Replacing dollars could save dollars
A dollar is a dollar is a dollar.
But the traditional $1 bill could soon go the way of the eight-track, incandescent light bulbs and handwritten letters.
A proposal to wean Americans from the $1 bill – and instead rely on $1 coins – is circulating through congressional corridors as a way to save up to $4.4 billion over the next three decades.
“We may be moving to a completely paperless society for monetary transactions, so small coins may be all that is left for the few of us who still shy away from the electronic world,” said Allan Saxe, an associate political science professor at the University of Texas at Arlington.
In the face of the “fiscal cliff,” federal officials recently talked about saving billions of dollars by switching from $1 bills to $1 coins – even though Americans haven’t seemed to embrace the coins.
Coins last longer than bills, so the replacement costs drop.
Similar currency changes have saved money and worked in other countries, such as Canada.
“We realize that replacing the $1 note with the $1 coin is controversial,” Lorelei St. James, a director for the U.S. Government Accountability Office, said during congressional testimony last month.
But, she said, “we continue to believe that the government would receive a financial benefit from making the replacement.”
The proposal, made recently by the GAO to a House subcommittee, could have a bigger-than-expected impact in Fort Worth, Texas, home of the Bureau of Engraving and Printing’s Western Currency Facility.
The facility, one of two places in the world where U.S. paper money is designed, engraved and printed, is scheduled to print 1.5 billion $1 bills in fiscal 2013, according to federal officials.
Workers have been printing money there since 1991.
And workers at the Bureau of Engraving and Printing in Washington, D.C., have been printing currency since 1862.
Coins of all denominations – along with commemorative coins, gold and silver bullion coins, and more – are produced at a handful of U.S. Mint facilities, including in Denver, Philadelphia, San Francisco and West Point, N.Y.
Late last month, lawmakers on the House Subcommittee on Domestic Monetary Policy and Technology heard a report on the benefits of replacing dollar bills with dollar coins.
They learned that:
• Dollar bills last about 4.7 years. Dollar coins last around 30 years.
• Six times in the past 22 years, the GAO has recommended replacing dollar bills with dollar coins to save money.
• Replacing dollar bills with coins could provide $4.4 billion in savings over 30 years.
• To replace every $1 bill now in circulation, the government would need to make 1.6 dollar coins (because coins might be stored in jars, drawers and – inadvertently – couch cushions, temporarily removing them from circulation).
• About 1.4 billion dollar coins were stored in the Federal Reserve as of late September 2011.
• Officials would need a four-year transition for the U.S. Mint to produce enough coins to replace the dollar bills now in circulation – and potentially $8 million to explain the switch in a massive public relations campaign.
St. James said a nationwide poll in 2002 showed that people weren’t using the dollar coin because they “were familiar with the $1 note, the $1 coin was not widely available and people did not want to carry more coins.”
“However, when respondents were told that such a replacement would save the government about half a billion dollars a year (our 2000 estimate), the proportion who said they opposed elimination of the note dropped from 64 percent to 37 percent.”
A 2006 Gallup poll, however, showed that 79 percent of respondents didn’t want to replace dollar bills with dollar coins.
“We have noted in past reports that efforts to increase the circulation and public acceptance of the $1 coins – such as changes to the color of the $1 coin and new coin designs – have not succeeded, in part, because the $1 note has remained in circulation,” St. James said.
U.S. Rep. Kay Granger, R-Texas, said she does not support eliminating the $1 bill.
“The costs of switching entirely to dollar coins would be large in production, transport and implementation,” she said. “Not to mention, people don’t want to carry around a pocketful of gold coins. Most importantly, we’d be losing good jobs in Fort Worth.”
Countries including Canada, France, Japan, Russia and Spain have replaced lower-denomination bills with coins over the past 50 years.
Officials from many of those nations said the rationale was lower production costs.
In Canada, for instance, officials introduced a $1 coin known as a “loonie” in 1987, saving about $450 million.
The switch to dollar coins went so well that in 1996, Canadian officials introduced a $2 coin known as a “toonie.”
A key to having consumers accept and broadly use the coins is stopping production of the paper money, according to the GAO report.
Within a few years in Canada, at least, “the $1 and $2 coins were the most popular coins in circulation and were heavily used by businesses and the public,” St. James said.
U.S. officials have issued a variety of dollar coins through the years – from the Eisenhower dollars to the Susan B. Anthony coins to Sacagawea coins – that never seemed to catch on.
Each year, the two U.S. printing facilities create about 4 billion $1 bills. At the same time, more than 3 billion aging $1 bills are removed from circulation.