A failure to account properly can lead a business to fail. Our government’s failure to count properly is costing taxpayers billions. The federal budget is one area where our counting system has gotten way off track. There are simple policy solutions — such as replacing the dollar bill with the dollar coin — that could make government work better and more efficiently, but outdated one-size-fits-all rules are masking the true, long-term savings of the switch to the dollar coin.
Coins last far longer than paper bills, and are recyclable at the end of their lifetime, unlike bills that must be shredded and put in landfills. Low denomination coins are cheaper for businesses to process (think of the automated change machines at some restaurants). The non-partisan Government Accountability Office has studied the dollar note vs. dollar coin question nine times over the past 20 years and every time has concluded that switching to the dollar coin saves taxpayers billions. Every other major industrialized nation — Canada, England, the European Union, Japan, Switzerland and others — have made a similar switch. So why haven’t we? It is based in our lack of fiscal accountability.
First, Congress has been using a fixed time-window of 10 years to account for costs and benefits of all policies. While 10 years may make sense for some policies, a one-size-fits-all approach clearly skews data. When the GAO and others study the coin vs. the note, the analysis is based a 30-year time window as that better maps to the average life-span of a dollar coin (a note lasts anywhere from two years to five years, on average). Using only a 10 year time window will mislead you from potential savings.
Second, the Congressional Budget Office simply doesn’t count the profit of printing and minting currency, often called seigniorage. This is not the CBO’s fault. Rather, the Budget Act of 1974, which established the CBO, directly prohibited it from counting changes in seigniorage as affecting the budget. Of course savings from seigniorage directly affects the budget, as the more the government saves the less it has to borrow, despite the CBO’s blinders to that reality. The result of this quirk is that new ideas which save taxpayers real money are not counted as savings, and budgeting gimmicks that push outlays beyond the 10 year window are not counted as costs.
Finally, there are a host of other benefits that CBO doesn’t account for at all; 15.2 million tons of shredded dollar bills are put in a landfill each year, but that is not counted. The savings to businesses from more efficient operations, estimated at more than $100 million a year, are never acknowledged. Taken together, the real economy could see large effects from making this switch — more than $13 billion in savings to the government and billions more in savings to the private economy. But when it comes time for Congress to officially count these savings, they will likely come up with a number far, far lower, because the CBO is restricted from looking at the full budgetary impact of legislation based on anticipated legislation.
Failure to complete these minor actions lead to a potential for major consequences. The effect of failing to count and account properly is that good ideas, like switching to a dollar coin, just don’t happen. The real cost is that taxpayers end up with higher taxes, the federal deficits grows higher and worthwhile programs are cut to find countable savings.
There is opportunity for this cycle of inconsistency and irresponsible spending to be broken with the new Congress. There is opportunity for bipartisan initiatives to lead to savings in the new year. Congress will have in its power to change the rules of the road and better align budgetary scoring with reality. Common-sense savings are something that everyone can agree on.
Tim Penny is former Democratic Representative from Minnesota. He is honorary co-chairman of the Dollar Coin Alliance, and a member of the Board of Directors of the Concord Coalition and the Committee for a Responsible Federal Budget.