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."
Tried it. Didn't work.
I wondered why the dollar coins were so weird and consumer unfriendly. If it were larger, people would use them.
Consider the fact that it costs one cent per year to keep a paper dollar in circulation, possibly more. That is unsustainable; we need a dollar coin.
So, why have the new dollars been failures? I looked into the matters concerning printed money - - the paper comes from Massachusetts, Kennedy’s old district! Imagine the loss if paper dollars were not printed!
Was this a designed failure?
Dollar bills are disease-caring, filthy cr@p! Their life is measured in mere months! They’re being printed constantly because of their short life. When they’re done for, they are shredded and sent to landfills. I hate it when I get those “de-contaminated” highly perfumed dollars! They STINK! Coins will last 20, 30? 50 years. And the metals in them are naturally anti-bacterial.
GET RID OF THE DOLLAR BILL!
Sorry for the rant, but my wallet smells of cheap perfume today!
“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.”
You may be right, but a pocket full of Ike dollars is still dragging around some non-trivial weight. Only thing I can envision would be to make $5 coins perhaps a tad bigger than standard silver-dollar (eg; Morgan, Peace) size. Maybe.
The mint’s obsession with making SBA dollars and then Saca dollars and now these presidential dollars has been quite the epic fail. Any fool could have predicted the outcome of making those silly SBA dollar coins. Sigh...government always knows best, huh?
It would be fun watching liberals handling those coins like a dead mouse. It might boost the economy as they try to spend them quickly so they don't carry them for long.
I’ll take them, and gladly inject them immediately into the economy...............
I use those coins, and two dollar bills, quite frequently. I swap out all of them I can find where I work and spend them at Wal Mart. Many of the cashiers don’t know what to make of them at first.
Those big suckers was heavy. Not such a problem when circulating coins had REAL SILVER. But the Ike dollars were huge and there was no point to it.
That was one of the coolest reverses I’ve seen on a US coin. Dump the dollar coin’s current Statue of Liberty and go back to the eagle on the moon. But it is a sign of US progress, which can’t be allowed in Obama’s America.
.if you are unfortunate enough to only have a 20 and buy a one way ticket, out comes 18 of these things for change...after a while, the dollar coins feel like they weigh a pound apiece....
throw the coins in with paper: problem solved.
But then the price of strippers would double!
Talk about inflation.
Many vending machines (e.g., the ones where I work) won’t accept the dollar coins.
This isn’t the THIRD failed attempt to get us to use $1 coins. More like the 10th attempt. I’ve lost count.
Every $1 coin issue back to the first one in the 1800’s has been less popular than the $1 paper alternative. Most have been FAR less popular. Large or small, precious metal or base, silver colored or gold, we just don’t want them. Never have, probably never will.
The government should make coins and bills that people want to use, in sufficient amounts to meet demand. That means lot of $1 bills, a small minting of $1 coins each year, and a mid-sized printing of $2 bills about once a decade.
Congress shouldn’t micromanage this by mandating issues that the people don’t want.
The mint and the bureau of engraving and printing are among the few federal agencies that mostly do their assigned jobs very well. Except when congress interferes.
(Yeah, some people like $1 coins because they last longer than paper, and think we’d save money by getting rid of $1 bills. I think the savings would be completely insignificant compared to other federal spending, so leave it alone.)
only decent uses i’ve found for them are to give ‘em to my kids when they lose teeth, or to throw at ugly strippers. lol
The reason that the $1 coin has always been a failure is because the denomination is too small in an age where your entire checking account is carried on your person in the form of a thin plastic card.
Make the next new coin to be $5 in value, and you might start seeing people actually use them.
This coin would have to be sized between the nickel and the quarter, and about 2.5 times the thickness of the nickel. Shiny gold in color like the Sac Dollar. No presidential portrait on the coin, just the Federal Eagle and shield. Reverse side should depict New England Minutemen.
Then we eliminate the penny. It would also be nice to have a $500 paper note, but no way would the US government allow that with it's never-ending 'War On Drugs'.
Back in the Susan B. Anthony (the idiot Jimmuh Carter years) days, no one wanted these coins, so they shipped them over to Europe and forced the military to use them. They weren’t popular there either. If you walked down the street, you sounded like Santa Claus with all the change jingling in your pockets and your pants would sag from the weight.
The store, not having a dollar coin tray in their register, sticks it in the deposit back with the $2 bills, and away they go.
Though, it should be noted, most new registers have been mandated to have five trays for coins (which now can't hold a full roll...) Though only 4 bill spaces..
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