Katherine Mangu-Ward | Jan. 11, 2013 4:48 pm
As we approach the debt ceiling, suggests for workarounds are getting more creative—and more depressing. For those who can’t quite stomach the trillion dollar platinum coin but prefer funny money to constitutional crisis, comes this suggestion from Edward Kleinbard, former chief counsel at the Joint Committee on Taxation and a law professor at USC:
There is a plausible course of action, one that the president should publicly adopt in the coming weeks as his contingency plan should debt-ceiling negotiations falter. He should threaten to issue scrip — “registered warrants” — to existing claims holders (other than those who own actual government debt) in lieu of money. Recipients of these I.O.U.’s could include federal employees, defense contractors, Medicare service providers, Social Security recipients and others.
The scrip would not violate the debt ceiling because it wouldn’t constitute a new borrowing of money backed by the credit of the United States. It would merely be a formal acknowledgment of a pre-existing monetary claim against the United States that the Treasury was not currently able to pay.