Getting rid of the dollar bill is a bad idea
Members of Congress, government waste watchdogs and a lot of others I admire have called on the United States to replace its dollar bill with a dollar coin. Advocates claim the new coin will produce $13.8 billion in savings over 30 years, particularly if paper banknotes are phased out at the same time.
It all sounds fantastic. But the reality is different: the United States has had three different dollar coin efforts in the past three decades — the Susan B. Anthony Dollar, the Sacagawea dollar and a series of dollar coins honoring each president — and all have failed. The most recent effort, the presidential coin ploy, currently has $1.4 billion in excess inventory that nobody wants. A fourth effort at a dollar coin will run into the same problems for at least six reasons.
1) Nobody wants it: Studies from the Government Accountability Office and independent polling firms show that Americans reject the dollar coin by an overwhelming margin. Although I — like most Americans — use credit/debit cards for the overwhelming bulk of purchases, I tend to carry cash when I want to save weight. The change (in singles) I got for a latte I purchased this morning on a bicycle ride weighs a fraction of an once in the United States but would weigh over a quarter pound if denominated in the United Kingdom’s coinage.
2) It won’t actually save money anyway: The cost of minting more coins in the short run means that the proposal will actually increase the deficit when it first goes into force. The supposed savings come only after four years. Previous dollar coins haven’t saved money. Why will this one?
3) The United States doesn’t have many vending machines: One country that has made heavy use of large denomination coins, Japan, has vastly more and more varied vending machines than does the United States. Thus, the coins are more useful in Japan. While there isn’t a night-and-day difference between vending machines in the United States and in much of Europe, we do seem to have fewer. Busy London underground platforms almost all have candy vending machines, for example, while there are no such machines in New York or Washington, D.C.
4) U.S. vending machines already take paper currency: There’s a chicken-and-egg problem: U.S. vending machines that do exist almost all accept dollar bills. Some take $5 bills and credit cards too. I can’t personally recall ever seeing a non-U.S. vending machine that took paper currency. Thus, a dollar coin doesn’t even appear to save money for the vending machine industry.
5) Credit cards: Although residents of some other countries (Canada, France) do make greater use of credit cards than the United States, Americans use less cash money than most Europeans. A large denomination coin is more useful in the Eurozone than it is the United States. Japan’s antiquated banking system (many ATMs aren’t 24 hours), likewise, makes carrying cash more useful there than it is in the United States.
6) Tradition: Americans are stubborn about government efforts to change long-established habits. Despite decades of prodding, hardly anybody wants to abandon the imperial system of weights and measures. This is a good thing, since the system is actually better than the metric (or SI) one for day-to-day things like cooking, building and measuring outside temperatures. A dollar coin will likely face the same broad, understandable cultural resistance and for much the same reason: paper money is better than coins for many purposes.
The idea of a dollar coin is a loser in the United States. There are plenty of ways Congress can act to save money. Making Americans give up the greenback shouldn’t be one of them.
