What Is a Trillion-Dollar Coin?
The term “trillion-dollar coin” refers to a theoretical concept whereby a government could mint a physical coin out of platinum with a face value of $1 trillion, which could then be used to reduce the national debt.
This conceptual strategy was first proposed in 2011 as a potential alternative to raising the U.S. debt ceiling. Although there were several high-profile proponents of the idea, it was eventually rejected in 2013 by Treasury Department and Federal Reserve officials.
The idea of minting a trillion-dollar coin reentered the national conversation in early 2023 after Republicans regained control of the House of Representatives, setting up another bout of political wrangling over the debt ceiling. Treasury Secretary Janet Yellen, however, rejected the idea.
Key Takeaways
- The trillion-dollar coin is a theoretical accounting strategy for reducing the federal debt, first proposed to circumvent congressional lockup over raising the debt ceiling.
- It would involve the Treasury creating a $1 trillion platinum coin and keeping it in a vault.
- The idea, which is based on a legal loophole, was the subject of active debate from 2011 to 2013, but it has never been tried in reality.
- The possibility of minting a trillion-dollar coin resurfaced in early 2023 amid doubts about whether the Republican-led House would agree to raise the debt ceiling.
Understanding the Trillion-Dollar Coin
The legal basis for the concept of a trillion-dollar coin arises from the fact that the United States Mint is authorized to produce platinum coinage without any restrictions as to the number of coins produced or their face value.
In other words, the Mint could theoretically produce an unlimited amount of platinum coins, each with an arbitrarily large value. By contrast, there are statutory limits regarding the amount of paper currency that can be in circulation at any one time, as well as limits to coins made of other materials.
Although distributing such a high-value coin would presumably produce inflation if it were exchanged throughout the wider economy, proponents of the trillion-dollar coin argue that this would not be the case if the Mint only distributed this coin to the Federal Reserve.
The Federal Reserve could then deposit the coin in the Treasury, thereby reducing the national debt and postponing or eliminating the need to raise the U.S. debt ceiling.
The idea of a trillion-dollar coin gained widespread media attention in 2011, as Washington struggled with whether and how to raise the U.S. debt ceiling. Although the 2011 debt ceiling was eventually raised, this issue resurfaces on occasion when the national debt reaches the debt ceiling again.
Trillion-Dollar Coin Discussion in Government
The idea of minting a trillion-dollar coin to reduce the national debt gained widespread media attention during the debates surrounding raising the debt ceiling, which occurred from 2011 to 2013. This included mentions in prominent publications such as The Economist and The Washington Post, along with several others.
In January 2013, the resurgent debt ceiling crisis caused the idea of the trillion-dollar coin to resurface again. One prominent commentator was Paul Krugman, who published a series of articles supporting the idea in his popular New York Times column.
In one of them, titled “Be Ready to Mint That Coin,” Krugman argued that using the trillion-dollar coin would be an economically harmless way to resolve the debt ceiling debate—one far preferable to the alternative risk of defaulting on the national debt.
Ultimately, it was the U.S. Treasury and the Federal Reserve themselves who put an end to the trillion-dollar coin debate. In January 2013, officials from these institutions ruled out the possibility of tackling the national debt by using the trillion-dollar coin loophole.
Revived Discussion of the Trillion-Dollar Coin
Although the conversation about minting a trillion-dollar coin largely remained dormant for a decade, the idea reemerged in 2023 after Republicans retook control over the House of Representatives. GOP leaders have signaled that they will make significant demands—including spending cuts on programs such as Social Security and Medicare—as part of the negotiations for raising the debt ceiling and avoiding the widespread repercussions of a default on U.S. debt.
Similar to the 2011–2013 situation, the idea of minting the coin reemerged in 2023 amid deep partisan divisions between the executive and legislative branches. While some analysts have suggested that minting a trillion-dollar coin could represent one of the only viable paths forward for the Biden administration, the idea still has plenty of powerful detractors.
For instance, Yellen called the coin solution “a gimmick” that would ultimately undermine confidence in the U.S. economy and the country’s ability to pay its debts.
What Is the Debt Ceiling?
The debt ceiling refers to the maximum threshold that the U.S. government can borrow by issuing bonds. When the debt ceiling is reached, the government must find other ways to cover costs, or the United States faces the risk of defaulting on its debt.
The government can avoid the risk of default by raising or suspending the debt ceiling, but this depends on the political will and budgetary agendas of Congress and the White House. The incapacity to reach an agreement on the debt ceiling has caused several government shutdowns.
What Happens If the U.S. Defaults on Its Debt?
There would be significant repercussions if the U.S. government were to default on its debts. The U.S. economy would likely see a sharp economic downturn, with a tailspin in consumer confidence and a thrashing of the stock markets. Decreasing trust in U.S. Treasuries would likely drive down the value of the dollar and discourage foreign investment in the U.S., with uncertainty spreading throughout the global economy.
A default would also complicate the government’s ability to perform critical functions—from cutting Social Security checks to funding national defense initiatives.
What Is the Total U.S. National Debt?
U.S. national debt totaled approximately $34.5 trillion as of March 24, 2024. According to the Treasury Department, the number represents “the total amount of outstanding borrowing by the U.S. Federal Government accumulated over the nation’s history.”
The Bottom Line
The trillion-dollar coin represents a hypothetical solution to political conflicts surrounding the U.S. debt. In theory, the government could mint a coin with an extravagant face value, keeping it in a vault and using the funds to reduce the national debt.
The trillion-dollar coin had supporters as well as detractors when it was discussed in 2011 through 2013, although it never came to fruition. The idea reentered the conversation in 2023 amid a new showdown over the debt ceiling.
