The United States is in cutting mode, with even the most sacrosanct government programs and spending on the block.
Or perhaps there are some things that Americans can’t abide eliminating, even if it means billions in savings. Namely: The dollar bill.
The country’s Government Accountability Office estimates the U.S. could save $5.5-billion over the next 30 years if it replaced its paper dollar bill with a coin. They point out what Canadians already know: Durable coins last longer than paper and therefore need to be replaced less frequently. That saves money.
At least one policymaker has embraced the cause: Rep. David Schweikert, a freshman Republican from Arizona, introduced a bill Tuesday (Sept. 20) that would replace the bill with coins within four years. He called legislation -- which received almost no media attention outside his home state -- the Currency Optimization, Innovation and National Savings Act. (Spell it out.)
Mr. Schweikert will fight uphill. The U.S. has made half-hearted attempts to introduce a dollar coin, always undermining the efforts by keeping the dollar bill in circulation.
There are 4.2 billion dollar coins currently in circulation, the GAO estimates, but try walking up to an American and asking for one: About 1.1 billion of the coins are in storage due to lack of demand.
“Other countries that have replaced a low-denomination note with a coin, such as Canada and the United Kingdom, stopped producing the note,” the GAO noted. “Officials from both countries told GAO that this step was essential to the success of their transition and that, with no alternative to the note, public resistance dissipated within a few years.”
The GAO report, like many before it, was dead on arrival when issued in March; there was no populist cost-cutting embrace of the message. Indeed, the GAO has done this study four times in the last 20 years, most recently in 2000.
Every time, Americans’ love of the dollar bill has far outweighed the cost benefit from scrapping it.
The bad news for coin advocates is that the GAO’s current estimate of annual cost savings from the bill-for-coin swap -- $184-million per year in present-day dollars -- is the lowest amount of savings of the four studies. The agency estimated annual savings of $318-million in 1990, $395-million in 1993, $456-million in 1995 and $522-million in 2000.
Why such a smaller number now? Bills are actually lasting longer than they used to, and coins are more costly to make with the rise in metals prices.
But most importantly, oddly, is that the GAO cut its estimate for how many coins would be needed to replace bills.
The estimates take into account “seniorage” -- the face value of a currency, minus what it takes to actually produce the currency. Previous GAO estimates figured the U.S. would need to produce two coins for every bill it took out of circulation.
However, learning from Canada’s example of producing 1.6 Loonies per bill retired, the GAO has switched its estimate to 1.5 -- creating less seniorage, and therefore fewer savings.
Such details may be lost on those would consider the transition -- if it will be seriously considered at all.
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