Stop legislating this buck and kill the dollar bill
By Michael Zielinski,
In the past month, six bills have been introduced in Congress to address a seemingly urgent issue before our nation: our growing stockpile of $1 coins.
Technically, the issue is not just the $1.2 billion in dollar coins being held in storage at Federal Reserve banks. Media reports, including one by NPR, have pointed out that the government has wasted millions to produce coins that nobody wants. (Last year, just over $400 million in dollar coins was produced.) A Federal Reserve Bank board of governors report published in June cited the projected cost of $650,000 to create a storage facility for the coins and an additional $3 million to transport the coins to the facility.
The buildup in unneeded coinage is a result of very specific language in the Presidential $1 Coin Act and the Native American $1 Coin Act, combined with the virtual absence of transactional demand for dollar coins. Federal Reserve banks are required to ensure that each newly designed presidential dollar coin is made available to depository institutions during an introductory period. To meet this requirement, they order large quantities of the four designs released each year. When the coins remain unordered or are eventually returned to the reserve banks, the coin stockpile continues to grow.
Meanwhile, the U.S. Mint is required to strike a Native American dollar coin design each year in a quantity of at least 20 percent of all dollar coins. The result is that dollar coins are produced absent demand, with the amount based on the exaggerated quantities required by the other series.
The six bills introduced in Congress (H.R. 2593, H.R. 2635, H.R. 2760, H.R. 2789, H.R. 2778 and S. 1385) offer a variety of solutions. Some would remove the introductory-period requirement that compels reserve banks to keep ordering the coins. Two of the bills would strike the entire section of the 2005 law authorizing presidential dollar coins, which would necessitate an immediate end to the sequential parade of former presidents. (Sorry, Warren G. Harding.) Others would suspend the presidential dollar coin series until the Treasury secretary determines that the existing surplus no longer exceeds the needs of circulation or for a stated 15-year period. One bill would reduce the number of designs issued per year in the presidential coin series and would postpone the Native American dollar coin series.
Some of the bills have puzzlingly specific requirements on dollar coin production, presumably with the goal of preventing future stockpiles. Perhaps the theory is that any problem created by overly specific legislative requirements can be solved by applying even more specific legislative requirements. One bill would restrict the number of presidential dollar coins produced in a year to no more than the number produced in the previous year. Another bill stipulates that the number of dollar coins struck for circulation may not exceed the number sold as numismatic items during the previous year. Another seems to require a specific determination of the number of dollar coins in circulation and the number of dollar coins issued but not in circulation.
In short, Congress has authorized the production and promotion of dollar coins and now seeks to suspend or curtail the same programs. The elephant in the room, meanwhile, has been the $1 banknote. As long as the two forms of currency for the same denomination exist, the dollar coin will end up the casualty. Clearly a choice should be made for the coin or the note, rather than wasting resources pursuing both (and acting surprised when one of them doesn’t catch on).
When faced with the same dilemma, most countries have opted to eliminate low-denomination notes. In the past 47 years, countries that have done this include Australia, Canada, France, Japan, the Netherlands, New Zealand, Russia, Spain and Britain. Those countries found that public resistance dissipated over a few years, and governments realized cost savings from the longer lifespan of coins compared with paper bills.
During the same 47-year period, the United States has launched three dollar coin series that failed: the Eisenhower dollars of the 1970s, Susan B. Anthony dollars and the Sacagawea dollars. That’s not including the current — floundering — attempts, all while the dollar banknote continues to be produced. Put another way, while Congress has restricted Americans’ choice in health care and light bulbs, the assertion that we need choice in the format of our lowest whole currency unit has remained inalienable.
The Government Accountability Office has recommended five times in the past 20 years — in 1990, 1993, 1995, 2000 and 2011 — that the dollar bill should be replaced with a coin. The most recent report, published in March, indicated an approximate savings of $5.5 billion over 30 years. If Washington is serious about seeking savings, why not join the rest of the world and make the switch? With a ready stockpile of dollar coins, the timing seems opportune.