Paul Krugman's Fixes For Debt-Ceiling Crisis Include Discharge Petition, Platinum Coin Or Premium Bonds: 'If It Takes Gimmickry... So Be It'

The U.S. government reached its $31.4 trillion borrowing limit on Thursday with Treasury Secretary Janet Yellen reportedly informing Congressional leaders her department had commenced using extraordinary cash management measures that could stave off default until June 5.

Given the circumstances, Nobel laureate and noted economist Paul Krugman has provided a few possible routes as alternatives. In an opinion piece published in the New York Times, Krugman said one possible solution can be that Democrats seek a “discharge petition” to force a vote on raising the debt limit despite opposition from G.O.P. leaders. “This would both take time and require support from a handful of sane Republican House members. But it’s surely worth trying,” he said.

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The noted economist also highlighted the possibility of using financial engineering to bypass the debt limit. He pointed out the possibility of minting a platinum coin with a face value of $1 trillion, depositing that coin with the central bank and “spending out of the bank account thus created.”

“Believe it or not, this would almost certainly be legal,” Krugman noted.

Premium Bonds: Krugman also discussed an option that involves raising money by issuing “premium bonds” when existing debts come due. These bonds would have a face value that would be the same as that of the bonds they replace. In this way, there is no official increase in debt but just high-interest rates, he explained.

“If it takes gimmickry to frustrate the schemes of destructive extremists empowered by a legal quirk, and thereby avoid financial catastrophe, so be it,” he stated in his opinion piece.

Krugman believes the Biden administration is facing the threat of economic terrorism and although it sounds extreme, “it’s basically what creating an artificial debt crisis amounts to.”

“And it should do whatever it takes to face down that threat,” he opined.

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