The most recent dust-up over the debt ceiling can claim one unexpected victory: Somehow, what began as a pretty insular conversation among so-called Modern Monetary Theory advocates has percolated fully out into the mainstream.
Among other points, Modern Monetary Theory holds that since the government controls the means to print the money it taxes and spends, there’s no inherent danger in the size of the federal deficit: We’re not going to run out. Spending, accordingly, isn’t a product of how much the state raises. In the past few weeks, as Congress wrangled over the debt ceiling, a growing number of wonks and committed Twitter users have lined up behind a specific proposal that flows from these ideas: Mint the $1 trillion coin. Essentially, this would inject enough money in the economy to dissolve the need for Congress to suspend the debt ceiling to keep spending, at least for a while. Although Senate Majority Leader Mitch McConnell finally backed down this week, agreeing to a temporary suspension until December, this proposal is still relevant. At best, the Senate vote on the deal Thursday night has postponed a fight that Democrats could soon lose—and to catastrophic ends. Simply put, there’s a strong case for minting the coin as part of a full-throttle effort to address the climate crisis.
Treasury Secretary Janet Yellen has rejected calls to mint the coin, calling it an unserious “gimmick.” Around the same time, she said she would rather be discussing how to deal with the climate crisis instead of dealing with the debt ceiling. In fact, the two are intimately connected. “Austerity is killing us,” Willamette University College of Law professor Rohan Grey told me over the phone, “and this scarce-money fearmongering is getting in the way of getting to the real conversation about what our actual capacity constraints are and how we should be addressing them.” Asked about Yellen’s comments, he was blunt: “I don’t feel like being lectured on seriousness by the same people watching the heat death of the planet.”
The debt ceiling originated in the United States in 1917, not to rein in federal spending—as is commonly thought—but to give the executive branch more flexibility during crises, in that case World War I. Prior to that point, Grey explained, Congress had to create specific financing authorities for every new spending commitment, like 30-year bonds or a new tax. As the U.S. entered the Great War, it became “unwieldy to micromanage at that level.… The presumption was that we had to give the Treasury more discretion and flexibility to exercise their own judgment on the ground.” Since then, this somewhat archaic statute has required Congress to periodically lift the debt ceiling so the U.S. government can keep making payments—but not until after after a lot of telegenic hemming and hawing from conservative lawmakers about irresponsible spending. “It’s suspended 99 percent of the time,” Grey said.
Unlike ditching the debt ceiling, minting the $1 trillion coin doesn’t require Congress. It could happen pretty quickly, too. All it would take is the treasury secretary directing the U.S. Mint to change the dies on its platinum coin cast and churn one out. It would then be carried over to the Federal Reserve and factored into the government’s general account. Spending would continue as normal, even as the political class reeled. There’s a chance the Fed could say no, which to Grey doesn’t seem likely. “I think they’ll say they don’t want to accept it. They would probably grumble and argue that we need to change this process so this never happens again. That would be constructive,” he told me.
“If we’re actually trying to create a paradigm shift, where average people can start to understand how money works,” Grey added, “the coin is big enough and loud enough and shocking enough to cut through the noise and reframe the entire debate.” The starting point for that shift, he says, is to create a widespread recognition that debt and money financing are “functionally equivalent.”
What began as a legislative formality has now become a ticking time bomb the GOP seems increasingly inclined to let go off. The consequences of not suspending the debt ceiling are enormous. Given how central U.S. treasuries are to the functioning of the global financial system, a default on them—what happens if the debt ceiling isn’t lifted—would be cataclysmic, leveling whole sectors of the U.S. economy and sending shock waves around the world. “If Congress fails to act, it could take decades for the United States to fully recover,” the White House Council of Economic Advisers wrote apocalyptically this week. “The Federal government would be immediately impaired from carrying out its basic functions.” This would present a few obvious challenges to hopes for an economy-wide mobilization to tackle the climate crisis.
McConnell caved this time, but the threat of a Republican-led default isn’t going anywhere. The Republican Party line at this point is to do everything possible to keep Democrats from governing. Passing a $3.5 trillion reconciliation package looks a lot like governing, and so the GOP has done all it can to throw a wrench into the works. Yet $3.5 trillion of spending over a decade is just a small piece of what’s actually needed to start meaningfully decarbonizing the economy, a task experts suggest should cost roughly $1 trillion per year for the next 10 years.
And that’s not even really taking into account what the U.S. owes the rest of the world. Thanks to its enormous historical responsibility for the climate crisis, civil society groups recommend the U.S. furnish at least $800 billion worth of climate financing between 2021 and 2030, as a “good faith down payment toward the U.S. fair share.” That’s both a moral obligation and pragmatic diplomacy: After it cratered the Kyoto Protocol and left the Paris Agreement, still without any climate law to speak of, what possible standing does the U.S. have to ask the rest of the world to reduce its emissions? If the wealthiest country in the world isn’t doing its fair share, then why should anyone else?
Republicans, meanwhile—their coffers fat with fossil fuel cash—have gone ballistic over peanuts’ worth of climate spending, at least relative to the scale of the problem. Is there any world in which they won’t jump straight to the nuclear option once Democrats move to meaningfully reducing emissions?
In the unlikely event McConnell shows some restraint, the specter of the debt ceiling will continue to limit appetites on both sides of the aisle for the kind of massive spending that rapid decarbonization demands. Even in the fortunate scenario that the $3.5 trillion reconciliation package makes it through this legislative session without being chopped down to suit conservative tastes, Republicans and Democrats alike aren’t likely to go back to the mat anytime soon to the rest of the climate appropriations that are so desperately needed.
Just last week, Joe Manchin wrote, “Adding trillions of dollars more to nearly $29 trillion of national debt, without any consideration of the negative effects on our children and grandchildren, is one of those decisions that has become far too easy in Washington.” The alleged threats posed to children and grandchildren by spending trillions of dollars, though, are a good deal less concrete than those posed by the climate crisis that will result from not doing that. Just yesterday, the White House released the results of 23 federal agencies’ climate adaptation plans, laying out the profound dangers warming poses to this country: rolling blackouts, a surge in traffic accidents, and radioactive waste storage facilities being hit by extreme weather, to name just a few. Even Yellen has called climate change an “existential threat.”
Should every country in the world follow through on its stated commitments to the Paris Agreement, the planet could warm by 3.2 degrees Celsius (5.8 degrees Fahrenheit), a chaotic result well beyond that document’s target of capping warming at “well below 2 degrees.” A 2018 special report from the Intergovernmental Panel on Climate Change found that 3.7 degrees Celsius of warming could cause $550 trillion worth of damages—more than all the wealth that currently exists. Debt default, as Bloomberg’s Joe Weisenthal writes, promises “the financial equivalent of Armageddon.” Failing to take on the climate crisis promises physical Armageddon, and economic havoc along with it. Why allow Republicans—or Democratic hawks, for that matter—to offer a false choice between financial and climate chaos? It’s hard to imagine saving the planet without minting the coin.