Federal COINS Act could remove $1 paper bill

Legislation introduced earlier this month in the U.S. Senate could make your pocket jingle with more change and save taxpayers big bucks.

S. 1105, better known as the Currency Optimization, Innovation, and National Savings (COINS) Act, would transition the $1 bill out of circulation and replace it with a $1 coin.

While the cost of production would initially be higher, the Government Accountability Office (GAO) said in 2011 that savings would start adding up quickly.

"According to GAO's analysis, replacing the $1 note with a $1 coin could save the government approximately $5.5 billion over 30 years," the study read. "This would amount to an average yearly discounted net benefit – that is, the present value of future net benefits – of about $184 million."

It is for that reason that Tim Yeager, Arkansas Bankers Association Chair at the University of Arkansas, said the idea made a lot of sense to him.

"We should have done it many years ago," he said. "The main thing is this – coins, even though they are more expensive to produce, can last an average of 20 to 30 years, where paper currency lasts 18 months. You have to continually produce this paper currency and coin is much more durable."

Yeager, who previously served as the former assistant vice president over bank risk analysis at the Federal Reserve Bank of St. Louis, said the issue of moving from a $1 bill to a $1 coin comes down to long term inflation.

"If you look at the consumer price index and go back to 1947 and you compare that to today's prices, today's dollar is worth a dime (of) 1947 purchasing power. So you can buy for a dollar (today) the same thing you would have purchased for a dime in 1947."

It's not just financial experts like Yeager who see this as a win-win for the American taxpayer. At least one local politician is pushing for the bill, as well.

U.S. Sen. Tom Coburn, R-Okla., is a co-sponsor of the COINS Act and said producing currency should not be a money-losing proposition.

"As GAO has said, a switch to the dollar coin would be cost-effective," he said in a press release

U.S. Sen. Mark Pryor, D-Ark., was less firm about a commitment, saying by e-mail that he would take the issue to constituents before making a decision.

"If this bill comes to the Senate floor, I’ll be talking with Arkansans about whether they’d rather have a wallet of $1 bills or a pocket full of $1 coins. Based on the limited circulation and use of these coins in the past, this could be a good opportunity to save taxpayer money."

U.S. Rep. Steve Womack, R-Rogers, said in an e-mail that there are a lot of hurdles for the $1 coin to overcome in order to achieve significant cost savings.

"I am always looking for ways to reduce spending and create efficiencies within the federal government. However – as GAO acknowledges – savings generated by switching to a $1 coin are dependent on several factors. This includes public acceptance, and I’ll be talking to my constituents about eliminating the $1 bill should the House consider similar legislation,” Womack said.

The fact that the $1 bill is still in existence is part of the reason why previous attempts to introduce the $1 coin have only been met with marginal success, according to Yeager.

"What's really absurd about this is we have several $1 coins already. … Several years ago, the Sacagawea Dollar came out and several other times we've put ($1 coins) out and we already have the coin out there. The problem is people won't use it because they are so used to the $1 bill, paper. They won't use it unless they take the dollar paper away. If you force it, there will be about a month of complaining, but then the people will get used to it."

Eliminating the bill from currency and introducing the coin is more logical for convenience, as well, according to Yeager. He cites the example of consumers having to un-wrinkle a bill from their pocket or wallet in order to make it work in a vending machine.

"The image of trying to un-wrinkle a dollar bill is unthinkable in today's technological world. It will make the world of inexpensive products more convenient for consumers."

The bill, which was introduced on June 6, still has a long way to go before passage in the Senate and moving on to the House, but Yeager is hoping the United States will catch up to other countries to eliminate small denomination notes, such as Canada, which eliminated the $1 and $2 bills in exchange for coins more than 20 years ago.

"What is the rationale for this not passing? It has to be fear of changing the dollar. But we've already changed it for protection against fraud. We've changed it over the years, so I don't get it at all. We should absolutely get rid of the paper dollar. It is a way past its time."