GAO: Long-term savings, short-term hurdle in dollar coin switch

Monday - 2/20/2012, 6:19pm EST

Lorelai St. James, director of physical infrastructure issues, GAO

Download mp3

The federal government could save $4.4 billion dollars over the next three decades by phasing out the $1 bill with a $1 coin, according to a new Government Accountability Office report.

But while the transition would spell savings over the long haul, the effort to ramp up initial production of the coins would actually result in a net loss of about $531 million over the first 10 years of production.

Lorelei St James, the director of physical infrastructure issues at the Government Accountability Office, joined In Depth with Francis Rose to discuss GAO's review of the bill vs. the coin.

GAO's latest report is an update to a March 2011 review. The watchdog agency's report hinges on the arcane formula of "seigniorage," the difference between the cost of producing currency and its face value.

Sen. Scott Brown (R-Mass.), the ranking member of a Senate subcommittee on federal financial management, requested the latest examination. However, he did not appear to be convinced by the report's evidence of cost-savings.

"This report is crystal clear about one thing: the unwieldy dollar coin is more expensive than the popular dollar bill, even over the long run," he said. "The dollar bill will continue to be the more cost-effective currency to produce and use."

Brown noted the long length of time it would take to recoup costs as well as the need to replace bills on a 1.5 to 1 basis.

The reason GAO used a 30-year time frame to measure savings because that is about the lifecycle of coin currency, St. James said.

GAO didn't present a formal recommendation in either of the two reports. "But we stand by the feeling that there is a benefit over time if you do replace a $1 note with a $1 coin," St. James added.

RELATED STORIES

GAO says switch to dollar coins could save $5.5 billion

White House cuts production of presidential coins