The possibility of minting a trillion-dollar coin to cover our debts has now publicly been abjured by the administration, which betokens a refreshing burst of realism. But there is a kernel of an idea here that we think should not be overlooked.
Mr. Obama has long argued that the wealthy are not doing their fair share, to the bewilderment of the folks whose income taxes foot most of the nation’s bills that aren’t paid by IOUs. And, of course, those IOUs will be largely paid by these same folks, or their kindred somewhere down the road.
Still, there is a way the wealthy can further improve the nation’s finances. Take that trillion dollar coin idea and whittle it down some, and you come up with an interesting proposition. I suggest the following:
That the Treasury mint and issue coins in denominations of $1 billion, $100 million, $10 million and $1 million. These coins would be offered to all buyers worldwide. To avoid creating a superliquid and untraceable money-laundering token, the coins themselves would be held physically by the Treasury, with certificates of ownership provided to the buyers. This should prove no impediment to their acceptance, as all treasury debt instruments — bills, notes and bonds — exist only as electronic records; physical certificates went by the wayside some years ago.
The coins, of course, would pay no interest. They would, however, be instantly liquid — that is, they can be converted into ordinary dollar deposits at any depository — banks, brokerage firms, etc. — at any time. But while they are on deposit in the Treasury, they play the same role as the trillion dollar coin: they provide the Treasury with cost-free capital that can be used to pay bills, at no interest expense to the taxpayers. Sell enough of them, and the benefit to the American people is huge.
So — what’s the attraction? Why would anyone give up interest on a large sum of money?
Three reasons: patriotism, prestige and profit. The first will hardly sell a coin. The second will sell some, The third is a killer. And as an added inducement, buyers could be permitted to deduct the interest they lose from their gross income. While this would result in a small reduction in tax revenue, the interest payment it replaces would be at least twice as large, so there would still be a considerable net gain for the Treasury.
Here’s the deal:
Patriotism: as we said, forget it. Won’t move a coin.
Prestige? Well, along with the coin will come a little rosette — you know, those tiny round silk buttons you sometimes see on suit lapels? Usually they indicate a high honor — the Order of Merit, for example. People who buy these coins will be given a metal rosette in colors and a distinctive design keyed to the amount of their coin, which they would display on their lapels the same way politicians now almost invariably wear flag pins. With any luck, the pins would become de rigeur in the haut-liberal ultra-high net worth set — Hollywood moguls and stars, hedge fund progressives, and so on. While pure patriotism may not drive even Warren Buffett to make such a purchase, the notion of an ultra-exclusive status might. Vanity and prestige often move money into some silly places — megayachts come to mind — and an irrefutable badge of public-spirited, doing-my-share altruism may become quite the rage.
And profit? Just as politicians now feel obliged to sport the national flag on their lapels, those seeking to do business with any — any — public enterprise, be it a town, city, state, state or federal agency, the defense department, and so on — might well be advised to show up at the meeting with the appropriate decoration somewhere displayed. (We’re not sure what to do for the women — a discreet brooch, perhaps.) And here we point out that these coins could be purchased by corporations as well as individuals — with the corporate CEO authorized to wear the decoration. Should GE, for example, consider a billion dollar purchase? Boeing? Bechtel? It just seems — you know — the least they could do.
The coins carry no risk. The treasury can easily liquidate the coins without any damage to its balance sheet, as long as such liquidations don’t come all at once. And if they do? Some kind of panic, pperhaps? Well, the Treasury can then do what iit would have done to obtain the funds in the first place — issue bonds to cover the redemption.
Okay, it sounds silly, but we think it could work. And it’s certainly not asking too much of the well-off to slip an interest-free loan to their country in its time of need. After all — it’s only their fair share.