MintTheCoin

@Mike_Policywonk

Recently, the hashtag #MintTheCoin was trending on Twitter. I am guessing 99% of the people on Twitter had never heard the term before. Those that did were probably economics students, libertarians, or conservative political activists trained to instinctively raise the concern of the U.S. debt whenever Congress proposes a costly social welfare program.

The legislative proposal; the Automatic BOOST to Communities Act, by Congresswoman Rashida Tlaib (MI-13) is well intentioned and I support her efforts to provide a Universal Basic Income (UBI)to every person in America during the crisis caused by the Coronavirus.

I will limit my comments to the #MintTheCoin element — the “funding of the program” language in the proposal. This unusual funding is based on the premise that under the Coin Act, Congress can fund the program by using its legal authority to create legal tender via coin seigniorage without raising the debt or requiring Congress to raise the debt ceiling.

Follow along. This is where it gets complicated and theoretical

1. The intent is that the Treasury Secretary would direct the U.S. Mint to issue two $1 trillion platinum coins, under the legal authority provided by 31 U.S.C. § 5112(k).
2. The coins, would then be deposited into the Central Bank of the Federal Reserve and the Fed would retain the coins for balance sheet capitalization purposes.
3. The Fed would credit the Mint account.
4. Then the Fed would “sweep” the newly created reserve funds from the Mint’s account into the regular Treasury General Account.
5. Finally, the Treasury would make the funds available to the Bureau of the Fiscal Service for dispersal to every person in the U.S.

To the best of my knowledge, this has never been done before.

It has the potential to cause harm to the separation between fiscal and monetary policy thus undermining the independence of the Fed. The Proposal does address this concern and asserts that the funding approach would maintain the independence of the Fed and separation between fiscal and monetary policy.

BUT, that has yet to be tested.

Therein lies the funding problem with the proposed legislation.

This novel financing mechanism has never been tested either economically or in the courts. The #MintTheCoin approach would likely be challenged and the legislation would be stuck in debates about economic theory, debates about why this proposal has to be debt-neutral while corporate bailouts and military spending are debt-financed without question. Left out of the discussion would be the workers who are suffering immediate financial hardship through no fault of their own.

Do we really need an untested, theoretical, “novel” funding mechanism that potentially derails or distracts from the worthy intent and purpose of the proposed legislation?

Disclaimer: These comments are just my opinion. My area of expertise is public policy, but I am not an economist or a lawyer. This post is for information purposes only and not intended to be a thorough analysis or critique.