It seems well past time that the US ditch its $1 bill, considering such a move could save the country somewhere in the neighborhood of $4 billion.
But there is much resistance or perhaps a lack of real consideration of the issue from most people. Watchdogs at the Government Accountability Office this week testified before a Congressional hearing on the topic said dollar coins could save $4.4 billion over 30 years, or an average of about $146 million per year.
The GAO says the financial benefits wouldn't be immediate. Rather replacing the $1 note with a $1 coin would provide a net government loss of about $531 million in the first 10 years, or an average of about $53 million per year. The cost of producing a large number of coins necessary for the transition would result in a net loss in 6 of the first 7 years, but in the eighth year, and for the remaining 2 years, this situation is reversed: the interest savings outweigh the production costs and the net benefits would be positive.
"We continue to believe that the government would receive a financial benefit from making the replacement. However, this finding comes with several caveats. First, the costs are immediate and certain while the benefits are further in the future and more uncertain. The uncertainty comes, in part, from the uncertainty surrounding key assumptions like the future demand for cash. Second, the benefits derive from seigniorage [which equals the difference between the face value of currency and its costs of production], a transfer from the public, and not a cost-saving change in production. Third, these are benefits to the government and not necessarily to the public at large," the GAO stated.
The GAO talked mostly about two big issues facing such a coinage move. The first is the effect of a currency change on the private sector. "Based on our interviews with stakeholders representing a variety of cash-intensive industries, we believe that the costs and benefits to the private sector should be carefully weighed since some costs could be substantial. Shorter-term costs would be those costs involved in adapting to the transition such as modifying vending machines, cash-register drawers, and night-depository equipment to accept $1 coins. Such costs would also include the need to purchase or adapt the processing equipment that businesses may need, such as coin-counting and coin-wrapping machines. Longer-term costs would be those costs that would permanently increase the cost of doing business, such as the increased transportation and storage costs for the heavier and more voluminous coins as compared to notes, and processing costs. These costs would likely be passed on to the customer and the public at large through, for example, higher prices or fees."
The GAO notes that industry experts could not easily quantify the magnitude of these costs, and the majority indicated that they would need 1 to 2 years to make the transition from $1 notes to $1 coins.
The second issue is public acceptance. The GAO said its 2012 estimate assumes that the $1 coin would be widely accepted and used by the public. In 2002, it conducted a nationwide public opinion survey, and we found that the public was not using the $1 coin because people were familiar with the $1 note, the $1 coin was not widely available, and people did not want to carry more coins. However, when respondents were told that such a replacement would save the government about half a billion dollars a year (our 2000 estimate), the proportion who said they opposed elimination of the note dropped from 64% to 37%, the GAO stated.
Yet, other national-survey results suggest that opposition to eliminating the $1 note persists. The GAO has noted in past reports that efforts to increase the circulation and public acceptance of the $1 coins-such as changes to the color of the $1 coin and new coin designs-have not succeeded, in part, because the $1 note has remained in circulation. There are more than 2 billion Presidential $1 coins in circulation but many go unused.
The GAO also pointed that over the last 48 years, Australia, Canada, France, Japan, the Netherlands, New Zealand, Norway, Russia, Spain, and the United Kingdom, among others, have replaced lower-denomination notes with coins. The rationales for replacing notes with coins cited by foreign government officials include the cost savings to governments resulting from lower production costs and the decline over time of the purchasing power of currency because of inflation.
"Stopping production of the note and actions to overcome public resistance have been important in Canada and the United Kingdom as the governments transitioned from a note to a coin. While observing that the public was resistant at first, Canadian and United Kingdom officials said that with the combination of stakeholder outreach, public relations efforts, and ending production and issuance of the notes, public dissatisfaction dissipated within a few years," the GAO said.
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