Budget hot tip: the President Trump dollar coin

Scrap $1 bills for a new Trump $1 coin.

The GOP wants to cut taxes, mainly for rich people and corporations, by at least $1.5 trillion over 10 years. They are quite naturally running into trouble finding compensatory cuts. “Dynamic scoring” fiddles can only go so far. Here is a modest contribution. The savings are only $5.5 billion over 30 years, but they are a sure thing according to the GAO in 2011 , and do not inconvenience anybody with a platinum card. It is quite simple:

Replace $1 bills with coins.

Argument and design suggestions below the jump.

If you are interested, the GAO assumed a life of bank notes of 40 months, of coins 30 years. They allowed for a modest 20% increase in electronic payments replacing $1 coins. Counter-intuitively, the saving does not come from the increased life of coins, but from the fact that people hoard them unwillingly:

It is common for people to take coins out of their pockets and store them at the end of each day rather than retain them in their wallets as they do notes, for use the next day. These factors cause coins to circulate with less frequency than notes. … Our analysis thus assumes that the number of $1 coins issued is 50 percent greater than the number of $1 notes that were in circulation. This assumption of increased production results in substantially increased seigniorage and accounts for our estimate of a net benefit to the government over the 30-year period of the analysis.

The expansion of fiat currency is an interest-free loan to the government, replacing other borrowing, and leads to lower interest payments. QED.

The reform would not be popular. The US government has tried to encourage coins for decades, to little effect. The American public likes $1 bills. I don’t understand it either, but it’s a fact. There is a small mountain of unwanted $1 coins in Fed vaults. It seems that even bank robbers scorn them because of the weight: $1 million in $1 coins weighs 8.1 tonnes. Wikipedia :

A U.S. Mint official claimed in a November 2012 meeting that most of the 2.4 billion dollar coins minted in the previous five years were not in circulation.

So it has to be coercion. No legislation appears to be necessary, though commenters may know better. Trump, through the Federal Reserve and the US Mint, can simply order the $1 notes to be withdrawn. That’s what ten other countries have done over the last half-century, without ensuing riots (GAO report, page 7).

The saving would be somewhat larger if the $2 note joined the $1 one in the shredder. The UK has a £2 coin, the Eurozone a €2 one. Switzerland even has a 5 franc coin, worth $5.11.

One disadvantage of this enlightened scheme in Trump’s eyes is that the great pile of coins that would be released into circulation consists of three types: the Presidential series, which is more or less OK, but also the horribly PC Susan B. Anthony and Sacagawea designs. It would be very costly to melt these all down for replacement. However, the scale of demand means that billions of new coins will be needed, opening the door to a new design better reflecting the Great Again America.

To be helpful, let me suggest two design features. One is to update the obsolete, inaccurate and probably unconstitutional motto “In God We Trust”. Why not take the opportunity to reflect the country’s new alliances, and smooth the path for the future negotiations on the resale of Alaska to its former owners, which would make a much bigger dent in the budget gap? For instance:

В Маммоне мы доверяем

For the main figure, here is a suitably stern and virile design from the Cook Islands, a Pacific dependency of New Zealand, whose currency is the unit. The American version should however have golden highlights.

Author: James Wimberley

James Wimberley (b. 1946, an Englishman raised in the Channel Islands. three adult children) is a former career international bureaucrat with the Council of Europe in Strasbourg. His main achievements there were the Lisbon Convention on recognition of qualifications and the Kosovo law on school education. He retired in 2006 to a little white house in Andalucia, His first wife Patricia Morris died in 2009 after a long illness. He remarried in 2011. to the former Brazilian TV actress Lu Mendonça. The cat overlords are now three. I suppose I've been invited to join real scholars on the list because my skills, acquired in a decade of technical assistance work in eastern Europe, include being able to ask faux-naïf questions like the exotic Persians and Chinese of eighteenth-century philosophical fiction. So I'm quite comfortable in the role of country-cousin blogger with a European perspective. The other specialised skill I learnt was making toasts with a moral in the course of drunken Caucasian banquets. I'm open to expenses-paid offers to retell Noah the great Armenian and Columbus, the orange, and university reform in Georgia. James Wimberley's occasional publications on the web

10 thoughts on “Budget hot tip: the President Trump dollar coin”

  1. One reason the dollar coin failed last time is that it was too similar in form to a quarter, even though it was a different color and slightly different size and shape. Apparently this is inevitable: there's a gazillion vending machines out there that have coin slots and internal machinery of fixed dimensions, that can be programmed to recognize dollar coins but cannot be physically expanded to receive coins significantly larger than or different in form from a quarter. So long as the vending machine lobby remains powerful we're not getting a dollar coin that can succeed.

    Though we could do what Canada did ~5 years ago and add rather sci-fi elements to our rather staid, even bland paper money.

    1. The dollar coins are not used because the stupid bill is available. Currency is a regalian function of the state: you just force the peasants to use what the king's mint supplies. Shred the dollar bills, and the peasants will come round smartly. I remember the day the UK switched to decimal currency. It wasn't liked, but the transition was instant, for lack of choice. Ditto the introduction of the euro, which I observed in Spain. Metrication in Britain is more or less voluntary and is still not complete.

  2. Actually the government would prefer that all coins and paper currency disappear completely, so they are not likely to invest much more in the system.

    1. Is that so? The seigniorage from currency, especially banknotes, is significant. All governments get from Visa and Mastercard is profit taxes. They will even knowingly make life easier for crooks with high-denomination notes. The worst offender is the €500 note, highly prized by drug capos and barely used by honest citizens. The CHF1000 note is worth even more, but there are a lot fewer of them in circulation and they are harder to exchange.

  3. The underlying reasons why the dollar coin movement has failed miserably over the past 40 years are (1) invidious opposition by the Federal Reserve, and (2) gross underestimating of the benefit to the government by both the GAO and advocates for the change, which is perversely damned by their faint praise.
    (1) According to ex-Mint Director Philip Diehl’s December 2012 testimony (at https://financialservices.house.gov/uploadedfiles… strong initial public demand for the Sacagawea and Presidential $1 coins “ultimately flagged” because the federal reserve banks commandeered and then suppressed the public supply, sitting on a production that they stored, while disingenuously pretending that no one wanted them, and that they were readily available on demand.
    (2) The benefit to the government of the dollar coin change is not the $4.4 billion given in the GAO report noted in the article. The GAO estimated this gain over a 30 year period, after substantial LOSSES over the first several years due to start up coin production costs. But the real savings would be about $60 billion, with the greatest gains being realized in the first few years, while the dollar bills were replaced. The primary reason for this difference is that the GAO fails to recognize that for each dollar coin put into circulation, the official public debt goes down by a dollar. There is no countervailing loss to the government when a dollar bill is withdrawn from circulation, because the bills are issued by the privately owned federal reserve banks.

  4. The Presidential Series has been nearly perfectly mis-managed. My daughter was an ardent history buff for a couple of years (ages 9-12, roughly), and she wanted as many of the dollar coins as she could assemble. But I checked with a dozen local banks, and the only had THAT year's version, The John Quincy Adams or the Benjamin Harrison, whatever. Plus, the other historical figures were unavailable at face value. An Abigail Adams dollar ran about $350 (it might have been silver, but still, it will never be seen by 99.99 percent of American girls).

    I think if they treated them like stamps, with a run for Elvis and a run for Paul Newman and a run for Willie Mays, people would be far more engaged in the switchover. As for confusing them with quarters, either give them an octagonal cut, or pop a thing in the middle, like the 1 euro or the 10 peso coins.

    1. I very much like the idea of non-political types on the coins. It may not be as easy as it is with stamps, so the faces can't change as often, but what about artists, poets, scientists, writers? Duke Ellington? Arthur Miller? Mark Twain? etc.

      1. Mmmm….I live in Mexico, and I love how they have Frida Kahlo on one side of the 500 peso note and Diego Rivera on the other. We really could do that as well, we don't HAVE to put an eagle on one side. Joe DiMaggio and Ted Williams. James Brown and Aretha Franklin. Jackie Gleason and Audrey Meadows. Jonas Salk and Linus Pauling. Faulkner and Hemingway.

    2. All the presidential dollars are available on eBay for about $2 each, so if you really want the complete set, it is not going to break the bank. [Just don't expect to get more than face value if you decide to part with them.] I am unaware of an Abigail Adams dollar coin; there are First Lady $10 coins [Including Abigail Adams], but they are 1/2 ounce gold coins, and go for about $700 up. And yes, many people have complained that you have to spend that much for them. There is a Dolly Madison silver dollar, but it only goes for about $25 or so.

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