A Dumb Idea


by: Dr. Lynn Reaser

bill_vs_coinAs Congress and the President struggle to find ways to reduce the deficit, the General Accounting Office (GAO) has proposed that replacing paper dollar bills with coins would save the government $4.4 billion over thirty years.  While an average savings of $147 million is tiny relative to budget deficits that have been running $1.0 trillion or more annually, perhaps any savings should be investigated.

Unfortunately, this idea should be rejected quickly.  Consumers and businesses have shunned the dollar coin in the past.  Currently, 1.4 billion of them are stored in Federal Reserve Bank vaults, which is enough to satisfy commercial demands for the next 40 years.

Dollar coins are more expensive to produce than dollar bills, with each costing less than $1.00.  The alleged “savings” accrue because the government would book as a “profit” the difference between the face value of the current dollar bill and the coin’s production cost.  This is a curious way to book budget savings.  A better way to reduce costs would be to encourage the growth of electronic exchange.

Bill vs. Coin. 2012. Picking PodcastsWeb. 29 Jan 2013.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s