The United States federal government faces some daunting economic challenges. From the debt to the deficit to our credit rating to joblessness, we are staring down the barrel of a gun, economically speaking. There are occasional signs that Washington is beginning to get serious about addressing these problems, such as the emergence of Rep. Paul Ryan as the intellectual force behind conservative economic policy. Sadly, there are just as many, probably many more, examples that Washington doesn’t get it.
Place the latest effort to shred the paper dollar and replace it permanently with the dollar coin in the latter category.
As the Hill puts it, “Rep. David Schweikert (Ariz.) and two other House Republicans — including supercommittee co-chairman Jeb Hensarling (Texas) — introduced legislation last week aimed at retiring the paper dollar. Schweikert said his bill would save billions of dollars over the next few decades by transitioning to a dollar coin in four years, or as soon as $600 million worth of dollar coins are in circulation.”
Schweikert should be commended for thinking imaginatively about how to save taxpayers money. But in this case he’s being a little too imaginative. Imposing the unpopular dollar coin on an unwilling American public (previous dollar coin mandates have flopped) – and more importantly, small businesses – will actually increase costs on American taxpayers. In fact, it already is.
The current, more reserved mandate has done nothing to spur the use of dollar coins. Instead these coins are handed out as change by the Post Office and DC Metro stations and customers almost immediately give them to their children as trinkets. As the Washington Times pointed out in a recent editorial, “This utterly wasteful program is costing us a billion, and it’s a perfect example of why this country is going bankrupt.”
The dollar coin is so unpopular with the public there are a billion of them sitting unused in Federal Reserve vaults. Businesses don’t use them and people don’t want them. Dollar coins take 32 cents to produce, a fact not taken into account by Rep. Schweikert. The General Accounting Office estimates that eliminating the dollar bill would increase costs on the American taxpayer by $3.5 billion over the current system.
This proposed change will also create new costs for small businesses. Dollar coins are more expensive to transport because they weighsignificantly more than their paper equivalents. Small businesses will carry this burden, not giant corporations, who would be better equipped to absorb the expenses. GE doesn’t use cash registers, Mom and Pop do.
As Stan Collendar has written with regard to the last dollar coin go-round, “What Congress didn’t realize or care about when it authorized the golden dollar was that it costs businesses more to get coins than billsbecause they’re heavier and the delivery charges from Brinks or some other armored carrier are higher. Plus, you had to order dollar coins in bags of 2000, which is way more than most retailers need and want to keep in their safes. Because consumers ultimately didn’t care whether they got a dollar bill or dollar coin when they made a purchase, businesses saw no reason to pay extra to have the coins delivered or to take the extra risk of having them in their safes.”
We have dollar coins now. They are unpopular and unused. The market has already decided on the dollar coin. Rep. Schweikert should pay attention.