Skip to comments.$1 Billion That Nobody Wants (dollar coins)
Posted on 06/29/2011 12:38:29 PM PDT by Aroostook25
Politicians in Washington hardly let a few minutes go by without mentioning how broke the government is. So, it's a little surprising that they've created a stash of more than $1 billion that almost no one wants. Unused dollar coins have been quietly piling up in Federal Reserve vaults in breathtaking numbers, thanks to a government program that has required their production since 2007. And even though the neglected mountain of money recently grew past the $1 billion mark, the U.S. Mint will keep making more and more of the coins under a congressional mandate.
The pile of idle coins, which so far cost $300 million to manufacture, could double by the time the program ends in 2016, the Federal Reserve told Congress last year. A joint inquiry by NPR's Planet Money and Investigations teams found that the coins are the wasteful byproducts of a third, failed congressional effort to get Americans to use one-dollar coins in everyday commerce.
In 2005, Congress decided that a new series of dollar coins should be minted to engage the public. These coins would bear the likeness of every former president, starting with George Washington. There would be a new one every quarter. So, far, the Mint has produced coins through the 18th president, Ulysses S. Grant. Members of Congress reasoned that a coin series that changed frequently and had educational appeal would make dollar coins more popular. The idea came from the successful program that put each of the 50 states on the backs of quarters. But as the new presidential dollar coins rolled out, the greenback lost none of its dominance in Americans' hearts and wallets.
If the mandate to make presidential coins wasn't enough to generate a growing heap of unwanted coins, a political deal ensured that even more unwanted coins would be produced. It was easier for the bill's sponsor, then-Rep. Mike Castle (R-DE), to move the presidential coin bill forward if it didn't displace other dollar coins honoring Sacagawea, the teenage Native American guide to Lewis and Clark. The deal: The mint would be required to make a quota of Sacagawea coins. Currently, the law says 20 percent of dollar coins made must have Sacagawea on them. So, there are now about 1.2 billion dollar-coin "assets" chilling in Federal Reserve vaults, unloved and bearing no interest. By the time the presidential coin series finishes, and there are coins honoring all past presidents, there could be 2 billion.
Several congressional leaders contacted by NPR declined to comment for this story. The Senate Banking, Housing and Urban Affairs Committee has jurisdiction over coins. Its chairman, Tim Johnson (D-SD), would not agree to be interviewed about dollar coins. Neither would the committee's ranking member, Republican Richard Shelby of Alabama, who recently requested a Government Accountability Office study on dollar coins. Both the Mint and the Federal Reserve provided information for this story, but neither agency would agree to an on-the-record interview.
The finances of all of this? You could say the government has wasted money to make money. Some 2.4 billion dollar coins have been minted since the start of the program in 2007, costing taxpayers about $720 million. The government has made about $680 million in profit by selling some 1.4 billion dollar coins to the public since the program began. Still, it's the program's waste that hits home when you're staring at millions of unused coins.
Inside one basementlike Federal Reserve vault in Baltimore, NPR was able to see 45 million $1 coins of various types. The coins were overflow from vaults elsewhere. And despite a national indifference to the coins, they were heavily guarded. A group of journalists from NPR passed through a metal detector and special secure doorway before reaching the inner entrance to the vault, a fence gate secured by two common Master padlocks. Two staffers minding the coins each had a key to one of them, and as the NPR group moved around the vault, the minders kept the group physically surrounded. Inside the vault, dollar coins languished in clear plastic bags piled high on sturdy metal pallets that looked like baby cribs.
Through the bags, one could see Sacagawea mingling with Suffragette Susan B. Anthony and rubbing edges with some of America's early chief executives. Glaring fluorescent lights coaxed an occasional shimmer from the dollars, which are made mostly of manganese brass and have a gold color. One row of pallets bore a handwritten note that said, "Dollars ... 48 skids ... 6,720,000." But how many of them will ever see a laundromat, soda machine or toll booth? Without an overhaul to the cash system that completely substitutes coins for bills, very few.
Try, Try Again. After the Susan B. Anthony and Sacagawea series lost their bids to become America's pocket change sweethearts, the presidential series was the next big idea. But in a report to Congress last year, the Federal Reserve said the coins are now being held "with no perceivable benefit to the taxpayer," and that banks are sending them back to the Fed in increasing numbers. "We have no reason to expect demand to improve," the Fed said. "We also note that a 2008 Harris poll found that more than three fourths of people questioned continue to prefer the $1 note." Still, dollar coin proponents, including some advocacy groups and vending-based industries, are undeterred.
Leslie Paige, who represents watchdog group Citizens Against Government Waste, says the government should withdraw the dollar bill from the market and force Americans to use the coins. "I think Americans will definitely embrace the dollar coin if they're just given the opportunity," she says. As for the Harris Poll showing Americans don't want dollar coins, Paige says, "I suspect that they just don't understand what the up sides are," including the fact that coins don't need to be disposed of as bills are. "The idea that, 'Oh, I don't want them jingling in my pocket,' I mean, I don't know, most people carry quarters with them," Paige says. "They use them for meters and all kinds of other things, so I certainly think Americans can adapt."
Money-Saver Or Hidden Tax? You may have heard that dollar coins are more cost-effective than dollar bills. Paige and other dollar-coin advocates point out that coins last longer than bills, and that's why they save money. A coin could last 30 years, but a new dollar bill will be ready for the shredder in less than four years. But if moving exclusively to dollar coins would save money, the question is, whose money? Certainly, issuing the coins and having them circulate, rather than sit in vaults, would create a source of revenue for the government.
Whether taxpayers would benefit is another matter. A Government Accountability Office study out this spring says that switching to a dollar coin "would provide a net benefit to the government" of about $5.5 billion over 30 years. But it's not because coins are cheaper. The report says the government would not recover the cost of switching from bills to coins over that period. Instead, the benefit to the government would come only from the profit it makes by manufacturing each coin for 30 cents and selling it to the public for a dollar. When this profit, known as seigniorage, is factored out, switching to the dollar coin would actually cost taxpayers money over three decades, according to a Federal Reserve analysis of the GAO's figures. The cost works out to $3.4 billion. The Fed's Louise Roseman wrote to the GAO that seigniorage should not be considered in an analysis of whether the switch would benefit the larger U.S. economy. The reason, says Roseman, director of the Fed's Division of Reserve Bank Operations and Payment Systems, is that seigniorage " is a revenue transfer from the private sector to the government." So, in other words, a tax? The profit to the government predicted by the GAO assumes that the government would have to issue 1.5 dollar coins for every dollar bill removed from circulation. That's because people handle coins differently than they do bills.
Even if all dollar bills were replaced with coins, some say the nation's evident distaste for dollar coins will simply mean more small transactions will be done electronically. And, it could accelerate a technological trend toward payments with mobile devices. Jack Weatherford, an anthropologist who wrote the 1998 book The History of Money, says he loves coins, but he doesn't love the billion dollar coins piled up in the nation's coin vaults. "Destroy them," he said. "People will not accept these coins. Nobody in America wants to use them. As long as they have a paper currency, they will use that." Of using coins to save money, Weatherford says that in an era of electronic financial transactions, "the argument is about 50 years too late. Coins have rapidly become less and less important in our society like paper money itself is becoming less and less important."
Buyer's Remorse For Bill's Proponents. Delaware's Castle, who left Congress after a primary loss and now practices law, acknowledges that the demand for golden dollars didn't materialize as he had hoped. Castle says he and others knew when they were passing the bill that widespread adoption of dollar coins would be hindered by the continuing production of dollar bills. But he says that mandating a wholesale switch from bills to coins was politically untenable then, as it is now. "It's not quite like cutting somebody's Social Security," Castle says, "but politically it's not something the members want to deal with, so it's just very hard to get something like that done."
When Congress was considering the law, the Congressional Budget Office warned that there would be low demand for the coins. The Federal Reserve Board cautioned that coin inventories and storage costs would increase. Castle says the coins should continue to be produced, but in smaller numbers. "It's ridiculous to have this kind of over-inventory pile up," he says. "I might actually make some phone calls myself as a result of reading these reports and learning more about what this problem appears to be."
But what should happen to that quota for Sacagawea coins, for which there is very little demand, and which the Federal Reserve no longer orders from the Mint? Earl Pomeroy, a former Democratic congressman from North Dakota who championed the quota while serving in the House, hedges a bit. Pomeroy stands by his defense of "dear old Sacagawea." But he acknowledges that there's at least some folly in continuing to make coins that will not be used. "I think the foolish part of the law may be not the Sacagawea part, but the fact that with no one picking up these coins, we've got to keep printing them because we've got to get through the rest of the presidents list," says Pomeroy, who lost his bid for a 10th term in Congress last year. "That to me doesn't seem to make any sense at all. "Is the nation waiting with bated breath for us to get to the Calvin Coolidge coin? No! Maybe we should call a halt to this whole thing."
Those who want low denomination paper can use $2 Jefferson bills.
I’ll take about half of them off their hands. I’ll even store them myself—at my expense.
Okay, dammit! I’ll take ‘em. Gotta do my patriotic bit, you know.
I worked at the Fed when they released the Sasquachaweeha (”Who REALLY saved Louis and Clarke while carrying a baby on her back!”) dollar coins. We had first dibs. I bought ten. No one I knew wanted them. They have since turned a nasty corroded green splochiness. No one wants them now. I may have to go to Nevada to get rid of them. BTW, whatever happened to the Susan B. Octagon dollar coins? The ones that jammed every 25 cent vending machine slot in the United States? Maybe they’re in another vault building...
Except at Best Buy. Man arrested, cuffed after using $2 bills
i use dollar coins all the time,
How about quit making money, period.
I love dollar coins. Give them to me.
Hire a paymaster. Transfer the funds to the Treasury. Have each member of Congress report in person each Friday at 4:30 pm to collect their pay.
I have a theory about why folks don’t use dollar coins. They’re close to the size of a quarter and it reminds everyone of how much the dollar has been devalued in their lifetimes.
If they were minted the size of the old cartwheels, it might work.
Save them just in case America is foolish enough to re-elect Obama. They will have collector value as token reminders of an ancient currency that once existed on the earth, called the American Dollar.....
I loved those as a kid. I had a paper route which I collected for myself. The rate was 75 cents per week and sometimes customers would give me one instead of a quarter. About once every other week I would find one in my bag and that meant I made an extra 75¢ profit from some customer. If I saw it before I put the money in my bag I was honest enough to fix the problem, but those things did look just like quarters so I often didn't notice.
Tell ya what....I’ll give the Fed’s 10 cents on the dollar..for all of them.
People who work real jobs in real factories, real offices, real places of employment KNOW intimately what those coins are for ~ that's how you get lunch or a snack or a soft drink without leaving work, driving half an hour to a restaurant, and then coming back late.
Automated vending equipment supplies billions of dollars worth of food and sustenance to tens of millions of American working men and women every day.
The Leftwingtards running NPR wouldn't recognize them if they ran over them with their Ferraris.
Force people to use them and say something like that. jeez.
If people don't want them, then so what? Let the market decide.
Unless they quit printing 1$ bills, there will never be a demand for 1$ coins.
Can anyone name the biggest obstacle to the introduction of 1$ coins and $2 bills?
Cash registers. They aren’t setup to handle the additional coins and bills. They trays are designed for a standard set of bills. Anything else blows the system out of the water. Businesses don’t request dollar coins or 2 dollar bills from their bank, because they don’t have anyplace to put them in their cash registers.
Funny story I heard Neil Boortz tell years ago. He got a stack of new 2$ bills and put gum rubber on the side, and made them into a “pad” of bills. Then he’d go into a business and peel 2$ bills off the pad and hand them to the cashier.
Made a nice sound on the bar back when a dollar went a little futhur(sic).
1. Quit minting Feminist coins. Mint Reagan Dollars instead!
2. Stop prinitng paper dollars.