The Buck Stops Here: $1 Coins to Be Curtailed

No one wants $1 coins because it is no longer a store of value in the U.S. or worldwide. Modern $1 coins are a sad reminder that the US fiat/paper dollar has fallen to just 1.3 cents of original value compared to gold "dollar" and 3.3 cents compared to silver "dollar".

By JEFFREY SPARSHOTT
DECEMBER 14, 2011
Wall Street Journal

WASHINGTON—The U.S. government, its vaults stuffed with 1.4 billion one-dollar coins bearing the likenesses of dead presidents, has had enough of them. It is going to curtail production.

"Nobody wants them," Vice President Joe Biden said Tuesday. That is for sure: The Mint says there are enough $1 coins sitting in Federal Reserve vaults to meet demand for a decade, and the inventory was on track to hit two billion by 2016.

More than 40% of the coins that are minted are returned to the government unwanted, the Treasury said. The rest apparently sit in vending machines—one of the few places they are widely used—or in the drawers of coin collectors.

What the coins don't do is get around much. In fact, the Mint has never had much luck with dollar coins. The Susan B. Anthony dollar (1979-1981, revived for one year in 1999) never caught on; some people said it was too close in size to the quarter. Neither did the Sacagawea Golden Dollars (2000-2008) or its successor, the Native American $1 Coin, which has the same front but a different back.

But that didn't discourage Congress. In 2005, it mandated that the Mint make $1 coins with the likenesses of the presidents, four each year between 2007 to 2016. So far, the Mint is up to James Garfield, the 20th president. Next up: Chester A. Arthur.

"And as it will shock you all, the call for Chester A. Arthur coins is not there," Mr. Biden said at a Cabinet-level meeting of a White House campaign to cut government waste.

Arthur fans needn't fret. The Mint will keep producing the presidential $1 coins on schedule, but will only make enough to meet collector demand and no longer attempt to circulate them. By law, 20% of all dollar coins produced have to be Native American coins, so production of them will be reduced too.

The move, the Treasury said, will save taxpayers $50 million a year—or about 15 minutes worth of the federal deficit.

The decision is a milestone of sorts in a long-running battle between those who think it is wasteful to keep printing dollar bills that wear out and have to be replaced frequently, and those who hate the $1 coin and see it as the real waste of money because Americans don't like them.

Peter Calabrese, a Roman Catholic priest who lives near Niagara Falls, N.Y., close to the Canadian border, is in the latter camp. He noted that Canada phased out its dollar bill when it introduced the $1 "loonie" coin in 1987. "You get used to it," Father Calabrese said.

Other countries, such as the United Kingdom, also phased out small-denomination paper bills when replacing them with coins.

Amid debates over taxes, health care and wars, the dollar-bill and dollar-coin camps have been waging war in Washington for years. A band of House Republicans is backing the Currency Optimization, Innovation and National Savings (COINS) Act that would eliminate the dollar bill.

The two senators from Massachusetts, Republican Scott Brown and Democrat John Kerrey, countered with the Currency Efficiency Act, which aimed at curtailing what they said was "massive overproduction" of "the unpopular one dollar coin."

Perhaps not so coincidentally, the company that makes the paper for the U.S. currency, Crane & Co., is based in Dalton, Mass. "There is more convenience in the form factor for the paper dollar and people are quite attached to how well it works," said Doug Crane, vice president of the company. "Coins tend to be a nuisance. They end up in jars or seat cushions."

Americans also appear to be sentimental about their currency. Efforts to eliminate the penny because of the costs of producing it, or its limited utility, have gone nowhere, and the Mint says it is committed to producing the one-cent pieces.

Tuesday's move by the Obama administration incensed those who have been promoting use of the dollar coin.

"This makes zero sense other than getting a cute little headline," said Tom Schatz, president of Citizens Against Government Waste. The anti-waste group is among several members of what is called the Dollar Coin Alliance, which includes the vending machine trade association and the steelworkers union.

The other side cheered, though. "These coins are a textbook case of wasteful spending—something Americans just don't want or need," said Sen. David Vitter, Republican of Louisiana, who has introduced a bill to kill the presidential $1 coin program.

Write to Jeffrey Sparshott at jeffrey.sparshott@dowjones.com

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