WASHINGTON — The U.S. Government Accountability Office (GAO) stands by its position that replacing the $1 bill with a $1 coin would provide hundreds of millions of dollars in benefits to the government annually.
Lorelei St. James, the GAO’s director for physical infrastructure issues, testified last week before the House Financial Services Subcommittee on Domestic Monetary Policy and summarized the GAO’s latest findings on benefits of making the switch.
Since coins are more durable than notes and don’t need to be replaced as often, many countries have replaced lower-denomination notes with coins to obtain a financial benefit, among other reasons.
The overall net benefit would be due solely to increased seigniorage—the difference between the cost of producing coins or notes and their face value—and not to reduced production costs.
GAO’s estimate takes into account processing and production changes that occurred in 2011, including the Federal Reserve’s use of new equipment to determine the quality and authenticity of notes, which has increased the expected life of a note (the $1 note is expected to last 4.7 years and the $1 coin 30 years).
The GAO acknowledges there would be shorter- and longer-term costs that would result from the replacement.
Shorter-term costs would be those involved in adapting to the transition, such as modifying vending machines, cash-register drawers, and night-depository equipment to accept $1 coins. Such costs would also include the need to buy or adapt coin-counting and coin-wrapping machines.
Longer-term costs may include transportation and storage costs for the heavier, more voluminous coins, and processing costs.
While the GAO recommends making the change—it has reported the benefits on six different occasions over the past 22 years—results from national surveys suggest that public opposition to eliminating the $1 note persists.