The Golden Dollar

Hearings on
The United States $1 Coin Act of 1997, H.R. 2637
before the
Subcommittee on Domestic & International Monetary Policy
October 21, 1997


My name is James C. Benfield, and I am speaking on behalf of the Coin Coalition, a group of 29 trade associations and companies.

Ten years ago, Rep. Frank Annunzio was the chairman of the Consumer Affairs & Coinage Committee. When asked to support a new $1 coin, he told the Coin Coalition, "Come back when the government's supply of Susan B. Anthony coins is depleted." And that is part of the reason why all of us are here today -- the fear of making more Anthony dollars.

Mr. Chairman, we thank you and your committee for addressing the need for a $1 coin. We view your legislation as an important first step in modernizing America's legal tender system of money. We all have come to accept the extraordinary burden that the Susan B. Anthony failure has placed on the government. The American public simply is not willing to accept the notion of removing the paper $1 bill without first seeing what its replacement will look like. H.R. 2637 will give them that opportunity.

But we must be careful not to delude ourselves. No matter how beautiful this coin will be, it will not circulate in large numbers. Let me expand.

Most people get their cash from Automatic Teller Machines (ATMs) or a bank teller window -- usually $10 and $20 bills. These bills are then spent at grocery stores, chain restaurants, convenience and drug stores, for example. During these transactions, coins and $1 bills enter consumers' pockets and purses. Later on, the coins and $1 bills find their way into vending machines, transit fareboxes, parking meters, pay phones, and library copy machines.

The term "circulate" is a far more descriptive of how coins and notes move in the economy than one might realize. Large bills move in one circle -- from banks to consumers to retailers, then back to banks again. At the retail level, coins start at the bank, move to cash retailers, to consumers, to coin-operated machines, then back to the bank. Thus, if the store manager does not get $1 coins in the morning to make change, consumers will not receive them later that day.

And why should the retailer load his/her cash registers with both $1 coins and $1 bills? Two forms of the same denomination are confusing.

And handling both $1 bills and $1 coins is slower than handling just bills or just coins. By analogy, it is like asking Blockbusters to stock their stores with 1000 movies on VHS and the same 1000 movies on Beta. Perhaps that is why Blockbusters removed the choice and now stocks movies on just one format.

Not only does the $1 bill effectively block the use of the $1 coin, it also blocks the entry of the $2 bill because there is no slot for it in the cash drawer.

The General Accounting Office, former Mint Director Donna Pope, the current Mint director, and other experts also have stated publicly that a $1 coin will not circulate widely if the $1 bill remains in circulation.

Under the provisions of H.R. 2637, cash retailers eventually will face the prospect of handling four different forms of the $1 denomination: the Susan B. Anthony $1 coin, the new Statue of Liberty $1 coin, the traditional $1 Federal Reserve note, and, perhaps, a redesigned $1 bill that is consistent with the Treasury's redesign program for all currency.

This committee can help reduce confusion by amending H.R. 2637 to prohibit the Treasury Department from redesigning the current $1 bill. We would request two additional amendments that are described in our prepared statement.

On the subject of public opinion. The mantra of our opponents has been that the public strongly opposes replacing the $1 bill with a $1 coin. However, those polls have never asked the follow up question: "If the government saves money, would you support the change?"

Last May, the Coin Coalition sponsored such a poll, the results of which I have included in our testimony. Here is what we learned.

When told that the Federal Reserve and the GAO project savings of $456 million annually, in addition to large savings for mass transit, a majority supported the idea -- 58% to 36%.

Further, when this committee held a hearing on the Kolbe legislation in May of 1995, dozens of editorials were written on the subject. Over 80% of those editorials not only supported the $1 coin, but also called for the removal of the $1 bill. I have here 107 such editorials. Many of these editorials resulted from contacts made by our opponents. But when the editors studied the facts, logic prevailed.

I do not suggest that newspaper editorials equate to public opinion. I merely make the point that when reasonable people have the facts, they will support replacing the $1 bill with a $1 coin.

As Congress delays a final decision, the private sector will continue to build around the inconvenience of $1 bills, pennies, and the absence of a $1 coin. Subway farecards, gambling tokens, telephone cards, parking meter cards, toll both scanners, and other electronic payments will continue carve away at the $24 billion the government avoids in interest payments each year on the national debt.

While electronic cash is sometimes hailed as the third wave of technology in the history of money, electronic cash is nothing more than a return to the mid-19th century when the private sector controlled and issued most money.

For most purchases under the cost of $2, coins can complete the transaction at a lower cost than any other payment system: credit card, check, or stored value card. One dollar bills cannot.

It is in the interest of the government, the American taxpayer, and the consumer to keep legal tender efficient and competitive. Unless Congress takes the next step and eliminates the $1 bill, H.R. 2637 will do little to improve the efficiency of legal tender money.

Amendments to H.R. 2637

Sec. 2(d)(2) ... the Treasury shall continue to mint and issue SBAs ...

Add the following:

SECTION 3. Marketing Program.

Before placing into circulation $1 coins authorized under Section 2 of this Act, the Secretary of the Treasury shall adopt a marketing program to promote widespread use of such coins. The Secretary of the Treasury is authorized to spend an appropriate sum for the marketing program.

SECTION 4. Establishment of a Commission.

A Commission shall be established, which shall be composed of the Secretary of the Treasury, the Chairman of the Federal Reserve Board, and the Comptroller General. The Secretary of the Treasury shall be the Chairman of the Commission. The Commission shall review all aspects of the $1 coin authorized under Section 2 of this Act including the cost of minting the coin, the cost of printing $1 Federal Reserve notes, public acceptance of the newly issued coin, and other relevant factors.

No later than January 1, 2002, the Commission shall determine whether to replace the $1 Federal Reserve notes with $1 coins authorized under Section 2 of this Act. If the Commission determines that $1 Federal Reserve notes should be replaced with $1 coins, it shall order Federal Reserve banks to cease placing into circulation $1 Federal Reserve notes after December 31, 2003.

SECTION 5. -- Federal Reserve notes in the denomination of one dollar may not be redesigned.

* * * * * * * * * *

Note: We also are concerned that the Treasury Department could allow the inventory of Anthony $1 cons to become completely depleted before allowing the new Liberty dollars to circulate. Coin-operated industries will need to have these coins as early as possible to adjust coin validators to the new golden-colored alloy. We prefer the language of H.R. 1174 that says the Treasury must issue the new $1 coin "before" the Anthonys are depleted. We would hope the Treasury would interpret that to mean two or three months before, but the term "before" gives sufficient latitude to the Treasury.



Introduction and Summary


I. Government Savings - Federal.

II. Mass Transit Would Save $124 Million Annually.

III. Visually Impaired Support the $1 Coin.

IV. A $1 Coin Will Not Be Inflationary.

V. Today's Dollar is the Quarter of the 1960s.

VI. Seigniorage & Portfolio Earnings.

VII. Why the $1 Note Must Be Phased Out.

VIII. Phase-In Period of $1 coins.

IX. Industry preparedness.

X. Public Opinion.

XI. Effects on Production Levels at the Bureau of Engraving & Printing.

XII. Federal Reserve Notes: Production, Counterfeiting & Contamination issues.

XIII. Foreign Experience.

XIV. Gaming

XV. Summary Environmental Analysis: 10-Year Totals.

XVI. Weight in the Pocket.

XVII. Lessons Learned From the Anthony Dollar.

XVIII. Editorial Support.



Because the government supply of Susan B. Anthony $1 coins likely will be depleted before the end of 1999, the U.S. Mint must order materials in 1998 to make more Anthony coins -- unless Congress approves The United States $1 Coin Act of 1997, H.R. 2637, introduced by Rep. Michael N. Castle (R-DE) . Inventories fell of the Anthony dollar by 136.9 million in 1995 and 1996 and now stand at 133.2 million as of 9/30/97.

The Coin Coalition supports the phase out of the $1 bill, as called for in the Efficient Currency Act of 1997, H.R. 1174, as introduced by Reps. Jim Kolbe (R-AZ) and Esteban E. Torres (D-CA) and S. 1038 as introduced by Sens. Rod Grams (R-MN) and Carol Moseley-Braun (D-IL).

The Coalition represents a diverse group of transit authorities, coin-operated industries, the visually impaired, and other organizations.

A well-designed $1 coin would help reduce government spending, eliminate the need for costly mass transit fare-box conversions, and help hold down the cost of vending machine products. It also would remove various hidden costs of the $1 bill and numerous inconveniences from modern life.

With $1 coins, we could more easily make a long-distance call on a pay phone, buy a Sunday paper from a street box, use a coin basket in a highway toll booth, or use a long-term parking meter. Lines at subway fare machines would move more quickly because coins are accepted more easily than bills.

"GAO recommends that the Congress authorize the introduction of a new, well-designed 1-dollar coin and simultaneously provide for elimination of the dollar note." General Accounting Office, March 1993.


Passage of The Efficient Currency Act of 1997 supports deficit reduction. The government saves at least $456 million annually, on average over 30 years, according to the Federal Reserve and GAO estimates. Coins remain in circulation 30 years; cost 8. Bills last 17 months; cost 4.

Local governments would save money on transit expenses and would not have to replace mechanically-operated parking meters. Mass transit would save $124 million annually. Bills cost about 2 each to count and are easy to steal. Buses would spend less time idling at curbs waiting for passengers to board.

The visually impaired would be able to make small purchases conveniently and would be able to easily distinguish the $1 coin from other coins.

Most vending machines are already equipped to process the Anthony (or similar) $1 coin without further capital outlay. Replacing the $1 bill with a coin will make future purchases of costly bill acceptors (up to $400) unnecessary and customer purchases from machines much more convenient and faster.

The public will have the option of carrying $2 bills, because cash retailers will have room for them in cash drawers once $1 bills are eliminated.

Every other major foreign country has successfully introduced high-denomination coins. The U.S. has coins with the least purchasing power of any major country.

A new $1 coin should 1) be golden in color, 2) have a distinctive edge and surface features to aid the visually impaired, 3) have the same dimensions as the Anthony dollar. Changing dimensions would require retrofitting transit fareboxes, vending machines and other coin-operated equipment. The Canadian "loon" $1 coin, which has replaced Canada's $1 bill, is an excellent prototype from a size, color and edge standpoint.

I. Government Savings - Federal.

The Congressional Budget Office, General Accounting Office, the Federal Reserve and private studies agree that replacing the $1 bill with a $1 coin would save the government billions of dollars. Each has used different assumptions to calculate the savings. Rules governing the CBO have limited its ability to calculate the entire spectrum of governmental savings.

1995 Federal Reserve System: $2.28 billion in first five years of implementation.

The Fed estimate (presented at the July 13, 1995 hearing before the Senate Banking Committee) is almost 9 times greater than the CBO's for two reasons: 1) the Fed assumes that two $1 coins will replace each $1 note that is returned and 2) the Fed includes interest avoided on the National Debt resulting from the interest free loan that coins provide to the government.

1996 CBO: $0.3 billion "direct" + $1.1 billion "indirect" savings, 1997 through 2002.

The Congressional Budget Office only calculates the net federal budget impact for the next six fiscal years. The "indirect" savings result from interest avoided on the National Debt. The "direct" savings result from production and handling efficiencies.

Because the Efficient Currency Act is phased in and has start up costs, the budgetary savings are small initially. Savings in years one and two (FY97 and FY98) are zero because the Mint requires 30 months for planning and production of initial inventories. In the third, fourth and fifth years, savings are small because the efficiencies of the coin are not yet realized.

Looking at only a five-year frame is like making a decision on paper plates versus china plates based on one week of use. Paper wins every time!

1995 General Accounting Office: $456 million average annual savings over 30 years.

The General Accounting Office (GAO), using a Federal Reserve model, includes interest avoided on the National Debt resulting from the profit ("seigniorage") on sales of coins to the public. Interest saved on the National Debt is not included in the CBO estimate. However, the $400 billion worth of Federal Reserve notes and $20 billion worth of coins in circulation fund about 8% of the National Debt interest free -- much as uncashed travelers checks and transit tokens kept as souvenirs provide an interest free loan to American Express and transit authorities. In 1995, the Federal Reserve rebated $23.382 billion to the U.S. Treasury as interest on Federal Reserve notes. Assuming a 6% interest rate, an additional $1.2 billion in interest was avoided through seigniorage on coins.

1991 Prof. George McCandless, University of Chicago:

$862 million average annual savings over 30 years.

Only McCandless has factored in savings resulting from $1 bills that are never returned to the Federal Reserve. The GAO estimate assumes a 100% return rate of the $1 bill. However, in Australia and Canada, between 44% and 48% of all $1 bills were never returned for redemption. Federal Reserve notes that are not returned earn interest for the government like uncashed travelers checks. If only 25% of the 6 billion $1 bills now in circulation were never returned, that $1.5 billion would continue to save the government $75 million annually in perpetuity, assuming a modest 5% interest rate.

Conclusion: The McCandless study assumed 1) a lower level of usage of $2 bills and 2) a smaller coin handling cost to the Federal Reserve, both of which tend to overstate the savings estimate. The CBO study only considered production and handling costs for the first 3 1/2 years following introduction of the coin so that an analysis of the long term impact is impossible. The Coin Coalition believes the actual savings will be in the $500 to $600 million range, on average, over 30 years -- or at least $15 billion total savings.

None of the estimates include the $124 million annual savings to mass transit systems.

II. Mass Transit Would Save $124 Million Annually.

Processing $1 coins instead of $1 bills would save the mass transit industry over $124 million annually in equipment purchases, maintenance, and processing of $1 bills. The American Public Transit Association supports H.R. 1174 as introduced. The transit systems of Chicago, Los Angeles, Atlanta, San Antonio, New Orleans, Philadelphia, and Washington, D.C. are among those strongly supporting the $1 coin and phase out of the $1 bill.

The New York City bus system has an easy solution to the paper-dollar problem: It doesn't accept them. Potential passengers with no token or change cannot ride -- in spite of the phrase "legal tender for all debts" printed on all U.S. bills. According to the MTA New York City Transit, more than half of the express bus riders between Staten Island and New York City pay a $4.00 fare each way, quarters only. Thus, 32 quarters are needed for the round trip.

Thomas Rubin, then treasurer of the Southern California Rapid Transit District, testified before a House Banking subcommittee on November 6, 1991.

Adding it all up, we believe that we can save approximately $3,500,000 per year if the dollar bill is replaced by a dollar coin. We can use these extra funds to expand our service by about 1%, adding about 24 buses to our schedule without one extra dollar of additional taxes or fare increases. Given that the SCRTD operates the most overcrowded buses of any large transit operator in the United States, these 24 buses will be most welcome -- they will carry about 4,200,000 extra passengers each year. That's a lot of extra transit services that are vitally needed for not one extra cent from either the taxpayer or our transit riders.

William C. Buetow, Vice President Finance/Treasurer of the Chicago Transit Authority, writing in the May 27, 1992 issue of "Passenger Transport":

Bills are counted at a cost of $22 per thousand. Coins can be counted for $1.64 per thousand coins. To reduce cash handling cost, a "deep discount" was instituted in April 1990. The cash fare was raised from 95 cents to $1.25, but token packs were sold in units of 10 for $9.

The quantity of $1 bills received daily now averages 285,000 [down from 485,000 before the change]. Although no demographic studies have been performed on who uses tokens and/or cash for payment of fares, it is possible that low income passengers do not have the financial resources to spend $9 for tokens on any given day.

The Chicago Transit Authority now processes about 400,000 $1 bills daily. They would save $2.4 million annually with a $1 coin. Using an industry standard, an additional $11 million in theft reduction could be realized.

III. Visually Impaired Support the $1 Coin.

The visually impaired support the introduction of a $1 coin, which begins to address their concern about the ability to distinguish between various paper currency denominations. A circulating $1 coin would reduce the chance of accidentally spending a large bill or of being cheated when receiving change.

To address the concerns of the visually impaired, H.R. 1174 say "The dollar coin shall be golden in color, have a distinctive edge, have tactile and visual features that make the denomination of the coin readily discernible..."

IV. A $1 Coin Will Not Be Inflationary.

Federal Reserve System, March 26, 1993. "It is our understanding that vending machines produced in recent years are already able to accept a $1 coin and dispense change, so we would not expect any significant cost pressures on suppliers of vended products. Even if a new $1 coin were to have size and weight characteristics different from those of the Susan B. Anthony coin, and therefore require adjustments to some machines, those would be one-time costs and probably not so great as to justify appreciable increases in the prices of vended products. In summary, we do not believe that there would be any discernable microeconomic or macroeconomic effects stemming from the issuance of a new $1 coin and the more or less simultaneous withdrawal from circulation of the $1 note."

Research Triangle Institute, September, 1976, p. 7-44. "The illusion that the introduction of this coin will imply a corresponding price increase in products sold through automatic merchandising is not based on sound economic reasoning. The one dollar coin will serve to expand the market for vended products and will make some purchases more convenient. ... the existence of the additional coin alone would not cause a price increase in the market."

Ford Motor Co. v. NLRB, U.S. Supreme Court, J. White May 14, 1979. "Holding:

In-plant cafeteria and vending machine food and beverage prices and services are "terms and conditions of employment" subject to mandatory collective bargaining under Secs. 8(a) and 8(d) of the NLRA . . .to require employer to bargain over in-plant food-service prices is not futile. Although prices are set by a third-party caterer (vending company), employer retains right to review and control such prices."

General Accounting Office, GAO/GGD-93-56 1 Dollar Coin, page 22.

The Canadian Automatic Merchandising Association reported that the coin has resulted in 15- to 35-percent increases in vending sales without price increases.

Further information on vending prices.

a) Equipment Cost Savings - The introduction of a widely circulating dollar coin will substantially reduce the need for costly bill acceptors (up to $400) on millions of vending machines to be purchased in the future. Additionally, most vending machines, transit fareboxes, and coin-operated machines manufactured since the mid-1980s have the capability of accepting Anthony dollars.

b) Competition - The merchandise vending industry is a highly competitive industry, with an estimated 6,000 companies competing vigorously in the food and refreshment vending market. Companies that raise prices, for any reason, frequently find competitors offering their customers lower prices. Furthermore, the vending industry competes in the sale of food and refreshment with fast food outlets, convenience stores and other non-vending sources. These competitive forces would prevent opportunistic price increases associated with the use of dollar coins.

Greater consumer convenience will lead to increased vending sales.

V. Today's Dollar is the Quarter of the 1960s.

  1965 1995
Daily newspapers (most) $0.10 $0.50
Soft drink, 12 oz., vended .10 .65
Pay phone, local call .10 .25
First Class postage stamp .05 .32
New York City subway fare .15 1.25
Bread, 1 pound .21 .78
Milk, 1/2 gallon .47 1.43
Ground beef, 1 pound .49 1.39
Gasoline, all types, 1 gallon .31 1.51
9 item average $0.22 $0.90


All Item Consumer Price Index

Base years 1982-84 = 100

31.3 151.4

Conclusion: In 1965, the average "small item" could be purchased with a single coin. In 1995, three or more quarters are needed for most purchases.

Sources: American Newspaper Publishers Association
American Petroleum Institute
Vending Times
U.S. Bureau of Labor Statistics

Prepared by The Coin Coalition
April, 1995

VI. Seigniorage & Portfolio Earnings

The savings to the government from a $1 coin come mainly from the fact that the government makes a significant profit on every coin that is put into circulation. "Seigniorage," the technical name for this profit, has been criticized as "smoke and mirrors" accounting. In fact, it represents proper, conservative, and very logical accounting conventions.

U.S. coins today are essentially tokens that have little intrinsic value. However, when coins are put into circulation, the public pays the government the face value. Seigniorage is the difference between the face value of a coin and its cost. In the case of a $1 coin, which costs 8 cents to make and distribute, the profit (or seigniorage) is 92 cents.

This profit is not considered revenue, because in theory, at some point, the coin might be redeemed (although redemptions are a minor factor), and the government would then have to refund its face value.

The receipts from coinage amount to an interest free loan from the public to the government. Issuing 10 billion new $1 coins would produce $9.2 billion in receipts, which would flow into the Treasury's general fund. Treasury would spend the money in lieu of borrowing. This would save Treasury the interest it would otherwise pay to borrow that amount and hold down the national debt. The savings are large, since interest on Treasury 30-year bonds is over 6% today.

The coin assumes value at the point when the coin is swapped for its face value with the public, because the government stands behind it and will refund its face value on demand. After the transaction with the public occurs, the government has the face value of the coin in its possession and can use the money to finance the deficit. These interest savings, in addition to savings from printing, paper and processing, should be counted when computing the savings to the government from issuing a new $1 coin.

Paper Notes. Receipts from paper money also are used to finance the deficit, but the procedure is somewhat different. When Federal Reserve notes are placed into circulation, the Federal Reserve receives face value from the public. The receipts are invested in Treasury securities, which earn interest. Each year the interest earned on those Treasury securities (called "portfolio earnings") is rebated to the Treasury, thus financing that portion of the deficit. In 1995, the Fed rebated the $23.382 billion it earned on about $400 billion worth of Federal Reserve notes outstanding. Most economists use "seigniorage" when talking about paper money, too.

Replacing a Federal Reserve note with coin is a wash, from an accounting standpoint. The government saves money from The Efficient Currency Act because three $1 coins will be needed for each $1 bill removed from circulation (based on the Canadian experience). $1 coins tend to "pool" in vending machines, pay phones, etc. more than $1 bills, so more coins are needed. This "increase" would not be inflationary, because the money supply (M1) would not change; each $1 coin would have to be purchased with existing money. A greater percentage of M1 would be held as $1 coins, from which the government would profit, just like American Express would by having more uncashed travelers checks in circulation.

The Private Sector. Similar transactions are common in the private sector. When an individual buys a travelers check, gift certificate, or subway token, the issuer has the use of the buyer's money until the check, certificate, or token is redeemed. The money may be invested to earn interest or be used for current cash flow needs -- just as the government does.

VII. Why the $1 Note Must Be Phased Out.

The Coin Coalition strongly agrees with the U.S. Mint and the GAO that the $1 Federal Reserve note must be replaced if a new $1 coin is introduced. The reasons are numerous.

Reason #1: Cash retailers. Most cash registers have ten position drawers, five for paper and five for coins. The five paper positions are often used for $1, $5, $10, $20 notes, with the fifth position used for checks, charge slips, food stamps, etc. The coin slots are used for 1, 5, 10, 25-cent coins, with the fifth position often used for spare rolls of coins.

Under the proposed changes, a cashier must find places for both the $1 coin and the $2 note. The current space for the $1 note is the logical place for the $2 note. The $1 coin would go in the fifth position used for coins. Checks, or $20 bills, would have to go under the drawer to make room for spare rolls of coins, or another location must be found for spare rolls of coins.

Continued use of the $1 note would create a space problem in the cash drawer. Having to handle both a $1 coin and $1 bill would be the worst case scenario. For that reason, the Coin Coalition supports a $1 coin only if the $1 note is removed from circulation.

Reason #2: Flow of currency. Cash retailers must pay out $1 coins in change in order for the public to have them for purchases that would be facilitated with coins.

Large bills ($20s and $10s), which enter circulation at Automatic Teller Machines (ATMs) and at bank teller windows, are carried by individuals to cash retail establishments: grocery, convenience, drug stores, chain restaurants, movie theaters, etc.

Cash retailers accept these bills, and give $1 bills and coins in return. The individual now has the $1 bills and coins necessary to use in vending machines, parking meters, pay phones, and mass transit fare-boxes. These industries "vacuum" up the coins and $1 bills. The coins and $1 bills are counted and sorted, then returned to banks where they are recycled to cash retailers.

For example, the Mass Transit Administration of Maryland (MTAM) uses Anthony $1 coins like a token in the Baltimore subway system. But it must go to the bank, stock the coins, and process the $1 notes it receives for Anthony dollars. The Baltimore system would save over $300,000 annually if the public entered the system with $1 coins in hand.

VIII. Phase-In Period of $1 coins.

The GAO study assumes a five-year phase-in period for the dollar coin and the removal of the $1 note. The Coin Coalition believes this is too long. The Federal Reserve System should begin withdrawing $1 notes as soon as possible following the coin's introduction. The total phase-in should last no longer than one year.

Example: The Canadian $1 "loon" coin was introduced in July 1, 1987, and the last $1 note was issued on July 1, 1989. The phase-in was virtually complete by the end of 1989. During the phase-in, there was a perception by the media that the coin was failing because it did not circulate in large numbers initially. This problem would not have happened with an earlier phase-out of the Canadian paper dollar.

IX. Industry preparedness.

Most vending machines, transit fareboxes, and coin-operated machines manufactured since the mid-1980s have the capability of accepting Anthony dollars. This was done at the urging of the U.S. Treasury Department to support the Susan B. Anthony dollar coin. Changing the diameter or thickness of a new coin would force more than 80% of the nation's 4.5 million vending machines to be refitted with new coin mechanisms.

Many bill acceptors currently used on vending machines are designed to take $1, $2, $5, $10, and $20 bills. A device can be set to determine which bills will be accepted. Thus, most of the industry is ready to handle a new Anthony-sized coin and higher-denomination bills.

There are several reasons why S. 874 and H.R. 1174 do not amend existing law regarding the size of the proposed $1 coin. (A coin the size of the British 1-pound coin would be a disaster.)

1) The existing infrastructure is ready to handle an Anthony-sized coin. Vending machines, transit equipment, and coin-separating machines placed into service after 1980 are ready to handle a new coin now.

2) Nickels, dimes and quarters are narrower than the British pound. Wider coin slots and shoots needed inside the coin mechanisms to accommodate a wide coin would cause these nickels and dimes to wobble or jam. The British pound coin is more than twice as thick as the US dime.

3) British pound coins cannot be easily machine wrapped into rolls. The alternative (small bags of coins) are easier to steal from cardboard containers, and bags of coins must be counted by hand. A thick coin would render virtually all coin separating/counting machines obsolete, because an additional step would have to be added to the hardware to "strip" dimes that are stacked on top of each other.

X. Public Opinion.

A 1997 poll (conducted by Epic-MRA of Lansing, Michigan) commissioned by the Coin Coalition found that 58% of respondents favored replacing the $1 bill with a $1 coin when furnished with the Fed/GAO estimates on savings. Other public opinion polls consistently show that people want to balance the budget, cut government waste, and retain public assistance programs that are efficiently run.

Virtually all other public opinion polls have been conducted by the zinc industry (which opposes elimination of the penny) and by Save the Greenback. In none of these surveys was the public informed that a circulating $1 coin would save the government billions of dollars over time. Nor were they informed that the $2 bill would be provided as a paper alternative.

XI. Effects on Production Levels at the Bureau of Engraving & Printing.

The Coin Coalition believes the impact of a $1 coin on these entities will be nil because the productive capacity should be used to make $2 bills and to quickly introduce the next generation of Federal Reserve notes to discourage the continued counterfeiting of high-denomination bills in the Middle East and Columbia. The Bureau of Engraving & Printing testified on March 21, 1996 that production would resume to current levels within three years of the $1 coin's introduction.

Failure to keep the U.S. legal tender system convenient for the U.S. marketplace and safe from counterfeiting will hasten the decline of profits for Crane and SICPA and the loss of jobs for the Printers Union. The evidence of this decline already has begun. See the following articles:

"High-Tech Counterfeiting" US News & World Report (cover story) 12/5/94
"Conspiracy Against the Dollar" Reader's Digest March 95
"What if the Dollar Doesn't Stay on Top? Wall Street Journal (page one) 3/20/95
"The Future of Money" Business Week 6/12/95
"Dead as a Dollar" New York Times Magazine (cover story) 6/16/96

XII. Federal Reserve notes: Production, Counterfeiting, Contamination issues.

The Treasury Department announced on July 13, 1994 "a comprehensive program to modernize the design of U.S. currency." $100 Federal Reserve notes were issued on March 27, 1996 and new $50 FRNs are scheduled to be released in October, 1997. Treasury claims the plan is "not a response to a crisis" or to any current counterfeiting case. (Experts disagree on this point.)

Although the BEP has testified that it has no plans to replace the $1 Federal Reserve note, high-ranking officials at the BEP and the Federal Reserve privately admit that replacing all notes through the $1 FRN is their goal.

Eliminating the $1 Federal Reserve Notes (FRN) would free capacity at the Bureau of Engraving & Printing to speed introduction of new $20, $10 and $5 notes. Currently, 44% of BEP capacity is used printing $1 FRNs. In 1996, the spoilage rate for the BEP was 5.4%.

In Circulation       FRNs printed (in billions)
at 12/31/96   '89 '90 '91 '92 '93 '94 '95 '96 '96 % 8-year%
$1 FRNs 6.4 2.861 3.149 3.213 4.090 3.577 4.563 4.787 4.167 44.1% 45.7%
$2 FRNs 0.5               .051 0.5  
$5 FRNs 1.5 .835 .912 .979 .787 .877 1.005 1.069 1.158 12.3% 11.4%
$10 FRNs 1.4 .771 .771 .813 1.037 .826 .794 .672 1.011 10.7% 10.1%
$20 FRNs 4.3 1.526 1.802 1.926 1.760 2.170 2.253 2.553 1.363 14.4% 23.1%
$50 FRNs 1.0 .134 .128 .128 .557 .259 .115 .147 .442 4.7% 2.9%
$100 FRNs 2.6 .201 .240 .957 .218 .323 .605 .730 1.251 13.2% 6.8%
    6.328 7.002 8.016 8.449 8.032 9.335 9.958 9.443    

Secret Service: Selected Comments on Counterfeiting:

"In general, the effect of replacing the $ Federal Reserve Note (FRN) with a $1 coin, would be positive with regard to the integrity of United States legal tender currency.

As you know, the $1 FRN's are currently being bleached and higher denomination counterfeit notes are being printed on the bleached genuine paper. The production of counterfeit FRN's on bleached genuine paper increases the difficulty for the public to detect those counterfeit notes. If the $1 FRN was discontinued, the Secret Service would expect to see a drop in the number of counterfeit notes being printed on bleached genuine paper.

The Bureau of Engraving and Printing estimates that 45 percent of their production time and materials are utilized in the production of $1 FRN's. The savings could be used to increase the security of our higher denomination notes."

letter to Rep. Jim Kolbe
April 22, 1993

Cocaine and Microbial Contamination.

The Chicago Sun Times reported on March 26, 1997 that "Nearly four out of five dollar bills in the Chicago suburbs contain traces of cocaine, a study at Argonne National Laboratory has found. Previous studies have found similar contamination rates in other cities."

A 1995 study by Northwestern University students that "The microorganism contamination of one dollar bills was 28- to 48- times greater than the contamination of metal coins. E. coli was detected as a contaminant on [5 of the 24] one dollar bills collected... None of the quarter coins contained E. coli as a contaminant."

Copper is a natural bactericide; dirty, moist cotton is not.

XIII. Foreign Experience.

Every other major industrial country already has switched to high-denomination coins. The paper currency of the same value was removed or phased out in every case.

Country Circulating Coins U.S. dollar equivalent

Japan 500/100-yen $4.12/$0.83

France 20/10/5-franc $3.41/$1.71/$0.85

Spain 500/200-peseta $3.39/$1.36

Switzerland 5/2 Swiss francs $3.43/$1.37

Singapore 5-/1-dollar $3.26/$0.65

Denmark 20/10-krone $3.02/$1.51

Germany 5/2 Deutsche Mark $2.87/$1.15

Israel 10-Shekel $2.87

Norway 20/10/5-krone $2.84/$1.42/$0.71

Mexico 20/10/5-new pesos $2.58/$1.29/$0.64

Netherlands 5/2.5-guilder $2.55/$1.27

Finland 10/5-markka $1.91$0.96

Austria 20/10-schilling $1.62/$0.81

United Kingdom 1-pound $1.62

Australia 2-dollar/1-dollar $1.47/$0.73

Ireland 1-pound (Punt) $1.46

Canada 2/1-dollar $1.45/$0.72

Sweden 10/5-krona $1.33/$0.66

Italy 500-lira $0.29

United States quarter dollar $0.25

(exchange rates as of 10/9/97)

The Canadian $2 coin. In February, 1996 the Canadian government replaced their $2 note with a $2 coin. This created a six-coin set: penny, nickel, dime, quarter, $1 coin, $2 coin. This will be awkward for cash retailers. The Coin Coalition would not support a currency system that employs more than five different circulating coins.

XIV. Gaming Industry

On November 6, 1991, Rep. James Bilbray (D-Nevada) stated before the House Banking Subcommittee on Consumer Affairs and Coinage that "I want to make evident that it is not the intention of this bill to require operators of coin operated [gaming] devises to bear the expenses of retrofitting their devices to accept the new coin."

The Coin Coalition supports this view. Many amusement game operators, mass transit systems, and coin laundries use tokens as part of their payment systems. Any change in the right to use these tokens would be highly disruptive of established practices.

The Coin Coalition believes that the "Final Statement of Treasury Policy Regarding the Use of Metal Tokens" published in the Federal Register, page 28679, on July 15, 1985, should not be altered in any way and that nothing in the Efficient Currency Act of 1997 (H.R. 1174) should be construed as changing the intent of that Final Statement.

XV. Summary Environmental Analysis: 10-YEAR TOTALS*

Replacing $1 bill with $1 coin; possible elimination of penny

From Copper Nickel Zinc Cotton Linen Ink

$1 coin: first five years @ 1.5 billion +56.9 +10.0

second five @ .5 billion +19.0 +3.3

Quarter reduction, years 3-10 -44.8 -3.8

Materials from $1 bills, years 2-10

5.0 billion/year @ 490/pound 75% cotton, 25% linen -34.4 -11.5 -19.8

Materials for $2 bills, years 2-10 1.6 billion/year +10.3 +3.4 +5.9

Pennies elimination, 10 years

@ 12 billion/year -8.3 -322.4


Aggregate Changes +22.8 +10.8 -322.4 -24.1 -8.1 -13.9

Thousands of tons (2,000 lbs), post manufacturing weight

Cotton: According the Bureau of Engraving & Printing "the cotton fiber [for currency]... comes from post-industrial sources such as textile factories. No post-consumer cotton fibers are used in the paper finish." Only 0.073% of US-grown cotton eventually is used in paper for the $1 FRN or 1 pound out of each 1,370 pounds produced. Cotton bags are used to ship coins: $1 coins in $2,000 bags, which weigh about 3.5 oz. each. Cotton is a very pesticide intensive crop.

Note: While the claim of post-industrial use of cotton is true, the opposition to the Efficient Currency Act by some in the cotton industry suggests that use of this cotton expands markets for virgin cotton. No substantiation has been provided for the claim that most of the cotton fiber used in paper money is diverted directly from the solid-waste stream.

Copper/Zinc/Nickel: Complete coinage reform would result in a 90% reduction in the use of metal. Only nickel is not domestically mined. The 50% reduction in quarter demand is based on the experiences of Norway, Netherlands, Great Britain, Canada, Japan and Australia.

Ink: The inks used for paper money are petroleum-based and have metal content to give the ink magnetic properties for counterfeiting deterrence.

Other Materials/Considerations

Disposable payment (plastic/paper) cards for telephones, parking meters, transit systems.

Increased production of private sector tokens for mass transit, game machines.

Batteries needed to operate parking meters, newspaper racks.

Replacement of fareboxes, parking meters, telephones to accept other payment systems.

Increased fuel use resulting from increased "dwell times" by buses waiting at the curb.

Increased cost of mass transit fares, resulting in fewer passengers.

Life Cycle Comparison

1 $1 coin weighing 8.1 grams does job of 21 $1 bills weighing 30 grams, counting fresh ink.

Recycling. 100% of the worn and mutilated coins returned to the Mint are recycled into new coins. Even though some paper notes are recycled into roofing shingles and stationery, 90.0% of notes returned to the Federal Reserve were landfilled in 1996.

* The analysis assumes no growth due to economic expansion or inflation. The purpose of this analysis is to identify variables and demonstrate the magnitude of materials usage resulting from changes in US coins and notes. Assumptions are based on government and Coin Coalition estimates.

XVI. Weight in the Pocket.

The average American carries three $1 bills. Three $1 coins will weight less than one ounce. A more technical analysis shows that complete coinage reform would actually reduce the average number of coins and notes needed per transaction. Note that the weight reduction does not take into account the decreased use of quarters in coin laundries, parking meters, vending machines, mass transit, pay phones, etc.

Two variables determine how much weight you carry in coins and paper:

1) The weight of the individual piece of currency,

2) The average number of coins and notes you receive in each transaction.

Below is a comparison of the current system and an alternative system.

Current System

Average Number per transaction Weight

Penny 2.0 coins 5.0 grams (@ 2.5 g/coin)

Nickel .4 2.0 grams (@ 5.0 g/coin)

Dime .8 1.8 grams (@ 2.27 g/coin)

Quarter 1.5 8.5 grams (@ 5.67 g/coin)

$1 bill 2.0 bills 2.0 grams (@ 1.0 g/bill) ___ ___

6.7 coins/bills 19.3 grams

Alternate System

(drop: penny, $1 bill; add: $1 coin, $2 bill)

Average Number per transaction Weight

Penny none

Nickel .4 2.0 grams (@ 5.0 g/coin)

Dime .8 1.8 grams (@ 2.27 g/coin)

Quarter 1.5* 8.5 grams (@ 5.67 g/coin)

$1 coin .4 3.2 grams (@ 8.1 g/coin)

$2 bill .8 bills .8 grams (@ 1.0 g/bill)

___ ___

3.9 coins/bills 16.3 grams

The number of coins needed is based on a simple computation of the total number of coins required to complete 99 transactions priced from 1 through 99, then dividing by 100.

* If the public shunned the $1 coin and used only quarters and $2 bills (a scenario suggested by the Director of the U.S. Mint) , the number of quarters need per transaction would jump to an average of 3.5 -- more than double the weight of the proposed $1 coin in the Efficient Currency Act.

XVII. Lessons Learned From the Anthony Dollar.

The last time a $1 coin was introduced in the United States-- the Susan B. Anthony in 1979 -- it did not circulate. The GAO studied the experience of the Anthony dollar, and concluded that "One of the major causes was the failure to eliminate the $1 note." Cash retailers were reluctant to count and store both paper and coin dollars.

Additionally, the coin was confused with the quarter, because of its similar silver color and feel, including an identical reeded edge. The Coin Coalition advocates a golden-colored coin that has a distinctive edge (like a nickel), as opposed to a reeded edge like the quarter. These two changes are sufficient to insure easy differentiation from quarters. The Coalition opposes changing the physical dimensions of a new $1 coin, as this would require the vending/coin-operated industries, as well as the mass transit authorities, to retrofit all the machines that have been designed to handle the Anthony dollar. Any change in the dimensions would cost these industries hundreds of millions of dollars. With the golden color and smooth edge, the quarter and $1 coin will be easier to tell apart than pennies/dimes or quarters/nickels.

Weight Diameter Thickness

Penny 2.50 grams 19.05 mm 1.57 mm (30% larger than dime)

Dime 2.27 grams 17.91 mm 1.35 mm

Nickel 5.00 grams 21.21 mm 1.98 mm

Quarter 5.67 grams 24.26 mm 1.70 mm (12% larger than nickel)

Anthony dollar 8.10 grams 26.50 mm 2.00 mm (40% larger than quarter)

Canada successfully introduced in 1987 the golden-colored "loon" $1 coin, which is the same diameter as the Anthony $1 coin.

Even though the Anthony dollar currently does not circulate among the U.S. public at large, it is an important coin in many localized operations. Following are some of the mass transit systems and vendors currently using the Anthony dollar:

Chicago Transit Authority, Chicago, IL

Dallas Area Rapid Transit, Dallas, TX

Mass Transit Administration of Maryland, Baltimore, MD

Massachusetts Bay Transportation Authority, Boston, MA

Metro-Dade County Transit Agency, Miami, FL

MTA Long Island Railroad, Jamaica, NY

MTA Metro North Railroad, New York, NY

New Jersey Transit, Newark, NJ

Port Authority Trans Hudson (PATH), Port Authority of NY and NJ

Port Authority Transit Corporation, Lindenwold, NJ

St. Louis Metro-Link, St. Louis, MO

Santa Clara County Transit District, San Jose, CA

San Francisco Municipal Railway System, San Francisco, CA

Tri-Met, Portland, OR

U.S. Postal Service, stamp vending

Over 75 vending companies, (names available from National Automatic Merchandising Assn.)

Anthony Resurgence. Inventory of Anthony dollars at the US Mint and the Federal Reserve: 12/31/93 363.5 million

6/30/94 338.7 million -24.8 in 6 months 6/30/96 205.8 million -32.0 in 6 months

12/31/94 310.1 million -28.5 in 6 months 12/31/96 173.2 million -32.6 in 6 months

6/30/95 273.0 million -37.0 in 6 months 6/30/97 145.8 million -27.4 in 6 months

12/31/95 237.8 million -35.2 in 6 months

At the current rate of depletion, the Mint will be forced to begin production of Anthony dollars in less than two years, unless Congress approves the U.S. One Dollar Act of 1997, H.R. 2637.

XVIII. Editorial Support. These newspapers and columnists support the $1 coin and, in most cases, expressly endorse the phasing out of $1 bills. Over 80% of editorials written in 1995 supported the $1 coin.

Aiken (SC) Standard 5/9/95

Alamo (TN) Crockett Times 6/1/95

Alexandria (LA) Town Talk 5/8/95

Amarillo Globe-Times 5/10/95

Anderson (SC) Independent 3/20/93 5/5/95

Annapolis Capital 6/24/90

Ashland (OR) Tidings 6/29/91

Athens (OH) Messenger 5/9/95

Baltimore Sun 7/4/91

Bangor (ME) News 11/18/91, 3/22/93 5/9/95

Bartlesville (OK) Examiner 10/17/89

Bay City (MI) Times 3/25/93

Bend (OR) Bulletin 5/7/95

Boston Globe 1/10/89 and 12/28/93 3/18/97

Bridgewater (NJ) Courier-News 6/19/90

Cadillac (MI) News 6/12/95

Camden (SC) Chronicle 3/12/93

Canadaigua (NY) Daily Messenger 10/20/94

Canton (OH) Repository 6/25/90

Cedar Rapids (IA) Gazette 10/5/97

Centralia (WA) Chronicle 7/22/94 5/10/95

Chattanoga Times 5/24/95

Cheyenne (WY) State Tribune 3/12/93

Chicago Daily Southtown 5/10/95

Chicago Tribune 2/20/88, 11/12/91, 5/10/95

Chicago Sun Times 12/26/90, 5/8/95

Cincinnati Enquirer 9/24/94

Columbus (OH) Dispatch 5/29/90, 11/9/91, 3/5/92, 3/21/93, 5/21/94 5/22/95

Dallas Morning News 6/20/90 and 7/27/91

Davenport (IA) Quad City Times 5/4/95 3/10/97

Denham Springs (LA) Parish News 4/30/95

(Denver) Rocky Mountain News 5/4/95

Des Moines Register 7/13/88, 7/1/89, 9/28/89, 3/3/92, 7/18/94, 5/19/95

Detroit News 5/4/95

Duluth News-Tribune 5/1/95

Eau Claire, WI 7/8/96

Elkhart (IN) Truth 3/28/95

Elmira (NY) Star-Gazette 6/18/95

El Paso Herald-Post 5/5/95

Evansville (IN) Courier 5/6/95

Evnasville (IN) Press 5/9/95

Fort Lauderdale Sun-Sentinel 6/2/95

Fort Meyers (FL) News-Press 5/13/95

Fort Wayne Journal-Gazette 9/22/87, 8/4/89 5/15/95

Fresno Bee 7/7/89 6/6/95

Gilroy (CA) Dispatch 3/31/95

Glen Falls (NY) Post-Star 5/9/95

Grand Junction Daily Sentinel 11/5/91

Greenbriar (AR) Gazette 6/21/95

Greenville (SC) News 4/24/95

Harrisonburg (VA) Daily News 3/30/93

Hazelton (PA) Standard-Speaker 5/11/95

Hickory (NC) Daily Record 10/1/87

Holland (MI) Sentinel 6/14/95

Honolulu Star-Bulletin 5/22/95

Huntington (WV) Herald 10/21/90 and 11/9/91

Indianapolis Star 9/2597

Ironwood (MI) Globe 6/13/95

Jacksonville (FL) Times-Union 12/26/93, 3/2/95

Jacksonville (NC) News 5/5/95

Joliet (IL) Herald-News 7/21/94

Joplin (MO) Globe 6/21/90, 8/10/91, 4/16/93

Kansas City (MO) Star 5/19/95

Kalamazoo Gazette 5/3/95

Kenosha (WI) News 5/9/95

Kent (WA) Valley Daily News 8/7/94

Kingsport (TN) Times-News 4/11/90

Kingston (NC) Free Press 5/23/95

Knoxville (TN) News-Sentinel 5/9/95

Kokomo (IN) Tribune 5/4/95

Lafayette (GA) Messenger 6/2/95

Lewiston (ME) Sun-Journal 10/17/89, 6/25/90, 11/6/91, 5/8/93

Lenoir City (TN) News-Herald 5/25/95

Lincoln (NE) Star 7/3/90,11/14/93 5/11/95

Longview (WA) News 5/30/95

Los Angeles Daily News 4/16/88 and 11/17/91

Los Angeles Times 3/24/93

Louisville Courrier-Journal 7/28/91

Lowell (MA) Sun 6/5/95

Lynn (MA) Daily Evening Item 4/30/88

Madison (IN) Courier 5/9/95

Mamaroneck (NY) Times 6/25/90

Manchester (CT) Journal Inquirer 5/10/95

Memphis Commerical Appeal 5/15/95

Miami Herald 6/7/95

Middletown (CT) Press 5/31/95

Minneapolis Star Tribune 9/29/89, 7/18/94

Modesto (CA) Bee 5/31/95

Mt. Clemens (MI) Macomb Daily 3/19/93

Napa Valley Register 5/31/95

Naples Daily News 5/5/95

New York Times 3/9/89, 9/24/89, 6/3/90, 7/15/94

Norfolk Virginian-Piolt 5/11/95

Northeast Mississippi Daily Journal 4/29/95

North Port (FL) Sun Herald 5/24/95

Norwalk (CT) Fairpress 6/28/90

Ottawa (IL) Daily Times 7/26/94 5/8/95

Owosso (MI) Argus Press 3/14/93, 6/1/95

Owensboro (KY) Messenger 6/27/90

Palm Springs (CA) Desert Sun 6/8/92

Pascagoula (MS) Mississippi Press 5/8/95

Pensacola News Journal 5/18/90

(Phoenix) Arizona Republic 3/10/95

Philadelphia Inquirer 4/24/95

Pine Bluff (AR) News 6/22/95

Pittsburgh Post-Gazette 7/11/90 5/31/95

Portland (ME) Evening Express 5/29/90

Portland (ME) Press Herald 6/22/90 and 9/4/91

Portland Oregonian 7/4/91, 3/16/93, 9/13/94, 5/3/95

Portsmouth (NH) Herald 5/18/95

Quincy (IL) Herald-Whig 5/3/95

Racine (WI) Journal Times 5/5/95

Rapid City (SD) Journal 5/17/95

Ravenna (OH) Record-Courier 5/10/95

Redding (CA) Record 5/3/95

Richmond Times Dispatch 5/30/95

Roanoke Times & World 12/14/87

Rochester (NY) Democrat & Chronicle 6/12/95

Rochester (NY) Times-Union 9/28/94 4/21/95

Rosewell (NM) Daily Record 5/14/95

Royal Oak (MI) Daily Tribune 3/17/93

Sacramento Bee 7/9/89 6/5/95

St. Cloud (MN) 3/8/95

St. Louis Post-Dispatch 7/20/89

Salt Lake City, Deseret News 10/5/87, 11/22/88, 6/26/90, 8/4/92,4/20/93 5/3/95

Salt Lake City Tribune 11/8/91 and 7/20/94

San Francisco Chronicle 2/25/89 and 5/26/90

San Gabriel Valley Tribune 4/21/91

San Juan (PR) Star 5/5/95

Scranton Tribune 8/ 8/94

Scripps Howard Newspapers 4/11/88

Sharon (PA) Herald 4/29/95

Sioux Falls (SD) Argus Leader 5/6/95

South Bend (IN) Tribune 5/22/95

Springfield (IL) State Journal-Register 5/18/95

Springfield (MA) Union News 3/16/93

Springfield (TN) Times 5/17/95

State College (PA) Centre Times 6/16/95

Stillwater (OK) News Press 5/14/95

Stuart (FL) News 5/16/95

Sunbury (PA) Daily Item 3/28/93

Syracuse Post-Standard 5/6/95

Tacoma (WA) News Tribune 8/6/94

Texarkana Gazette 6/27/90

Temple (TX) Daily Telegram 10/9/89 6/7/95

Thousand Oaks (CA) Star & News 5/7/95

Toledo Blade 11/16/91 5/11/95

Trenton Times 11/6/91 and 3/14/94

Tucson Citizen 4/14/95

Tyler (TX) Morning Telegraph 3/29/92

USA Today 5/4/95

Victoria (TX) Advocate 6/8/95

Wakefield (MA) Item 10/11/89

Walla Walla (WA) Union Bulletin 5/9/95

Waukegan (IL) 5/12/95

Wichita Eagle 3/12/93

Wilkes-Barre Citizens' Voice 4/2/91

Wilmington News Journal 6/22/90 and 2/13/95

Winston-Salem Journal 5/2/95

Winter Haven (FL) News-Chief 5/4/95

Woodbridge (VA) Potomac News 5/14/95


The Golden Dollar