Updated: The $1 bill still beats $1 coin, GAO report says
Wednesday February 15, 2012
Berkshire Eagle Staff
The U.S. $1 bill may be safe from potential replacement by the $1 coin, following the release Wednesday of a report by the U.S. Government Accountability Office on the costs and impact of a switchover.
All U.S. paper currency has been printed at the Crane & Co.complex in Dalton since 1879. The company, ranked as the No. 6 employer in Berkshire County, has a current staff count of 876 in Dalton, with a total of 1,365 worldwide.
The GAO report -- an updated and revised version of its analysis completed last year -- was prepared at the request of U.S. Sen. Scott Brown, R-Mass. Brown said he wanted to know what it would cost to phase out the dollar bill in favor of a coin.
One of the report's key findings is that the U.S.government would face a net loss of $531 million over the first decade of a transition to the coin because of higher production costs compared to paper currency during the first years of a conversion.
The GAO analysis acknowledged that, in theory, dollar coins eventually could provide a net benefit to the government of about $4.4 billion over 30 years. That gain is due to "seigniorage" -- the difference between the face value of the coins and the metal value plus production costs.
"We believe it's appropriate to include seigniorage as a cost benefit for the government," said Lorelei St. James, director of the GAO's physical infrastructure team. She signed the report and was involved in writing it.
In a telephone interview from her Washington, D.C., office. St. James told The Eagle that at Brown's request, the GAO also prepared a cost estimate if the seigniorage value is excluded. By that measure, the U.S.government would lose $1.8 billion over 10 years because of the conversion to coins.
"But including the seigniorage omits the monetary benefits for the government," she said.
The report pointed out that paper-currency processing has become more efficient, extending the "life expectancy" of the dollar bill. The currency paper is the world's most durable.
The GAO is the investigative arm of Congress assigned to examine issues involving the spending of public funds.
After examining the draft of the GAO findings, the Federal Reserve and the Treasury Department cited the cost to the private sector and the environmental impact of a switchover to dollar coins instead of bills.
According to the report, "the GAO agrees that such costs and impacts are important considerations." But the office was unable to provide cost estimates based on the projected impact of a conversion.
"This report is crystal clear about one thing: The unwieldy dollar coin is more expensive than the popular dollar bill, even over the long run," said Brown in a prepared statement. "The dollar bill will continue to be the more cost-effective currency to produce and use."
In response to a proposal by Brown to prevent the minting of more dollar coins, since more than $1.2 billion of them remain in storage in government vaults, the Obama administration has ordered the U.S. Mint to stop producing those coins, saving millions of dollars in production costs.
Brown cited the unpopularity of the dollar coins with the public compared to the bills.
"Special interests, including some foreign companies, want to take away that choice," Brown stated. "I won't let that happen because it's the wrong thing for the American taxpayer and would cost Massachusetts hundreds of jobs."
Brown plans to seek an investigation by the U.S. Treasury Department Inspector General of the U.S. Mint's unsuccessful marketing plan to promote the dollar coin.
The unwanted coins cost $300 million to produce and the overflow is forcing the Federal Reserve to build new vaults, Brown said.
The GAO's report highlights
Here are the key findings of a Government Accountability Office report on whether the U.S. should switch from dollar bills to coins. The report was requested by U.S. Sen. Scott Brown, R-Mass.
- Dollar coins cost more to make than dollar bills, even when the longer life span of coins is considered.
- It would take more than 30 years to recover the cost of transitioning to dollar coins.
- The government would have to produce 1.5 coins for every bill because the coins are easily lost.
- Production of the coins would create a major inconvenience for the U.S. economy.
Source: Government Accountability Office.
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