Yesterday, Rep. David Schweikert (R-Ariz.) introduced the Currency Optimization, Innovation and National Savings (COINS) Act of 2011. This bipartisan bill will phase out the $1 note and transition to the $1 coin.
On March 4, 2011, the Government Accountability Office (GAO) issued a report highlighting the substantial benefits of discontinuing $1 notes in favor of $1 coins. This money-saving idea has been touted by CAGW in its annually-updated Prime Cuts database for years. According to the GAO, phasing out the $1 note and increasing circulation of the $1 coin would save taxpayers an average of $184 million annually and a total of $5.5 billion over the next 30 years. The GAO has published four previous reports on the benefits of the $1 coin, in 1990, 1993, 1995 and 2000, twice recommending the elimination of the $1 note to ensure the success of the coin.
Most of the cost savings associated with coins comes from their comparative durability. The Bureau of Engraving and Printing produces approximately 3.4 billion $1 bills each year, each of which costs 4.2 cents to manufacture and lasts 40 months. By comparison, the $1 coin costs between 12 and 20 cents but has a lifespan of 30 years or more. The $1 coin also saves money because it is cheaper to handle and process. Mass transit agencies have found that processing $1 coins costs 83 percent less than processing $1 bills. Other benefits include savings on the processing of money by banks and businesses. Coins cost 30 cents per thousand pieces to process at Federal Reserve Banks, compared to 75 cents per thousand for $1 notes. Large-scale private-sector users reap even more savings. Coins are also much more difficult to counterfeit.
The GAO report points out that “Over the last 47 years, Australia, Canada, France, Japan, the Netherlands, New Zealand, Norway, Russia, Spain, and the UK, among others, have replaced lower-denomination notes with coins … Canadian officials later determined that the Canadian government saved $450 million (Canadian) between 1987 and 1991.”
The Federal Reserve and the U.S. Mint are already required by law to remove barriers to the $1 coin’s circulation. However, the Federal Reserve issues the United States’ paper currency and doesn’t like the competition from the $1 coin, which is issued by the Mint. The Fed’s leaders have instituted regulations and red tape that restrict access to $1 coins for banks, businesses, and individual Americans. These policies have resulted in the continued circulation of $1 notes, nullifying nearly all of the cost reductions $1 coins would otherwise create. Conversely, countries in Europe have achieved currency production savings by substituting coins for bills on their lowest-denominated currencies.
In a statement yesterday Rep. Schweikert said:
“At a time when we are staring down a record-breaking $1.3 trillion deficit, any commonsense measure that cuts billions needs to be given serious consideration. That is exactly what the COINS Act will do and why I am introducing it. Protecting taxpayer dollars has never been more critical. One area where Americans may be surprised to learn we can save money is in our currency. Washington needs to learn to save money to save our future for our children and grandchildren. The COINS Act is a responsible way to trim our bloated deficit, and I encourage all of my colleagues to support this cost-saving legislation.”
Rep. Schweikert’s legislation to phase out the $1 bill in favor of the $1 coin should be an easy decision for elected officials in Washington, who are looking everywhere for ways to reduce the record deficit and debt.
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