GAO: Eliminate dollar bills in favor of dollar coins, save more than $5 billion

If not for gold dollars, Millard Fillmore would be under-representated on US currency.

I love my Congresswoman, Jackie Speier. She’s never backed down on a fight, despite having been shot five times for her political work. She’s been a strong representative for my community (including its transit issues) on the local, state and national level.

But I think she’s on the wrong side of one of the latest fights she’s taken on. Speier announced over the summer that she would introduce a bill to kill the dollar coin program.

Dollar coins? Yes, the United States has dollar coins. You don’t see them much, unless you actively seek them out or buy some straight from the mint, but they’re there.

And there should be more of them. The non-partisan Governmental Accounting Office recently issued a report that stated swapping dollar coins for bills could save the US Government $5.5 BILLION.

Annual savings to US government by replacing dollar bills with coins.

The United States recently got a few million more dollar coins into circulation by doing two things: starting the Presidential Dollar Coin Program, in which every dead president gets his own coin (hence my Millard Fillmore coin); and introducing a direct ship program to the public.

The problem with the latter deal was that frequent fliers got word of the program, buying literally nearly a billion dollars worth of coins in order to get miles or points, then depositing them right back into the bank. The government recently discontinued the direct-ship program because of “ongoing activity by individuals purchasing $1 coins with credit cards, accumulating frequent flyer miles, and then returning coins to local banks. Local banks, in turn, returned coins to the Federal Reserve. While not illegal, this activity was a clear abuse and misuse of the program.”

The result was more than $1 billion of dollar coins stuck in the Federal Reserve, raising the ire of Speier and resulting in her bill. (Disclaimer: I bought about $20,000 worth of dollar coins through the program, accumulating miles, but I also spent about $5,000. The coins are great for everything from bus fare to tips to Tooth Fairy Money for dentally challenged seven-year-olds.)

So let’s look at the numbers. The average cost to print a dollar bill was about 9.6 cents in 2010. The cost to make a dollar coin was about 30 cents – but as coins last about 20 times longer (40 years, versus two years for the “paper,” actually cotton/linen, dollar), the US would save millions in the medium-to-long term.

Let’s also look at some of the most-traded worldwide currencies. None of them print anything nearly as worthless as the US dollar:

Country/region -- Currency -- Lowest denom. bill -- Value in US $*
Europe -- Euro -- €5 -- $6.71
United Kingdom -- Pound -- £5 -- $7.70
Australia -- Aus. Dollar -- $AUD 5 -- $4.85
Canada -- Can. Dollar -- $CAD 5 -- $4.85
Mexico -- Peso -- Mex$20 -- $1.42
* As of Sept. 23, 2011

The U.S. government’s huge mistake, of course, is to continue printing $1 bills while producing dollar coins. Canada, Australia and the UK introduced coins of similar value into circulation by replacing the corresponding notes, eventually leaving the public with no alternative but the coin (the Euro has never had anything less than a €5 bill). That is what needs to happen here.

Freshman Congressman David Schweikert (R-Ariz.) has introduced what he calls the COINS Act, which would replace dollar bills with dollar coins. Is Schweikert’s bill going to go anywhere? Probably not, but it’s a start.

I love dollar coins, but with the direct ship over the Internet program ended, I’m running short on Tooth Fairy money. Luckily the kid says he doesn’t have any loose teeth.