Our MMT Critics Are Not Just Wrong About The Big Picture. They're Also Wrong About The Details
by Neil H. Buchanan and Michael C. Dorf
In our April 17, 2023 Verdict column (The So-Called Platinum Coin Option is Illegal, Even on Its Own Terms), we discussed a widely promoted gimmick that its proponents claim would enable the government to continue to pay all of its bills even if Congress fails to raise, suspend, or repeal the debt ceiling before the Treasury's "extraordinary measures" run out in the next few months. The gimmick exploits a supposed federal statutory loophole that would enable the executive branch to mint a platinum coin worth as large a sum as needed (potentially trillions of dollars), deposit it with the Federal Reserve, and use the credit to its account to pay bills with real money. Although we sympathize with the goal of circumventing efforts to tank the global economy, as we explained in the column, the gimmick fails because there is no such statutory loophole.
Our April 17 column recapped arguments we first made over a decade ago and highlighted new ones. The column garnered considerable attention, most of it positive but some extremely negative. We seem to have particularly irked one subset of the coin gimmick's proponents: advocates of modern monetary theory (MMT), an unorthodox economic perspective that advocates funding most if not all of government's functions by creating money rather than through taxing and borrowing. MMT-based platinum-coin enthusiasts took to social media to accuse us of "lying," "bad faith," and incompetent research.
Revealingly, none of the substantive points that accompanied the invective from the MMT crowd addressed the ultimate legal flaw with the coin gimmick (beyond the basic textual error that we also explained, and that we will explain again below): because the argument for the legality of multi-trillion-dollar platinum coins has no logical connection to the debt ceiling, if accepted, it would mean that a presidential administration would always have unilateral authority to fund the government entirely through minting platinum coins. Although that proposition would surely be welcome news to MMT adherents, it is simply preposterous to suppose that when Congress authorized the minting of platinum coins, it thereby also authorized completely circumventing our entire system of public finance through borrowing and the country’s extremely detailed laws governing taxation. Because our April 17 column mixed that argument in with other, more technical ones, we are willing to be generous and say that perhaps it was relatively easy for the critics to ignore it.
Accordingly, we have written a new Verdict column, in which we focus on this core argument showing why the platinum-coin gimmick's proponents' reading of the key statute is plainly mistaken. Again, that argument is that if the loophole exists, it could be used for anything and everything, meaning that we were needlessly modest in our April 17 column when we wrote this:
Put simply, it is beyond implausible to imagine that a Congress that did not directly repeal the debt ceiling statute nonetheless hid an Easter Egg in a different statute that would authorize the Treasury to avoid the debt ceiling by writing the words "one trillion dollars" on a hunk of platinum (but not on other metals or physical objects).
If it is silly to think that any Congress would hide an implicit repeal of only one law (the debt ceiling) in a statute authorizing coinage--and it is--how cuckoo-bananas would it have to be to think that Congress inserted a full-on repeal of the entire system of public finance, including the Internal Revenue Code, and make that repeal visible only to those with extra-sensory perception?
As we have made clear for over a decade, our first-best choice would be to kill the debt ceiling statute entirely. President Biden and even Bernie Sanders have rejected that idea (for reasons that escape us), however, so that is never going to happen--and a future Congress could re-enact it anyway. We repeat ourselves here, however, to remove any doubt that our objection to the MMT bros' implicit repeal argument is somehow driven by our druthers. Quite the opposite. We would love it if the debt ceiling were gone, but we can't always get what we want (or need).
In any event, that core argument alone suffices to dispose of the platinum coin loophole, but in the interest of completeness, the balance of this essay addresses three somewhat technical points that the incensed MMT tweeters angrily made while objecting to our additional arguments against the loophole's existence. We emphasize that even if we are wrong about the technical points--and we don't think we are--we would still be right about the bottom line, because of the argument we set forth in today's Verdict column (which, to repeat, merely crystalizes and underscores points we have been making for over a decade).
1. Legislative history
In our April 17 column and in footnote 107 of the current version of our forthcoming Boston University Law Review article on a related subject (which we linked in the April 17 column), we cited the legislative history of the statutory provision authorizing the minting of platinum coins to support our conclusion that it authorizes commemorative coins to be sold to the public, not coins of arbitrarily high value to be deposited with the Federal Reserve. In particular, we cited the 1996 omnibus law that enacted the platinum coin provision. We acknowledged in the B.U. L. Rev. draft, in language we quoted in the April 17 column, that the subsection of the U.S. Code that authorizes the minting of platinum coins
does not itself state that it permits the minting of only commemorative coins, but it was enacted as part of the same omnibus statute that also limited the number of 'commemorative coin programs' that the Secretary of the Treasury may annually invoke 'under this section' of the statute--i.e., under the section that includes the authorization to mint platinum coins.
The incensed critics accused us of lying or incompetence, pointing out that the section of the omnibus that authorizes platinum coins is Section 524, whereas the commemorative coin provision is in Section 529 of the omnibus. These two sections, some of the tweets added, were originally in different bills before ending up in the same omnibus. Oh no! Did we make a foolish blunder? Are we liars?
Hardly. For one thing, the fact that the two provisions were originally parts of different bills is of no moment whatsoever. Various provisions of statutes (or for that matter of the Constitution) may originate in different ways, but what matters is what actually passes. And Sections 524 and 529 were enacted as part of the same omnibus law.
More importantly, we certainly didn't fail to notice or lie about the existence of two sections of the omnibus. Had our accusers bothered to actually click through to the B.U. L. Rev. article--which might be the decent thing to do before accusing two people of lying--they would have discovered that right there in footnote 107 we cited both Sections 524 and 529. We weren't trying to hide anything.
And the critics are plainly mistaken. As we thought was clear enough from what we wrote, the term "this section" is contained within the omnibus as the then-newly-enacted codification of the change that Section 529 of the omnibus made by adding subsection (m) to the codification in the coinage statute. The omnibus expressly identifies the language as part of a "new subsection" of the U.S. Code section. Thus, when codified subsection (m) refers to "this section," it is obviously referring to the Code section, not to any section of the omnibus. And the Code Section is Section 5112 of Title 31. It contains both subsection (m)--with its reference to "commemorative coins under this section"--and subsection (k)--which authorizes the minting of platinum coins. That's why we said the most logical reading of subsection (k) is an authorization for the minting of commemorative coins.
Does this mean that our critics are lying? Maybe, but we are more generous than they, so we assume that they're simply lazy or not very good at reading legislative history (or even at reading the text of the law itself) and so either didn't bother to read what we actually wrote or didn't understand the difference between the sections of a piece of omnibus legislation and the sections of the U.S. Code. We are happy to educate them.
On the merits, we acknowledge that the language of subsection (m) and the legislative history we cited were not neatly packaged in sequence in the statute. Legal provisions that implicate each other might be separated in the text by other provisions, which is annoying but hardly unusual. Thus, subsection (k) does not expressly say that it may be used only for commemorative coins or even only for commemorative coins, other collectors' items, or coins to be used to store value or to speculate on the price of platinum. But both provisions are subsections of a section that authorizes commemorative coins, which would put the onus on those who think that somehow when Congress inserted the word "section" in what it expressly called a "subsection" of a Code provision, it was so confused about what it was doing that it used the phrase "under this section" to mean "under this subsection but not any other part of this section." Beyond that, if there were any remaining doubt, our argument based on the text and legislative history should be read in tandem with the other arguments.
So we shall repeat ourselves yet again: Congress cannot possibly have meant this obscure provision to authorize the president to bypass all of the laws governing public finance. But what other purpose could it have had in mind? Oh, we see; it’s about commemorative coins. And as we noted in the April 17 column, that reading is also supported by the practice of the Mint since the enactment of subsection (k). It has only ever used the authorization to issue commemorative platinum coins for collectors and investors.
2. Discretion of the Fed
Our April 17 column also noted that even if a $3 trillion coin is legal, the Fed doesn't have to accept it because a statutory Code provision says the Fed "may," not that it "must," accept various forms of deposits, including "from the United States." The MMTwitterverse was not pleased. One of its spokestweeters claimed that we had cited an irrelevant statute. The relevant statute, according to this objector, is a different Code provision that permits the Secretary of the Treasury to direct the Federal Reserve banks to "act as fiscal agents of the United States." That provision adds that "the revenues of the Government or any part thereof may be deposited in such banks, and disbursements may be made by checks drawn against such deposits."
We disagree with the tweet's claim that the provision we cited is irrelevant. and in fact there is no puzzle about how to harmonize the two provisions. The first seemingly gives the Fed discretion whether to accept deposits (including by the United States). The second seemingly allows the Secretary of the Treasury to direct the Fed what to accept, which the social media critic reads to mean that the fiscal agent provision allows the Secretary of the Treasury to override the Fed's discretion.
But the statutory provisions are not in conflict. To "act as fiscal agents" simply means that the Fed is Treasury’s banker, which means that it acts like a normal bank in at least this regard: it processes checks, cashing them so long as the balance in the account is adequate to do so, and bouncing them when it is not. But the fiscal agent provision does not require that the Fed accept any particular item as a deposit against which Treasury’s checks are drawn. That is why the law gives the Fed discretion about what it will treat as an item to accept as a deposit. After all, the fiscal agent provision also contains permissive language: it says government revenues "may be deposited" with the Fed, not that they must be. Reading the fiscal agent provision as preserving Fed discretion would not require one to say that it overrides another provision that it does not in any way repeal.
More to the point, the language that our critics would read to turn "may" into "must" says only that "the revenues of the Government or any part thereof may be deposited in such banks." Revenues. Even if every other part of the argument were not insane, that provision is limited to revenues, not any other asset. Not only does it not implicate platinum coins, but it would not even cover items of undisputed value that are not revenues, such as the land title for Yellowstone National Park or an NFT of George Washington riding a Harley.
We are strengthened in our view that the Fed retains discretion by the fact that we didn't come up with it. Janet Yellen did. Earlier this year, she said this about the magic platinum coin: "The Fed is not required to accept it, there’s no requirement on the part of the Fed. It’s up to them what to do." Thus, Yellen plainly does not read the fiscal agent provision or any other statutory provision as giving her, as Treasury Secretary, the power to order the Fed to accept a coin it does not want to accept. It's possible that the MMTweeter knows more about the legal relationship between the Treasury Department and the Federal Reserve than we do. However, it's extremely unlikely that said tweeter knows more about it than Yellen, who is currently Secretary of the Treasury and was previously Federal Reserve Chair.
Meanwhile, it's important to keep in mind that even if the Fed lacks the discretion that we and Secretary Yellen think it has, it can accept only what the U.S. Code calls "lawful money." If the Secretary of the Treasury were to scrawl "$3 trillion" on a banana and attempt to deposit it with the Fed, the Fed would rightly reject it--even if we read the fiscal agent provision for all it's worth. So (for the fourth time, in just this column alone) unless the platinum coin enthusiasts can persuasively explain that Congress really did grant the president discretion to bypass nearly every aspect of the law governing public finance in a 1996 authorization of the Mint to create platinum coins, one never even gets to the question of Fed discretion.
3. "Literally" and "Unforgivably" Wrong?
Our MMTwitter critics also made other, even less substantial, charges about our April 17 column. For example, the same tweeter who accused us of citing an irrelevant statute wrote this:
Literally the very first legal claim in this article is unforgivably wrong. The statute isn’t “silent” on the value, it says that the Secretary of the Treasury may prescribe the denomination of coins at their discretion.
With due respect, huh? We used the term "silent" exactly once in our column, so we infer that the following language comprises "the very first legal claim" with which that tweet takes issue:
Federal law authorizes the government to mint coins in the familiar denominations: pennies, nickels, dimes, and quarters. It also sets out rules that allow the government to mint platinum coins, with the notable absence of statutory language specifying the values of such coins. A naïve reading of the law might thus lead a person to think that because the law is silent, the government can do anything that it likes when minting platinum coins.
How is that wrong at all, much less "literally" or "unforgivably" so? The law is in fact silent with respect to exactly the issue we identify. That’s why the coin gambit's enthusiasts think there's no limit to the value that Treasury can denominate them. We do not anywhere deny that the provision thus grants the Secretary of the Treasury some discretion. Hence, the Secretary has exercised discretion to set the nominal value of 2023 commemorative platinum coins at $100, while selling them to collectors and investors at a price of $1645. We have little doubt that the Secretary could have exercised her discretion to set the nominal face value at some other point--$50 or $200, for instance.
What we said in the claim that our tweeting critic thought was "literally" and "unforgivably" wrong is in fact literally and obviously correct: only a naïf with no familiarity with statutory interpretation or administrative law could think that the statutory provision confers unlimited discretion on the Secretary. If we had written, "Someone who has never read the Constitution might believe that it has twelve articles, but that is obviously wrong," would we be accused of saying that there are twelve articles in the Constitution? Is reading comprehension optional on Twitter? (Well, obviously yes. But still.)
* * *
We share what we take to be the progressive values of the MMT enthusiasts. We also agree with some of their objections to overly-constrained fiscal policy. And, like them, we want the federal executive to minimize the damage in a debt-ceiling crisis. We happen to disagree with them about the legality and advisability of the platinum-coin gimmick, but were it not for the extremity of their social media response to our April 17 column, we would regard them as allies with whom we have a principled but friendly disagreement about some issues of law and policy.
We recognize, however, that MMT has some of the features of a religious faith and that its most zealous adherents are thus impervious to argument. Paul Krugman--who, as we note in our latest Verdict column, has promoted the platinum coin gimmick as legal without ever explaining how it could possibly overcome the sorts of objections to it that we have raised--nonetheless once astutely observed that arguing with MMT enthusiasts is like playing Calvinball: "every time you think you’ve pinned them down on some proposition, they insist that you haven’t grasped their meaning." Accordingly, although we hope to be pleasantly surprised, we expect more social media castigation.
Except perhaps to post links to our writings (such as the new Verdict column and this essay), we do not intend to respond further. We have said more than enough to demonstrate that the platinum coin gimmick is illegal, unwise relative to other substantially less bad options in a world in which there are only bad options, and would in any event create debt that violates the debt ceiling, thus failing at its ostensible purpose. Henceforth, we will try to maintain our focus on the less bad options for mitigating the economic catastrophe that House Republicans seem intent on bringing about.