A proposal has been floating around Congress for the past few years, and it should save taxpayers $4.4 billion over the next thirty years. The Currency Optimization, Innovation, and National Savings (COINS) Act would replace the $1 bill with the $1 coin.
The $1 coin has been in production and circulation since 2000, with an extra publicity boost when the U.S. Mint began producing dollar coins featuring the likenesses of former Presidents of the United States. The Presidential dollar coin series was popular with collectors when it entered circulation in 2007, but neither collectors nor businesses seem to have much interest in the coins today.
The public hasn’t wanted to replace the dollar bill with the dollar coin so far. Every time Congress proposes elimination of the dollar bill, the legislation doesn’t succeed. People complain about carrying change in their pockets, and seem to prefer carrying their singles in a wallet. Public adoption of the coin has been non-existent, and this seems to be one of the reasons the bill never passes.
Other western countries have successfully replaced low-denomination bills with coins. If the $1 notes are no longer produced in the United States, consumers will have no choice but to use coins, and eventually it would become the norm. Until production and circulation of the dollar bill is brought to an end, the public will always have a choice.
Although the replacement of the bill with the coin will save money over the long-term, there is a short-term problem according to the Government Accountability Office. In the first ten years after the replacement, the government would lose $531 million. The costs of the transition are front-loaded due to the need to increase production according to the estimation in the GAO’s 2012 report. This is a new report since the last time I wrote about the movement to replace the dollar bill.
The longer we wait, however, the longer these costs are offset. Every year, more dollar coins are produced but never enter circulation. As of last year, the government was storing a surplus of 1.4 billion dollar coins. One estimate claims that the stockpile may reach 2 billion coins by 2016. But due to the poor adoption of circulating dollar coins, the Presidential coin minting program was changed. New Presidential dollar coins are only minted for collectors, with no new coins intended for circulation, although the government continues to mint the Sacagawea $1 coin for circulation.
The gain and loss estimates don’t reflect the total effect of the transition on the economy. The private sector will face some expense, although now that the current dollar coin shape and weight has been consistent for thirteen years, some of these challenges in business have already been resolved. Equipment that accept bills and coins as payment need to be calibrated or fitted to accept dollar coins. The replacement of equipment can be a significant cost to industries throughout the country’s economy.
Had the bill been officially replaced by the coin in circulation in 2000, this would have been a big problem. Companies would have no choice other than retrofitting equipment used for toll collection and vending immediately. But the dollar coin in its current form has been in production for thirteen years now. As old equipment needed routine replacement, business should have been aware of the need to accept these new dollar coins in the future. Machinery installed over the past decade should be capable of accepting modern dollar coins.
Additionally, new laws tend to prescribe change in phases; it’s unlikely that a law would dictate that business must stop accepting dollar bills overnight. The elimination of the bill from circulation would take place over time, allowing business the time to replace any remaining equipment that doesn’t accept dollar coins. By now there shouldn’t be much remaining equipment in need to replacement or adjustment.
The a $4.4 billion savings over the next thirty years worth the pain of a $531 million loss over the next ten? When is a good time to accept the short-term loss that seems to be required when chasing a long-term gain?
Most countries that successfully replaced their bills with coins didn’t see widespread adoption until the dollar bill was eliminated and there were no longer competing types of currency for certain denominations. A few congresspeople think now is the time to move forward with the plan to begin eliminating the $1 note from circulation in favor of the coin. The economy may be technically back on track, but with the continued struggle with unemployment and only small growth in the housing market, perhaps it is too soon to begin accepting the public costs of the transition.
If we expect these trailing or lingering economic problems to subside over the next decade, the loss, a relatively small loss when compared with other government programs, might be a risk worth taken. Asking politicians — and sometimes the public — to think about the long-term benefits of a program rather than the short-term can be a challenge, however. I’d be surprised if the COINS Act passes, but I’m in favor of eliminating the dollar bill, and would prefer to see it accomplished sooner rather than later in the United States. Let’s catch up to other western nations.
It seems the bill is in the news again thanks to Senator John McCain’s recent answer to a question about the potential law. John McCain is a cosponsor of the bill.
I don’t know whether the question was presented as reflective of legitimate concern for the particular industry in question or was simply tongue-in-cheek: What happens to strippers when the dollar bill is no longer in circulation?
McCain is reportedly hoping strippers will receive larger denominations of currency from their patrons, with dollar bills no longer freely available for strategic placement inside undergarments. I think the industry would disappear if customers were to begin pelting coins rather than gently tucking bills in appropriate (or inappropriate) locations. Perhaps dancers would need to design new clothing with built-in change pockets to accommodate the only form of transaction.
Should the government move now to put this transition from dollar bills to dollar coins into effect? What would it take to convince the public that coins are better in the long run? What will strippers do?