GAO proposes axing dollar bill in lieu of dollar coins

George

The GAO is at it again, suggesting the dollar bill be replaced by a dollar coin, which has been tried before and didn’t work. Photo Credit: BKMD/Wikimedia Commons/CC-BY-SA

There are a few units of American currency which some find troublesome, such as the uber-expensive and annoying penny. The Government Accountability Office has some reservations about the one dollar bill and has suggested that it would be cheaper, in the long run, to switch to dollar coins instead.

Dollar coin suggested to replace dollar coin, again

Few would argue against getting rid of the penny. The penny is easy to pick up but hard to get rid of. They sit around, collecting dust and fill up the couch cushions. Worse, it costs more to make them than they are worth.

Another coin that a lot of people haven’t been thrilled about is the $1 coin. In the past 50 years or so, the dollar coin has never really caught on and every attempt to get people to use them has failed. The last run, according to USA Today, is mostly held in storage at the Federal Reserve, which is hard at work making sure people never use them, by ruining their value with inflation.

The Government Accountability Office is not deterred and has suggested the dollar bill be replaced with dollar coins.

Benefit mostly for government

The GAO suggested the dollar coins supplant the dollar bill at a recent series of hearings convened in Congress about how to save money making the nation’s money supply.

The idea is that bills have a typical life of four to five years, whereas coins last 30 years or more. However, the benefit, according to the Washington Post, is mostly for the government, through what’s called seigniorage, where the government pockets the difference between the cost of making a dollar and the amount of money it represents.

Let’s say the government has one dollar worth of credit it has to print and give to someone, usually lent to a bank that repays it at near-zero interest, thanks to the sweetheart deal between the Fed and Wall Street. They print a dollar bill or mint a dollar coin. The bill or coin only costs so much to print and whatever the difference is, they keep it after sending said bill or coin into circulation.

Coins cost more to make than bills, but since the coins last longer, they have to make fewer of them. Switching entirely to coins would net $4.4 billion over the next 30 years.

Would cost a lot at first

The GAO flatly admits the government would be the prime beneficiary as, according to NPR, it stated in it’s report to Congress that “these are benefits to the government, not necessarily the public at large.”

Dropping the dollar bill, according to the Washington Post, would take a long time and would also be initially very expensive, as the GAO estimates 1.6 dollar coins would have to be minted per each dollar bill in circulation. Designing, tooling and minting the coins would cost $582 million to do and the savings don’t kick in until 10 years after implementation.

Then there is the problem that every dollar coin in living memory that’s been introduced has been rejected by the public.

Sources

USA Today

Washington Post

NPR

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