Why the dollar bill’s days may be numbered

Would you be less likely to spend a dollar if it were a coin instead of a bill?

The Government Accountability Office is counting on it.

According to a November report on the benefits of permanently replacing the $1 bill with a $1 coin, the GAO estimated the government could save up to $4.4 billion over 30 years because of consumers’ habit of reaching for their wallets instead of into their pockets.

“What we found is that people use coins differently,” said Lorelei St. James of the GAO. “You’re more likely to have dollar coins and hold those … those are going to go into your coin jar. With dollar bills you typically don’t do that.”

It costs about 5 1/2 cents to make a $1 bill and about 18 cents to produce a $1 coin, according to the Federal Reserve and the U.S. Mint.

So where are the savings?

Frankly, in your coin jar, on top of your desk and in between your couch cushions. The GAO estimates the government would have to produce 1 1/2 coins for every $1 bill it wants to replace to keep up with the normal flow of business transactions.

The savings comes through seigniorage -- a clunky government term that means that while it costs the government 18 cents to make that dollar coin, it sells it to the consumer for $1, resulting in a profit. Without that precious seigniorage, converting to coins would actually result in a $1.8 billion loss over 30 years, the GAO said.

Shawn Sneallie, executive director of the Dollar Coin Alliance, said that even if consumers spend the coins just like their paper cousins, the government saves money because coins last up to 30 years while bills are replaced every three to five.

“Your upfront costs are just so much cheaper, I think any way you slice it, it’s a no-brainer,” Sneallie said.

Australia, Canada, France, Japan and Britain are just a few of the many countries that have permanently coined their small denominations.

“No governments are going back to paper dollars,” Sneallie said. “We’re the last man standing.”

The GAO concluded that people are loath to embrace the idea of switching to coins until they hear about the savings. And seven previous attempts by the GAO to bring about a conversion haven’t done the job.

So don’t go trading in your dollar bills just yet. Some folks are just opposed to change.

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