WASHINGTON -- The U.S. Government Accountability Office on Feb. 15 issued a new report that gave fresh ammunition to both supporters and opponents of $1 coins. The report increased the already-considerable confusion that surrounds this controversial issue.
The report, called "Alternative Scenarios Suggest Different Benefits and Losses from Replacing the $1 Note with a $1 Coin," is online here.
But the headline-grabbing part of the GAO's new report said that replacing dollar bills with dollar coins would cost taxpayers half a billion dollars over the short term (10 years). This expense would be incurred despite the fact that replacing banknotes with currency would save the government several billions in the long term (30 years and up).
Supporters of the $1 banknote highlighted GAO's finding that replacing the $1 note with a $1 coin would provide a net loss to the government of about $531 million in the first 10 years, or an average of about $53 million per year.
Coin supporters pointed to a section of the GAO's statement that confirmed that replacing the $1 note with a $1 coin would provide a net savings to the government of approximately $4.4 billion over 30 years, or an average of about $146 million a year.
Government officials said the revised cost-benefit estimate for switching to $1 coins differs from GAO's 2011 estimate because it considers recent efficiency improvements in note processing that have extended the expected life of the $1 note and other updated information.
The GAO report also said the long-term net benefit of switching to $1 coins was "due solely to increased seniorage." Seniorage is the spread between the cost of producing coins (a few cents) and their official value on the market (one dollar). Switching to $1 coins would not lead to a decline in actual production costs and outlays, said the GAO study.
Observers who follow currency issues said the GAO report triggered "nearly panicked opposition" from the U.S. Mint and the Federal Reserve.
Dollar coins and dollar bills are the subjects of competing legislation in Congress, as reported in recent months by VT. | SEE OUR LATEST STORY