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.

By MSN Money Partner Mar 9, 2011 6:38PM

This post comes from Seth Fiegerman at partner site MainStreet.

 

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.

"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

59Comments
Mar 10, 2011 9:34AM
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What am I going to do when I go to the strip club?
Mar 9, 2011 7:36PM
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I think it could do wonders for our economy but I see many people denying coins. Think of the strippers who would now need to carry around pocketbooks to hold all those coins.
Mar 10, 2011 1:25AM
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But Stripers hate it when you put coins in their panties!!! 
Mar 9, 2011 10:28PM
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We can't even get rid of the penny. What a joke, and what about that 9/10 of a cent on a gallon of gas. That made sense when gas was less than 50 cents a gallon.
Mar 10, 2011 10:21AM
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Americans also want deficit reduction and to stop unnecessary spending. This is a way to do both with no reductions in services or programs. It's a no brainer.

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.   

Mar 10, 2011 7:53AM
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After living in Japan for two years I am totally convinced of the convenience of having both $1 & $5 coins. As it turns out, I usually end up with the same number of coins in my pocket as before. Also, I am always surprised to have more money on me than I expected.  The American government needs to take a closer look at other countries monetary denomination system and see what works,  what doesn't and adjust ours accordingly. People always want to maintain what is comfortable rather than try something new.  It's not going to become popular until people get accustomed to it and see that coins work just as well as paper for the $1 denomination. 
Mar 10, 2011 1:28AM
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I think it's a great idea to get rid of the dollar bill.  Like others have said, I think the coin should be a little bigger than some of the recent dollar coins, or perhaps slightly thicker.  I also think it would be good to introduce a $2 coin, to cut down on the number of $1 coins you might be carrying around.  

I generally have less than $10 in $on dollar bills at any given time.  If I get more than that, i use them.  So..  having four $2 coins and two $1 coins isn't so bad.

Also, let's say there were going to mint 300 billion in $1 coins to replace the bills.  If instead, they mint 100 billion in $1 coins and 100 billion in $2 coins.  They've supplied the same dollar amount, but cut the cost of minting by 1/3 (only 200 coins instead of 300).

Go for it!
Mar 10, 2011 8:07AM
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It always amazes me on this topic when stated, Citizens prefer paper bills.  If it will save Billions, simple, mint coins & not print bills.  I lived in Spain for several years, they have 1 and 2 Euro coins, worked great.  By the way, if the dollar sinks much further, the dollar will be as a quarter and you won't need to carry as much coins anyway.
Mar 9, 2011 10:27PM
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I've spent a lot of time in Canada, Australia and Europe. The transition is easy but I always feel like a walking cash register! Go for it, it's not as bad as it may seem.
Mar 10, 2011 11:53AM
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For a savings of $522 mil per year...  just to change to a coin, is fiscally responsible to do regardless of whether the public prefers the dollar or not...  Those in other countries have figured it out, why can't we.  Lets take it a little further...  $5 coins can be circulated as they are in the EU.  They should include that  as well...  Could that possibly double the savings?  Come on people, although small in comparison to all other debt we take on, this just makes good sence!!!
Mar 10, 2011 12:04AM
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Get with the program....most countries haven't had small denomination bills in years!
Mar 10, 2011 9:54AM
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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.

Mar 9, 2011 11:22PM
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It would be nice to see a dollar coin. BUT design a new one like the old Trade Dollar - Even the Eisenhower dollar was better than the last couple of designs. In fact, the Trade Dollar would be great to bring back.
Mar 10, 2011 9:28AM
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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.

 

 

Mar 9, 2011 10:40PM
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Being that I work in retail and go to the bank a few times a week to get $400 in ones, I would really not appreciate having to carry $400 in coins.  The real question is how much will our government spend trying to determine if changing to $1 coins is a good decision.  My guess would be millions of dollars to research the idea and determine if it is a good one.  Guess that would cut down on our savings, huh!
Mar 10, 2011 2:31PM
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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?    

Mar 10, 2011 4:12PM
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"We don't like having a lot of coins in our pockets! they're heavy and we don't like the jingle!"

 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.
Mar 15, 2011 6:30PM
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SO... IF THIS HAPPENS... WHAT THE HELL ARE YOU GONNA DO AT THE STRIP CLUB?

THROWING $1 COINS WILL CAUSE SOME SERIOUS INJURIES TO THE STRIPPERS... LMAO!
Mar 10, 2011 3:38PM
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In Brazil, plastic money bill with watermark, more durable over 30 years, possible fabrication with recycled material, more economical and preserves for the pocket and good for the environment.
Mar 10, 2011 3:39AM
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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.

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