The $1 bill has been a part of U.S. currency since the Lincoln administration in 1862. It has survived countless attempts by Congress to replace it. And it has the sentiment of many U.S. consumers on its side.
But its time may be coming on Capitol Hill, where a group of congressmen led by Sen. Tom Harkin (D-Iowa) are increasingly optimistic that a bill replacing the $1 bill with a dollar coin could pass the House and Senate by year's end.
The reason: Savings. With Congress in a cost-cutting mood, and the Bush administration's tax cuts set to expire, negotiators will be looking for revenue.
Six times between 1990 and 2011, the Government Accountability Office has studied the idea and concluded that it would save hundreds of millions of dollars a year. The latest estimate: Up to $500 million. That's because the GAO considers the $1 coin simply cheaper to produce and longer-lasting. Most dollar bills now in circulation are less than three years old, while a $1 coin supposedly lasts 30 years.
"It's always the same recommendation - hundreds of millions in savings," says Harkin, who has been pushing the idea since 1990. "I think it's been difficult because of people's resistance to change. But if you actually phase out the dollar bill, people will get used to it."
In January, Harkin introduced a bill that would phase out the dollar bill over a four-year period and replace it with a coin. The legislation is bipartisan - 2008 GOP presidential nominee John McCain of Arizona is a co-sponsor - and it has a companion bill in the House by Rep. David Schweikert of Arizona, also a Republican. Currently, the legislation is sitting in the Senate Banking Committee and the House Subcommittee on Domestic Monetary Policy.
But the idea has lobbying clout behind it in Washington -- the Dollar Coin Alliance, a coalition of business groups, mass transit agencies and advocacy groups. Alliance officials tout the potential savings of the idea but acknowledge that resistance to change has historically doomed the idea among U.S. consumers.
Jim Kolbe, a former congressman from Arizona, is honorary chairman of the group.
"Americans generally are very loathe to change their currency," Kolbe said. "But eventually, retailers, consumers and everybody else will be very happy with a dollar coin. Every country that's made such a change has found it easier. No question about it."
Economists are mixed about the idea and its potential effect on the economy. Nigel Gault, chief U.S. economist at HIS Global Insight, said consumers may be reluctant at first - but he also noted that Britain recently started issuing its one- and two-pound notes as coins.
"The public there accepted it, actually," Gault said. "The big question is whether people here will accept it."
Gus Faucher, a senior economist at PNC Financial Services Group, doesn't see such a change having any affect on consumer behavior.
"It's difficult to see why people would spend more or less," he said. "But certainly I think people would adjust to (the change)."
Officials at the Dollar Coin Alliance are quick to point out that according to the GAO, countries such as Britain and Canada have already made similar changes and discovered much more savings than were originally expected. The DCA also notes that Britain, Canada, Australia, Japan, Switzerland and England now all have coins with higher exchange values than one U.S. dollar.
Kolbe said he agrees with Harkin that as partisan squabbles continue on Capitol Hill over federal spending, the savings from a dollar coin change could become appealing enough to Congress as soon as later this year.
"It's the reason it's coming to the floor," Kolbe said. "Everyone's looking for savings."
by RTT Staff Writer
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