The Government Accountability Office (GAO) says the U.S. government could realize 4.4 billion benefit over 30 years simply by replacing $1 paper bills with $1 coins, like the ones Americans have been refusing to use for over 30 years.
Since 1979, the U.S. mint has produced 3 versions of dollar coins, only one of which -- the 2013 Native American $1 coin -- is still being minted for circulation today.
When the Mint halted production of the presidential $1 coins in 2011, Vice President Joe Biden summed up the past and probable future of $1 coins, correctly stating, "Nobody wants to use them."
But all of those dollar coins were issued in addition to paper dollar bills. Carrying and spending the dollar coins was optional. The GAO's proposal would change that.
The GAO report, Benefits and Considerations for Replacing the $1 Note with a $1 Coin, bases the estimated $4.4 billion benefit to the government on replacing, rather than supplementing, the paper dollar bill with $1 coins. That's right. No more U.S. $1 bills.
It's All About Seigniorage: Rather than reduced production costs, GAO based the estimated benefit of replacing paper dollars with dollar coins on "seigniorage," the difference between printing paper notes or minting metal coins and their face value. Seigniorage reduces government borrowing and interest costs, resulting in a financial benefit to the government.
The GAO estimate also takes into account the fact that in 2011, the Federal Reserve banks began using new scanning equipment to determine the quality and authenticity of paper money, which has increased the life expectancy of paper bills thus reducing the cost of circulating them.
The $1 paper bills is now expected to last 4.7 years, compared to 30 years for $1 coins.
Also See: How to Replace Mutilated Money
Businesses, especially the vending machine industry, have long opposed the replacement of the $1 notes with a $1 coins due to the increased costs involved in modifying equipment to process, store and transport $1 coins.
It's Up to Us: Businesses aside, as the GAO points out, for replacement of the dollar bill by dollar coins to be successful, the American people must accept and circulate $1 coins. One reason that has not happened over the last 30 years, says the GAO, is that so far, the people have been given a choice in the matter.
"Efforts to increase the circulation and public acceptance of the $1 coins have not succeeded, in part, because the $1 note has remained in circulation," stated the GAO report.
As it has since 1995, the GAO recommended that Congress act to completely replace the paper U.S. dollar bill with a $1 coin. "GAO continues to believe that replacing the $1 note with a coin is likely to provide a financial benefit to the federal government if the note is eliminated and negative public reaction is effectively managed through stakeholder outreach and public education," said the GAO.