It looks like those pennies really do add up after all, as the Government Accountability Office (GAO) and the White House gear up to reintroduce several dust coated proposals to cut costs in printing dollar bills and minting small value coin. The idea, previously pitched to Congress at least once for the last 22 years, is to take the one dollar bill and convert the paper note back to a coin while improving the production process for pennies and nickels. Not a super ambitious plan, considering that the amount of money it saves over 30 years amounts to less than $150 million per year, but when Uncle Sam is looking for any way to cut corners $150 million is still, $150 million. While slightly more inconvenient to carry a few more coins in our pockets, recasting small dollar amounts as coin and improving production of nickels would be worth implementing in light of the rankling in Washington over federal spending despite fairly modest savings.
For the U.S. Mint, production of both coin and paper dollars is fairly cheap with each $1 dollar bill costing about 5 cents and each $1 coin costing around 30 cents. However there’s a drastic difference in shelf life between the two as the metal coins can stay in circulation for up to 30 years while paper notes last about five. At these rates, for every one metal dollar coin, six paper dollars come and go, so metal coins are cheaper in the long term, and the government can save millions on production costs since the Mint wouldn’t need to recast new coins as often as it needs to print new bills.
Pennies and Nickels are problematic because they cost the government more to make them than they’re actually worth. With paper and coin dollars, the cost to actually produce the currency is less than the value of the note or coin itself so the government makes a profit once it sells the dollars to Americans. On the other hand pennies and nickels cost much more than their actual value, 2.4 cents per penny and 11.2 cents per nickel. Today’s pennies are mostly zinc coated in copper and nickels are about three quarters copper and one quarter nickel. All of these metals are fairly expensive, not to mention issues with corrosion in modern pennies and increased demand for the metal globally. To solve this problem, the Treasury Department is looking for a new composition for both coins that would be cheaper to acquire, produce, and last longer.
How Much Would Uncle Sam Save?
According to reporting from CNNMoney, the GAO estimates that converting paper dollars over to metal coins would save the federal government $4.4 billion dollars over 30 years, about $146.66 million per year. The numbers for pennies and nickel conversions are speculative at best since there’s not yet a solid proposal for what the new composition would be, but Treasury looks to find something that could cut down on the $20.556 billion per year price tag the coins carry.
Will America Go For It?
Interestingly enough, the Treasury Department actually halted the production of the one dollar coin because of the widespread resistance to the metal coin in place of the paper reserve note. In fact, it holds about $1.4 billion in dollar coins, and slowed production has saved the government some $50 million dollars since last December. According to Treasury, resistance from vending machine makers and a lack of demand for coin dollars warranted the stop, but with the economy still struggling to recover wear and tear on smaller bills like $1′s and $5′s has increased since they’re exchanged more often than $20′s or $100′s.
How Hard Would The Changes Be?
Converting small bills to coins would be a fairly simple task, particularly because the Treasury already has $1.4 billion in dollar coins ready to go into circulation. All it would need to do is replace paper dollars with coins as the paper notes leave circulation or are destroyed, and eventually the supply of paper dollars would be completely supplanted by the coins. The bigger problem is finding a new makeup for the penny and nickel, and there are few proposals on the table. During WWII these coins were minted from steel to conserve copper for the war effort, but now steel would prove a cheaper alternative since prices for steel are much cheaper than copper or zinc. The Mint could also stand to find a cheaper alternative to buying prefabricated (they come ready-to-stamp) coins ,a process that accounts for much of the added costs of these coins.
Overall this is a pretty good idea, especially with the federal government looking for any way to save money. Personally I’d like to see coins for the $1 and the $5 bills since they’re exchanged enough to limit their lifespan to just under five years. Keep in mind that other countries such as Great Britain, Canada, and the EU countries use coins for amounts larger than one full unit of their currency and transactions work just as well. With the fiscal cliff looming, any idea that saves some money is a good idea and why not? Those pennies add up!