When we learned that a new proposal to discontinue production of $1 banknotes in favor of dollar coins has been introduced, our first reaction was that this train has left the station. The measure, Senate bill, S.759, was introduced by Sens. John McCain (R-AZ) and Mike Enzi (R-WY) as the Currency Optimization, Innovation and National Savings (COINS) act. It includes some noteworthy provisions that would spur circulation of the $1 coin. This seemed to us like water over the dam.
But on second thought, we recognized that the failure to have done something in the past has no bearing on whether it should be done now. The United States is the only "first-world" nation to circulate a low-denomination banknote; it's inconvenient, inefficient and expensive. Replacing it with a coin is a good idea, whenever it's done.
The change would be beneficial to this industry, even now. It obviously would have a very positive effect on bulk vending, and we believe that large numbers of candy and snack machines (at least) in good small to midsize locations would see increased traffic if people were carrying around $1 coins. The argument that the world is moving away from currency as the younger generation votes with its wallets for cashless payment systems is true in general. But there still are many people who are not millennials, and many situations in which a coin is the simplest and fastest way to pay.
Older readers will recall that an attempt to replace the $1 bill with a coin was made during the Carter administration, and that a campaign to restart the process gave us the Sacagawea "golden" dollar of 2002. Neither design found wide favor.
Experience in other countries has shown that widely shared habits of long standing are difficult to change: if a familiar banknote is joined by a new coin of the same denomination, that coin will not circulate.
With that in mind, the Coin Coalition led by the late James Benfield supported legislation to end production of the $1 note. S.759 would halt production of the $1 bill but not demonetize it; the notes could circulate freely as long as they lasted, and the Federal Reserve would withdraw damaged ones from circulation as it does now, and not replace them.
The Coin Coalition also proposed to eliminate the penny, a coin that is widely perceived as having outlived its usefulness. The COINS act declares that there probably are enough 1¢ coins in the public's hands to meet present needs, and so directs the Treasury Department to stop minting new ones. Pennies would continue to circulate -- or not -- as they do now. The measure provides for a follow-up study to determine whether new pennies are needed.
And it calls for adopting the Mint's recommendation for updating the 5¢ coin. This still is a useful denomination, but it costs more to produce than its face value (as also does the penny). The Mint has recommended changing the proportion of copper to nickel in the alloy to 80% copper and 20% nickel, and the proposed COINS Act calls for that recommendation to be adopted if the director of the Mint verifies that the change would reduce costs to the taxpayer -- and would have no impact on the public or stakeholders.
Legislation of this sort has been proposed for quite a while now, which either suggests that it has little chance of passage or that its time may have come at last. We shall have to wait and see. In the meanwhile, we might reflect on the unseen costs to the vending industry of the lack of a circulating $1 coin over the past four decades.
We think those costs have been substantial, perhaps incalculable. The advent of practical in-machine bill validators in the early 1980s gave vending a much-needed tool for addressing product-cost inflation, but machines in lower-volume stops did not warrant the extra expense of the new technology. Those machines reinforced the belief in a "$1 price ceiling" that necessarily limited vending to lower-priced merchandise. New consumers entering the market had not grown up in a period of stable prices, but had learned to look for the value they desired and pay the required price. As the old blue-collar industrial market contracted, new premium snack products were introduced to address a growing quality-oriented audience. Vendors, engaged in upgrading to the automated capture, retrieval and use of sales data, had enough on their plates without adding upmarket pricing tiers in high-traffic sites. There always have been a few vendors who have seen the value in a broader spectrum of products, and have fought hard to get them into the vending channel. Those efforts have begun to bear fruit, but it has been a long struggle.
While that situation prevailed, many of the retail market-oriented features made possible by the sophisticated controller boards of new vending equipment went unused. When micromarkets were introduced, those new features came with them, and operators have hailed them as a revelation. We hope they'll revisit those features on their vending machines.
A circulating dollar coin in the context of reduced costs of government still would be a valuable advance, and we think it deserves our support.