Economist John Caskey Evaluates Push to Switch from Paper Dollar Bills to Coins
The Olympian: Small Change? Lawmakers Push Dollar Coins Over Bills
WASHINGTON - If certain lawmakers have their way, soon there will be fewer dollar bills in your wallet and more coins in your pocket. After years of talk, dollar-coin supporters and some economists say the time has come to replace the $1 bill with a copper coin.
Among those backing the introduction of a dollar coin are Sen. Tom Harkin, D-Iowa, and Rep. David Schweikert, R-Ariz., both of whom introduced bills in Congress earlier this year to improve the circulation of the dollar coin through education efforts and the collection of obsolete coins. Arizona and Iowa would benefit from the fiscal injection brought about by copper-coin production.
To supporters of the dollar coin, the concern over the economy will make any cost-cutting strategies - such as the switch to the dollar coin - more appealing, said John Caskey, a professor of economics at Swarthmore College.
"The people who back this look and say the United States has a budget problem, so if we're ever going to get traction on this issue, then let's do it now," he said. ...
The Government Accountability Office, Congress' investigative arm, estimated last year that taxpayers would save $5.5 billion over 30 years by making the change to a dollar coin. The dollar coin costs 15 cents to produce and lasts 30 years; the dollar bill costs about 3 cents to produce and lasts 4.7 years, the GAO's Lorelei St. James said. Given the nation's $16 trillion budget deficit, the dollar coin is a "smart investment for our country," Harkin said.
Even so, Caskey said the estimated savings were too small to have any real impact on the deficit in the long term. ...
To some, the transition is unavoidable. "In my view this is something that inevitably will happen," said Jim Kolbe, a former Republican congressman from Arizona who's the honorary chairman of the Dollar Coin Alliance. Even so, the legislation has made little progress in this election year. The bills await committee hearings.
But is it all too little, too late? As Caskey pointed out, consumers are starting to use credit cards more often. He added that the public won't want to make the change to coins without being told of the savings the U.S. economy would gain. The only way to make it happen is to take dollar bills out of circulation, Caskey and Kolbe said.
"You've got to force people to make the transition," Caskey said.
That's what countries such as Canada and the United Kingdom did when they made the transition, and Harkin said that's what the U.S. should do if it were serious about changing to coins.
"If you look at other modern economies around the world that have phased out some paper bills, you see that people quickly adjusted to the switch," he said.
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Professor of Economics John Caskey is an expert on consumer finance and banking. He has specialized on pawnshops, check-cashing operations, payday lending and financial firms that primarily serve lower-income people.