More than 10 years ago, I worked with Republicans and Democrats alike to enact the United States $1 Coin Act, launching a beautiful, easily recognizable, golden dollar coin.
Todayís conventional wisdom is that the dollar coin was a failure, but it certainly wasnít at the time. Public demand for the coin was so strong that the Mint had to produce more Sacagawea dollars in its first year ó 1.3 billion ó than it did in the entire 20-year history of Susan B. Anthony dollars ó 1 billion.
With all the recent press, and the Obama administrationís decision late last year to halt dollar coin production, you might think many of those Sacagawea dollars gathered dust in Federal Reserve Bank vaults. However, by December 2002, almost 1.5 billion had been issued by the Mint while only 183 million remained in Fed vaults. But demand for the new dollar coin ultimately flagged because of resistance from the Federal Reserve and opposition elsewhere in government.
Even before the Susan B. Anthony coin was issued in 1979, the Treasury and the Federal Reserve knew that the dollar coin was unlikely to circulate broadly unless the dollar bill was eliminated at the same time. Three decades of bipartisan failure to take this simple action is why, today, dollar coins are not reaching consumers.
The benefits of the dollar coin are well-known and hardly debatable. Put simply, switching to a coin saves the country money. The nonpartisan Government Accountability Office has studied this issue six times during the past 20 years, and each time has concluded that the government can save billions by replacing the dollar bill with a dollar coin. In 2011, it estimated that terminating the dollar bill could save taxpayers $184 million annually, or $5.5 billion over 30 years. Previous GAO studies put the savings as high as a half-billion dollars per year. Figures like this make the administrationís estimated $50 million in annual savings look rather puny.
As the dollar has devalued over time (itís worth today about what a quarter was worth in the 1970s), it makes less and less sense to produce a paper version which circulates for a couple of years as opposed to a coin version which lasts for 30 years or more. Nearly every other country in the world made this simple transition decades ago without so much as a ripple of effect on businesses or consumers.
The cost savings are proven. According to reports from the Canadian government, when our neighbors to the north moved to the $1 coin, commonly called a loonie, 24 years ago, the country saved at a rate 10 times initial government projections. The private sector wins, too. According to data from the American Public Transportation Association, dollar coins are six times cheaper to process than dollar bills.
When we were planning the Sacagawea launch in 2000, we talked to the banks and the Federal Reserve in an attempt to coordinate the logistics of distributing the new coin. They confronted us with a conundrum. They would only order the Sacagawea dollar after we had proved there was demand for it, a difficult feat considering the coin couldnít get into the marketplace without them ordering it.
We resolved this issue by bypassing the Fed and the banks and shipping the coins directly to Walmart stores nationwide. In just a few weeks, Walmart distributed 100 million Sacagawea dollars as change in routine retail transactions, demonstrating that Americans welcomed the new coin.
This debunks another piece of conventional wisdom ó that Americans are opposed to eliminating the dollar bill. In fact, opinion polls consistently show that, when informed of the savings of substituting a dollar coin for the dollar bill, two-thirds of Americans support making the switch.
Unfortunately, the dollar coin faces significant obstacles to success, including the Federal Reserveís clear preference for the dollar bill. I discovered this for myself when the Mint launched the Sacagawea dollar in 2000. The Fed is the channel through which the Mint distributes coins to banks and ultimately businesses and consumers. If the Fed doesnít order a coin, it doesnít go out the Mintís doors.
The deck would appear to be stacked against the dollar coin.
Itís clear that the dollar coin is unlikely to overcome these obstacles unless Congress eliminates the dollar bill. In these difficult economic times, itís a rare opportunity for the country to save money without raising taxes or cutting programs. Now is the time for Congress to act and finish the job.
Philip N. Diehl was director of the U.S. Mint from 1994 to 2000.
Senate Minority Leader Mitch McConnell, R-Ky., carries a musket on stage as he speaks during the American Conservative Union's Conservative Political Action Conference (CPAC) at National Harbor, Md., on Thursday March 6, 2014.