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."
The dies are the cheapest part of the process.
and they say the Canadian coins are loonie...
If I ever received them as change from a story, I’d happily use them. Basically when the gas station manager or fast food manage goes to the bank for a stack of singles to make change with, they need to tell him, here, use these coins instead. That would be the end of it.
The steel mill in my town pays its yearly safety bonus to employees in 2 dollar bill’s a lot of them float around every October.
Well, we could always force the welfare recipients to start taking them, instead of direct deposit...
And they should be required to show up in person at the mint for collection each week. :)
Fletcher J
I keep a few in the car. They’re handy at toll booths.
I’d spend them if I had them, but I never see any in circulation. All I get from the ATM is twenties, and no one gives out dollar coins or two dollar notes in change. Maybe I’ll ask at the bank next time I’m in the lobby.
It might also remind people that he killed our space program, in favor of MooseLib outreach.
Our post office has removed all of the stamp vending machines, my only reliable source of the dreaded dollar coins.
Frankly I’m surprised that they don’t give you change......in stamps ;-)
It’s time once again to trot out my currency and coinage reform proposal, with the notation that rarely do people have much use for a coin that is 100x the value of the smallest coin.
Given that there has been ample inflation on the order of 10 since the last change, and we have an excessive array of confusing coins and low-value currency, it is time for a practical simplification.
First, denominations need to proceed in a proportional way without large value ratios or crowded ratios. The classic 1-5-10-50-100... progression with ratios of 2.0-5.0 is ideal as a minimum, with denominations of 2, 20, etc. being optional for important valuations.
Second, we want to avoid coins of such low value that they are more trouble than they are worth. Economic waste occurs with the extra time wasted dealing with needlessly small coins. A dime is worth less than a minute of labor at minimum wages, and no currency transaction requires anything smaller than this denomination. The penny and the half-cent served well as the smallest denominations when their values were that of today’s dime. (Note to any economic imbeciles: electronic transactions are often conducted in smaller units than our smallest coin, and that cash registers have been “rounding” - without bias up or down - to the nearest small coin for sales tax purposes for generations. Google “sales tax rounding” if you have doubts and read a few articles).
Third, we want to set the coin/currency transition at a practical level that avoids our wallets being overstuffed with small bills, or our pockets with too many coins. Coins should be suitable for purchases like a magazine, a coffee, a lunch, or a brief cab ride.
Fourth, the ratio between the largest and smallest coin should be limited to a practical factor. Consider that the economy functions effectively with coins at 0.05, 0.10, and 0.25, with pennies treated as trash, and larger coins generally not used. That is a factor of 5 between the largest and smallest coin. A factor of 10-50 may be ideal, and a factor of 100 (as in actual current coinage) is excessive.
Fifth, we need bills of adequately high value for large cash purchases (consider the largest Euro note has a value of about 6.5 times that of the largest US note.)
Sixth, coins should be sized approximately proportional to their value for ease of recognition and use.
The proposal:
Coins:
$0.10 (slightly smaller than the current dime)
$0.50 (slightly smaller than the current nickel, larger than the penny)
$1.00 (slightly smaller than the current quarter dollar, larger than the nickel)
$5.00 (slightly smaller than the current half-dollar) Or it could be set at $2 to avoid overlap with a $5 note.
Currency Notes:
$5 (optional)
$10
$20 (optional)
$50
$100
$500
Our current 6 coins are replaced with 4.
Our current 7 notes are replaced with 4-6.
If you want to talk about making coins out of silver or gold, I’m even more enthusiastic:
$1000 gold coin (1 oz)
$500 gold coin (1/2 oz)
$100 gold coin (1/10 oz)
$20 silver coin (1 oz)
$10 silver coin (1/2 oz)
$2 silver coin (1/10 oz)
$1 copper or base metal coin (1/2 oz)
$0.50 copper or base metal coin (1/4 oz)
$0.10 copper or base metal coin (1/10 oz)
“Certainly, issuing the coins and having them circulate, rather than sit in vaults, would create a source of revenue for the government.”
I haven't seen any for a while, but I liked them.
Not in San Francisco where they each carry around those goofy payment boxes. Money goes on the stage then they put it in their box (not trying to be funny).
What IS it about people who win elections that they come to think they understand the complex systems of this country well enough to screw around with them? Did no one consider the changes that would need to be made to, oh, say every cash register used in every store in the entire country? Or vending machines? Then there’s the weight and the bulkiness of coinage. And, those are just off the top of my head. Does gaining employment inside the beltway immediately infect one with arrogant stupidity?
“But then the price of strippers would double!”
Hmmm...where would the stripper let us put the coin? (refraining from obvious dirty jokes...tough call)
I’ve seen a few in Morgan dollar sales. Interesting but not my kind of coin. Too much like the Franklin Mint for me.
Where is “In God We Trust”?
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