Eliminating $1 bills could save billions
Switching to dollar coins would be cheaper in the long run, but Americans seem to prefer the paper version.
Washington has come down with a case of fiscal fever as the Obama administration proposes everything from spending freezes on domestic programs to selling off unused government property to bring the budget back in line.
Now, one study argues that the government can save billions of dollars simply by making a change to the currency itself. Post continues after a video about the issue from last summer -- the last time it was discussed in detail before falling by the wayside yet again.
Earlier this month, the U.S. Government Accountability Office issued a formal proposal to the Treasury and Federal Reserve noting that if it eliminated the $1 bill and replaced it with the $1 coin, the country could save roughly $5.5 billion during the next 30 years. The reason, according to the agency's report, is that dollar bills have a shorter lifespan than dollar coins because they wear much faster, which in turn requires the government to spend more to print new bills.
The GAO estimates that phasing out dollar bills in favor of coins would require a four-year transition period, during which the government invests in the new currency, but following that, the government would save an expected $522 million each year from the change.
Canadians like their coins
Unfortunately, as the GAO notes, there is one problem with the plan: When given a choice between dollar coins and dollar bills, Americans always choose bills.
- Calculator:Is your budget in balance?
"GAO has noted in past reports that efforts to increase the circulation and public acceptance of the $1 coin have not succeeded, in part, because the $1 note has remained in circulation," the agency wrote in its report. So if we are ever going to make the switch to dollar coins, as other countries like Canada have done, the GAO suggests the only way to do so is to phase dollar bills out of circulation altogether.
Before you start hoarding your dollar bills, though, keep in mind that the GAO has made similar proposals four times during the past two decades, and obviously dollar bills are still in circulation. The only difference this time is that the overall climate in Washington is more geared toward budget cutbacks now, but given that it would take several years for the savings to kick in, this seems unlikely as well.
Still, we'd like to pose the question to readers: Would you be willing to eliminate dollar bills and switch to coins if it meant improving the country's balance sheet?
More from MainStreet and MSN Money:
VIDEO ON MSN MONEY
The UK had the same reservations many years back when they eliminated the pound note and came out with the coin, but it worked out fine there and also will here.
While we're at it, eliminate pennies or start making them out of plastic. First copper costs more that their value. Now zinc is edging up to make it cost too much. As inflation raised commodity prices, no metals will be able to be used to keep the price far enough below one cent to make them a break even.
Given the actual value of a dollar, this seems like a fine idea to me. I really doubt that it would mean carrying around more coins. What I am sure everyone would miss, though, is having to straighten out/crinkle up/unfold/retry that $1 bill that the vending machine won't take. Though I suppose we will still have th $5 bill for that, since vending machines don't sell anything for less than a $1 anymore.
Ok I am for using the $1 coin and have been on the rare occasion that I can acquire them. There is a problem that no one seems to know about, the banks (your local branch) has to pay to ship in bills and coin from the federal reserve bank, and it is shipped by armored car and guess what they dont charge by the sack they charge by the pound. You can see why banks are not in favor of going to $1 coins it costs them more to have them on hand.
So far the only place who is using them as much as possible is the US post office, when you buy stamps from their vending machines you get your change back in coins only.
I agree with PHLYo. Not only EU, but Japan also use nearly $1 worth coin, as well as $5 worth coin. The smallest paper money starts at $10 worth. People there heavily rely on cash than credit cards for their daily purchases. People here in US use credit cards everywhere.
Why can't we?
If you don't want to carry a bunch of coins, then just pay for your large purchases with a debit or credit card. Not to mention, the internet allows for electronic banking and purchases. Also keep in mind, the proposal is only to replace the $1 bill. NOT the $10. Vending machines now take dollar coins, so you can't whine about that either.
The government has tried this a few times in the past and it failed. All they have to do is change the paper and cotton ratio, by increasing the amount of cotton to make the bill stronger. They could also try using some type of plastic thread, like nylon. This would greatly increase the life of the one dollar bill. They could actually test different types of material through public use, before deciding on a final material. This change would only be used on the one dollar bill; since no one would try to counterfeit it and it could not be used to counterfeit larger denominations.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.