To Make Sense of the Coins Act, Follow the Money

The American people might be surprised to learn that for the past 20 years a handful of lobbyists and lawmakers—mostly from states with mining and metal-processing interests—have been pushing a proposal to take away dollar bills, and force the public to use metal coins instead.

The most recent attempt is the Currency Optimization, Innovation and National Savings (Coins) Act, sponsored by Sen. Tom Harkin (D., Iowa). This proposed law would prohibit the issuance of dollar bills after five years and replace them with dollar coins. The otherwise obscure piece of legislation was recently catapulted into the spotlight when Coins Act co-sponsor, Sen. John McCain (R., Ariz.) made the somewhat dubious claim that switching to a dollar coin would mean higher-denomination tips for strippers.

The more serious Coins Act proponents have seized on the continuing budget battle in Congress, arguing that the legislation would save billions supposedly being wasted on the replacement of worn-out dollar bills. They've latched on to a 2011 Government Accountability Office study that projects a multibillion-dollar "net benefit" from the switch to dollar coins.

If you buy the GAO's analysis, which is based on questionable assumptions, you might conclude that switching to a dollar coin would improve the federal government's bottom line. But for all the GAO's calculations, the report's findings are negated by its admission that the public is unlikely to accept the change unless they are literally given no choice—which, of course, is precisely the point of the Coins Act.

Read Full Article