Dollar Coin Supporters Trying To Sell Us The Brooklyn Bridge
For some reason the dollar coin keeps coming up.
A press release in my inbox yesterday announced that Senators Tom Harkin (D-IA) and John McCain (R-AZ) had introduced the "Currency Optimization, Innovation and National Savings (COINS) Act" that would create yet another dollar coin. This is the Senate version of a bill introduced in the House last year.
As I've posted several times before (here, here, and here) I know from very very personal experience with the Golden Dollar in 2000 that, as far as the budget is concerned, a dollar coin is a good idea for the federal government.
I also know, however, it's been impossible to eliminate the bill so that the dollar coins that have been created have been a supplement to rather than a substitute for the greenback. That completely changes the transaction: Instead of producing savings, the dollar coins that have been minted have ended up costing taxpayers more rather than less. The real beneficiaries have been the suppliers of the raw materials for the coins and the armored carriers that delivered them to banks and retailers.
Think of it this way. Suppose there was a old bridge that cost the government a great deal to maintain every year and someone determined that replacing the bridge with one that was more efficient made a great deal of budget sense. It clearly was going to cost more in the first few years to build the new bridge than to maintain the old one, but the new one was going to save money over the next three decades compared to what it would cost to keep the old one in place.
But there's a problem: Drivers like the old bridge and aren't going to use the new one because it's located 3 miles further down the road. They also don't like the design of the new bridge and have trouble getting there because the access points are difficult to maneuver.
As a result, traffic on the old bridge only decreases slightly and the government still has to pay to maintain it while it also pays for the new bridge. The result is more rather than less spending. That makes the new bridge a good deal for the companies and workers that build it and the steel and concrete manufacturers that provide the raw materials. But it's a terrible deal for taxpayers.
I'm sure you see where this is going. The savings can be guaranteed if the old bridge is torn down. That, in fact, is what the newly introduced COINS act would do: it would mandate that the dollar bill be eliminated.
But that doesn't take into account the politics of the situation. The bill is very popular (some consumers feel incredible loyalty to it and think of using a coin as the equivalent of cheating on a spouse), and retailers don't like them because they are more expensive to have delivered than bills.
Vending machine owners whose machines don't already accept dollar coins don't like them because it costs a good deal of money to make the conversion (It was $50 per machine in 2000; that's undoubtedly $75 or more now).
Banks don't like new dollar coins because they still have large inventories of Susan B. Anthony dollars -- maybe the most unpopular coin is U.S. history -- and can't get get consumers to take them.
And lets not forget the companies that manufacture the paper and ink for the bills that want to keep selling that to the government.
So the likelihood that the dollar bill will be phased out is small to nonexistent. That means that the transition to a dollar coin in the U.S. will not produce the budget savings its supporters claim.
It also means that the supporters are just trying to sell us a bridge.