Posted on Tue, Dec. 13, 2011
last updated: December 13, 2011 07:37:56 PM
WASHINGTON — The federal government has too much money on its hands.
That may be surprising, especially since the government is flat broke, with a $15 trillion national debt.
But it's also awash in shiny one-dollar coins, with more than a billion of them going unused by the public and piling up at bank vaults across the country.
To deal with the excess, the Obama administration announced Tuesday that it would all but halt production of its special presidential dollar coins for general circulation.
The decision came after the Federal Reserve told Congress earlier this year that it wanted to spend $650,000 to build a storage facility at its bank in Dallas to store all of the surplus coins in one place. And it planned to spend another $3 million to transport all of the surplus coins to the new warehouse.
Administration officials said the move would save the government $50 million annually for the next several years.
"We simply shouldn't be wasting taxpayer money on money that taxpayers aren't using," said Treasury Secretary Timothy Geithner.
Members of Congress were trying to intervene, with Rep. Adam Smith, D-Wash., introducing a bill that would have forced the U.S. Mint to reduce production. Smith said he was pleased that the president and his administration "have seen the waste in this program" and reacted to it.
"We don't use dollar coins," Smith said. "It's funny — you go to Europe, and you've got the euro and you've got the pound, but in America, people just don't walk around carrying coins the way they do in Europe. It's a cultural thing."
The beginning of the surplus dates back to 2005, when President George W. Bush signed the Presidential $1 Coin Act, which required the U.S. Mint to issue new coins to honor deceased presidents each year, regardless of demand. The government tried to force circulation of the coins by requiring their use by federal agencies and the U.S. Postal Service.
Despite the efforts, nearly 1.4 billion excess dollar coins sat untouched in vaults, enough to meet expected demand for more than 10 years. And the Mint planned to produce another 1.6 billion dollar coins in the next five years.
The plan to stop production was made by Vice President Joe Biden as part of the administration's "Campaign to Cut Waste." Biden said the Mint was only halfway through its production cycle, still making coins to honor presidents from the 1800s.
"And as it will shock you all, the call for Chester A. Arthur coins is not there," Biden told members of the Cabinet.
At first, Smith said, Congress' mandate was a moneymaker for the federal government.
"It costs like 30 cents to make a dollar coin, so you make 70 cents on the deal," Smith said. "The problem is we were generating so much more than there was demand for. If you've spent 30 cents and don't sell it, all you've done is spend 30 cents, first of all. Second of all, you've got to store the darned things somewhere. ... We're trying to save money here."
In its annual report to Congress this year, the Federal Reserve said it had ample space to store more than $2 billion in dollar coins by 2016, when the government planned to stop producing the presidential coins.
But since it needed more space for its inventory, the Fed said it needed a new warehouse in Dallas, even though there would be "no perceptible benefit to the taxpayer."
The Fed's report prompted a spate of bills on Capitol Hill.
Smith proposed a bill that would require the Fed to roughly cut its production of coins in half. His bill would not have stipulated exactly how many coins would be produced each year, but the number would have been linked to the demand for the coins in the previous year.
The administration said it still would be required by law to produce "a relatively small number of the coins to be sold to collectors," but not the 70 million to 80 million coins mandated to honor each president.
Officials said they expect the excess inventory to be drawn down over time.
While the government will stop producing most of the coins, it won't stop the debate over whether U.S. citizens should stop using the one-dollar bill.
A report by the Government Accountability Office in March of this year found that replacing the one-dollar bill with the one-dollar coin would save the government about $5.5 billion over 30 years.
That's mainly because the coins are so much more durable than bills. But polls have consistently found that Americans favor the dollar bill.
Over the last 47 years, the GAO said, Canada, France, Japan, Australia, the Netherlands, New Zealand, Norway, Russia, Spain and the United Kingdom have replaced lower-denomination bills with coins, most of them acting in the 1980s.
Public resistance to the coins in Canada and the United Kingdom came only years after the governments stopped producing paper bills, the GAO said.
Citizens Against Government Waste, a government watchdog group, criticized the Obama administration's decision, saying it would undercut the authority of Congress. The group said the White House should have pressed harder to discontinue dollar bills and get the dollar coins in circulation as a way to save taxpayers even more money in the long run.
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