Miletus: One grain of sand is not a heap ("soros" in Greek); neither are two grains; nor three; but if you keep adding grains one by one, eventually you have a heap.  Where do you draw the line?

Paradox shmaradox. In a case like this one, the answer is straightforward: Reasonable people can differ about whether Treasury can mint a $100,000 coin (which is the highest value U.S. currency ever printed),  but no reasonable person would put a trillion-dollar coin on the permissible side of the line. Ah, but what if the govt were to mint 20 million $100,000 platinum coins or 200 million "mere" $10,000 platinum coins? Because the conclusion that the platinum coin option violates the statute rests on the obvious fact that it is an effort to evade the statutes that limit money creation and borrowing, these variations would also rest on unreasonable interpretations of the statute and thus should be deemed invalid.

Another objection might go like this: Chevron is a tool that courts use to defer to agencies but Professor Tribe says (and I agree) that no one is likely to have standing to challenge the platinum coins; thus, Chevron is irrelevant.

This objection also strikes me as wrong. Whatever Chevron's origins, it is now understood as a tool for measuring the scope of authority conferred on the executive by congressional delegations. In other words, it's a tool that can be used--and should be used--by the executive to measure the legality of its own actions. And anyone but the most cynical legal realist would agree that the executive must follow the law, even when it can get away with violating the law due to the limits of judicial redress.

The upshot is that the jumbo coins are not merely illegal but unauthorized. And since Article I commits to Congress the power to coin money--just as it commits to Congress the other relevant powers of taxing, spending and borrowing--minting and depositing jumbo platinum coins would also be unconstitutional. The erstwhile proponents of the jumbo coins plan did not find a legal escape hatch; they converted the trilemma into a quadrilemma in which the President must choose among four unconstitutional options: tax without authorization; cut spending without authorization; borrow in excess of the debt ceiling's limit on authorization; or create money without authorization.

Notwithstanding the important worry that Professor Buchanan raised on Friday regarding undermining confidence in money, perhaps I could be persuaded that creating money without authorization would be less unconstitutional than directly borrowing in excess of the debt ceiling, based on an assessment of how the markets would react, but--and this is a crucial point--if the best argument for the jumbo platinum coins is that they are unauthorized but less unauthorized than direct unauthorized borrowing, then this argument points in favor of something else entirely: Print actual money to be deposited with the Fed. Once we understand that jumbo coins are unauthorized per Chevron as applied to 31 U.S.C. sec. 5112(k), then we should see them as no different from any solution that creates money for the government without authorization. And because just printing money would not look cartoonish in the way that minting the jumbo coins would, it would likely have less of a destabilizing effect on the economy.

So . . . if and when the day of reckoning arrives, big coins could properly re-enter the discussion as zombies: as one of a variety of proposed illegal/unconstitutional options. But if that happens, anybody who thinks big coins are a better option than direct issuance of new bonds should abandon big coins in favor of simply printing money. Thus we have the answer to the riddle "How many pictures of Benjamin Franklin (aka hundred dollar bills) does it take to kill two zombie big coins?" Answer:  20 billion.

11 comments:

Neil H. Buchanan said...

To supplement Professor Dorf's post, I would add that his concession (in his discussion of the sorites paradox) that the Treasury can mint a $100 platinum coin is incomplete. Yes, the statute authorizes such an action, but not to be deposited at the Fed against which Treasury can write checks. The Treasury can raise money by selling things (entry passes to national parks, office buildings that it no longer needs, and so on), and selling commemorative coins is a way to raise some money. That's what the statute permits. So, if the Treasury wants to sell a $1 trillion coin on the open market and spend the proceeds, great. If an arms'-length sale generates $1 trillion, then we've been sitting on an easy solution for years.

Michael C. Dorf said...

Yes, I endorse the limitation on my concession.

Sam Rickless said...

Your analysis presupposes a purposivist interpretation of statutes. (I think there are powerful objections to purposivism, but let's leave those aside.) Even under a purposivist analysis, it's not clear to me that the statute does not permit the minting and issuing of platinum coins of extremely large denominations *as a means of evading the debt ceiling*. You say that we should look at context, but I don't see how context helps. It's true that other statutes limit the face value of paper money and coins made of other metals. But purposivism then requires us to ask after the purpose of these statutes. As far as I am aware (though here I defer to the experts on the matter), the limitation on the face value of paper money and non-platinum coins did not have anything to do with the debt ceiling. More likely there were concerns about the money supply and the assumption that collectors of standard commemorative coins would not be interested in coins with a ridiculously large face value. And unless we accept Prof. Buchanan's argument that the coins *would actually be* government obligations if deposited with the Fed (I'm not persuaded), they wouldn't be debt at all, and hence wouldn't be used to raise the debt ceiling de facto. Even if there is a legislative intention to prevent the executive from raising the debt ceiling, there is no clear intention on the part of Congress to prevent the executive from *evading* the debt ceiling in some other way. Congress clearly did not intend that the Secretary mint and issue coins to evade the debt ceiling. But it does not follow that Congress intended that the Secretary not mint or issue coins to evade the debt ceiling. And this makes all the difference.

What we have here is a classic unintended consequence of a relatively clear statute, even when read in context. If Congress doesn't like the way the Secretary proposes to use the statute, it can pass a bill that makes such use illegal.

Consider the following analogy. Almost surely very few citizens of California who voted for the original draconian three-strikes proposition intended the consequence that non-violent triple-felons would end up in prison for life. But we cannot say that they intended that the law not be used to put non-violent triple-felons in prison for life. And so, until the law was modified by means of another proposition, it was read in accordance with its plain meaning and attendant draconian consequences. This is what purposivists should say about the three-strikes law, and, by parity of reasoning, they should also say that 31 U. S. S. sec. 5112(k) permits the minting and issuing of coins with very large face value to be used as the Secretary sees fit without violating other laws.

[Note: I am not a fan of expressio unius, which is misleading inasmuch as it requires us to posit the existence of legislative intentions in cases where there very likely were none. As a canon, it is a linguistically ham-handed way of determining speaker-meaning or speaker-intentions.]

Michael C. Dorf said...

Sam: My analysis does not depend on purposivism. I offered that as one way to get to the result. My analysis depends on Chevron, a unanimous Supreme Court decision which is accepted by textualists as well as purposivists. Eric Posner makes the same point using the Brown & Williamson case at:
http://tiny.cc/5izwqw

Sam Rickless said...

@Mike: My apologies. You're right, I was assuming that you were engaging in purposivist analysis. Yes, you are relying on Chevron, and yes, you say in your post that textualists and purposivists are on board with Chevron. Even accepting all this, the core of the Chevron question is whether it is reasonable to interpret the relevant statute as having delegated to the Secretary the authority to mint and issue the relevant sort of platinum coin. But I think that the main points I made above also apply to the reasonableness question. What are the determinants of reasonableness? You point to context. But, as your discussion of context presupposes, context is evidence of intent. And here, I believe, context can't distinguish between (i) the statute's not having been intended to delegate the relevant authority to the Secretary and (ii) the statute's having been intended not to delegate the relevant authority to the Secretary. Moreover, it is consistent with (i) that the statute does in fact delegate the relevant authority to the Secretary. This is because in many cases a statute entails many things that it was not intended to entail.

Sam Rickless said...

P.S. Posner's piece is all about intent. Here are the relevant quotes.

"And the platinum coin clause appears among other provisions that more carefully circumscribe denominations and quantities, which provide a basis for believing that Congress never intended to give the president the unlimited power to mint coins."

The law was "intended to augment the collections of numismatists."

My reaction is to say, "exactly, but so what?" Congress intended P [augment the collections of numismatists and raise a little money for the Treasury] and did not intend Q [giving the president the unlimited power to mint coins] when it said R [that "the Secretary may mint and issue platinum bullion coins etc."]. If R entails that the Secretary may mint a platinum bullion coin, then the Secretary may mint the coin.

AF said...

How can Chevron possibly help your case against the coin? The argument being made is that, under ordinary principles of statutory interpretation, the statute is authorizes coins of any denomination. Chevron is a more deferential standard.

Gnash said...

"[N]o reasonable person would put a trillion-dollar coin on the permissible side of the line" - empirically, this is patently false, unless you postulate that people like Paul Krugman, Bruce Bartlett, Lawrence Tribe, and many others are unreasonable.

And, even before we get to empirical evidence, I don't see any rational basis to assume that every reasonable person would put any limit at all on the permisible amount, let alone a limit below one trillion dollars.

Michael C. Dorf said...

AF: What you say might be right if people were saying that ordinary principles of statutory interpretation REQUIRE the minting of the coin. Then it would follow a fortiori that the Secretary is permitted to mint the coin, per Chevron. But the commentators have been saying that the statute confers sufficient discretion on the Secretary to mint the coins and the question of how much discretion a statute confers on an agency is governed by Chevron.

Gnash: Obviously I mean no reasonable person who has taken account of the entire statutory context. The people who say otherwise are reading the platinum coin statute without the background context. I agree that taken in isolation the language contains no limit.

Bob Hockett said...

Here's the solution to Mike's variant of the sorites, consistent with Neil's limitation on his concession: Treasury mints the coin and sells it, in an arms length transaction, to George Soros, whose 'heap' (soros) is surely adequate to cover a few tril. In order that Mr. Soros not be required to bankrupt himself in the interest of saving the nation that Republicans are bent on destroying, accompany the sale with a repurchase agreement. If investment banks can fund their investments with repos - which after all were invented by the Fed to finance WWI expenditures - so can the government.

Cicy said...

This is what purposivists should say about the three-strikes law, and, by parity of reasoning, they should also say that 31 U. S. S. sec. 5112(k) permits the minting and issuing of coins with very large face value to be used as the Secretary sees fit without violating other laws.

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