On July 19, 2011, separate bills were introduced in the House of Representatives and the Senate which call for the termination of the Presidential $1 Coin Program. The legislation follows numerous high profile media reports about growing hoard of $1 coins in storage and a report from the Federal Reserve System Board of Governors indicating costs of $3.65 million to transport and store the hoard.
The bill H.R. 2593: Wasteful Presidential Coin Act of 2011 was introduced by Rep. Jackie Speier of California and is cosponsored by Rep. Jared Polis of Colorado.
Specifically, the bill calls for subsection (n) of Section 5112 of title 31 to be struck. This subsection of the code provides for the redesign and issuance of the Presidential $1 coins at a rate of four per year until all deceased (for 2 years or more) former Presidents have been honored. The amendment to the code would take effect at the end of a 30-day period on the date following enactment. Currently, the series has reached the 18th President Ulysses S. Grant and would have been expected to continue until at least 2016.
The bill also seeks to restrict the overproduction of $1 coins. This seems to cover the separate Native American $1 Coin Program, which would remain within the code. Specifically, “No $1 coin may be minted or issued under this section during any period in which the number of $1 coins issued, but not in circulation, is more than 10 percent of the number of $1 coins in circulation.”
H.R. 2593 would seem to have at least one additional implication. It does not specifically address the First Spouse Gold Coin Program, contained in subsection (o) of Section 5112 of title 31. This program features each of the spouses of the former Presidents on one-half ounce 24 karat gold coins. The code instructs the series to continue “during the same period described in subsection (n)”. Without subsection (n) in the code, the First Spouse series would presumably also come to an end.
The restriction on overproduction of $1 coins included in the bill seems particularly ambiguous. In the first place, how many $1 coins have been issued? The number of Presidential $1 coins struck by the United States Mint is more than 2.2 billion, and the production for the Native American $1 Coin Program is around 180 million, but what about previous $1 coins? There were more than 1.4 billion Sacagawea Dollars struck and issued by the US Mint. Prior to this, there were 900 million Susan B. Anthony Dollars, and more than 600 million Eisenhower Dollars. How do you determine the number of these $1 coins “issued but not in circulation”? Possibly this language was intended to reference the number of coins being held by the Federal Reserve Banks, but large portions of the coins held by the public are no doubt accumulated in jars of loose change and coin collections, and not actively circulated. The application of this restriction with the current language seems impossible, if not highly problematic.
The Senate bill S. 1385 introduced by Sen. David Vitter of Louisiana and cosponsored by Sen. Jim DeMint of South Carolina takes a more succinct approach. It simply calls for subsection (n) to be struck and replaced with “(n) [Reserved]”.
Similar to the House bill, this would eliminate the Presidential $1 Coin Program, leave the Native American $1 Coin Program intact, and seem to end the First Spouse Gold Coin Program.
Other Possible Responses
While both of the bills introduced would address the current issue of storing and maintaining our national $1 coin hoard, they would again put off the main issue of the non-circulation of $1 coins. From 1971 to 1978, Eisenhower Dollars were produced in large numbers and failed to meaningfully circulate. It was believed that the coins were too bulky and large to be readily used by the public. In 1979, the smaller sized Susan B. Anthony Dollar was introduced to solve the perceived issues of the previous series. The coins were extremely unpopular with the public since the smaller size caused them to be confused with quarters. In 2000, the next bold experiment was the Sacagawea Dollar, which had both a distinctive edge and color, so as not to be confused with other denominations. Again, the coins failed to circulate. The next attempt came in 2007, with the present series that would feature rotating designs to entice the public’s interest. Once again, it is clearly not working.
All along, the obvious primary deterrent to $1 coin circulation has been the coexistence of the $1 banknote. If the Presidential $1 Coin Program is terminated, several years in the future, I am sure that yet another well meaning $1 coin series will be introduced and again rejected by the public.
On numerous occasions, the Government Accountability Office has indicated that replacing the $1 banknote with the $1 coin would save money in the long run. The switch has taken place long ago in countries around the world with positive results and seemingly little backlash from the public.
A second possible response to the $1 coin hoard would be the minor tweaks to the existing legislation that were recommended by the United States Mint and the Federal Reserve System Board of Governors. The mandatory introductory period during which Reserve Banks must have a sufficient number of each new Presidential $1 coin design available would be eliminated, and the production requirement for the Native American $1 coin would be removed.
Without these requirements, the two $1 coin series could continue in limited fashion. A likely scenario would be that the coins would not be produced for general circulation, but struck in quantities necessary to satisfy the demand from coin collectors. Meanwhile, any actual circulation demand for $1 coins could be satisfied from the existing hoard.
The limited continued production of $1 coins would be a money maker. When the previous Sacagawea Dollars failed to circulate, the US Mint continued to produce the coins and sell them to collectors in bags and rolls at a premium to face value. The US Mint currently sells 25-coin rolls of each Presidential $1 coin and Native American $1 coin to collectors for $39.95 plus shipping and handling. That makes for a price of $1.60 per coin for something that costs about 30 cents to produce. Demand for the rolls would no doubt increase if the coins were not available through any other channels.