On July 24, 2014, Rep. Mike Coffman of Colorado and Rep. Kyrsten Sinema of Arizona introduced H.R. 5196: Unified Savings and Accountability Act, or the “USA Act”, which includes reforms projected to result in spending cuts and savings estimated at $193 billion over ten years. Included in the bill are two provisions which would have a significant impact on circulating coinage.
According to press releases issued by Reps. Coffman and Sinema, the bill implements recommendations made by the Government Accountability office to improve the efficiency and effectiveness of government by elimination of overlap and duplication.
Coffman said, “The provisions in the USA Act are reasonable reforms that will result in substantial savings. This is a bipartisan effort that will improve the efficiency of the federal government and improve stewardship of federal tax dollars.”
“This bipartisan bill cuts wasteful spending and government inefficiencies. These are non-controversial, common sense solutions that result in significant savings through better management, oversight, and modernization.” said Sinema.
The bill has been referred to the Committee on Oversight and Government Reform, and in addition to the Committees on Energy and Commerce, Ways and Means, Foreign Affairs, Financial Services, House Administration, and Rules. It currently only shows Rep. Sinema as the sole cosponsor.
Prohibition on Non-Cost-Effective Coins and Currency
The first provision of the USA Act related to coins is included in Sec. 203 of the bill which would prohibit the non-cost-effective minting and printing of coins and currency. The prohibition would be accomplished by amending certain sections of the United States Code.
With respect to coins, Section 5111 of title 31, United States Code, would be amended by adding the following:
(e) Prohibition on certain minting.-
Notwithstanding any other provision of this subchapter, after the end of the 4-year period following the date of the enactment of this subsection, the Secretary may not mint or issue any circulating coin that costs more to produce than the denomination of the coin (including labor, materials, dies, use of machinery, overhead expenses, marketing, and shipping).
With respect to currency, Section 5114(a) of title 31, United States Code, would be amended by adding the following:
(4) Prohibition on certain printing.-
Notwithstanding any other provision of this subchapter, after the end of the 4-year period following the date of the enactment of this paragraph, the Secretary may not engrave or print any United States currency that costs more to produce than the denomination of the currency (including labor, materials, dies, use of machinery, overhead expenses, marketing, and shipping).
If this provision is implemented, it would have an impact on the two lowest circulating coin denominations. Based on the most recent figures, it cost 1.83 cents to produce and distribute each cent and it cost 9.41 cents to produce and distribute each nickel. The costs for all other denominations remained below the respective face values.
While the cent and nickel did generate losses on their own, the United States Mint does generate positive seigniorage across all circulating denominations produced. During the most recent fiscal year, circulating coin segment generated an overall gain of $137.4 million.
A bill previously introduced in the House of Representatives had also sought to prohibit non-cost effective coins. The bill H.R. 3146, known as the SAVE II Act, had been introduced on September 19, 2013 and included numerous measures aimed at reducing the deficit of the Federal Government. Interestingly, the provision included in the SAVE II Act did not specifically apply the prohibition to circulation coins, which may have had consequences for bullion and numismatic coins.
Replacing the $1 Note with the $1 Coin
The second provision of the USA Act related to coins is included in Sec. 205, which calls for the replacement of the $1 Federal Reserve Note with the $1 coin within circulation. Reps. Coffman and Sinema indicated projected savings of $4.4 billion over ten years, which was the figure indicated in the most recent GAO report recommending the change.
From 2007 to 2011, more than $2 billion worth of Presidential Dollars had been produced for circulation. Since December 2011, the United States Mint has not produced $1 coins for circulation, following a build up of $1 coins in storage at Federal Reserve Banks.
The process for transitioning from the $1 note to the $1 coin would begin with the Board of Governors of the Federal Reserve System undertaking steps to sequester all $1 coins minted and issued from 1979-1981 and again in 1999, referring to the Susan B. Anthony Dollars which had been unpopular in circulation. The sequestered coins may be released for certain uses including to dealers in collectible coins and to countries that have adopted the United States dollar as their base unit of exchange. One year from the enactment of the Act, the coins would be considered obsolete, although they would remain legal tender.
The Board of Governors of the Federal Reserve System would be required to undertake efforts to improve the circulation and remove barriers to the circulation of the $1 coin, including outreach and education programs.
A deadline is indicated for Federal Reserve Banks placing $1 notes in circulation as the earlier of the date on which the number of $1 coins placed into circulation after the enactment of the Act exceeds 600 million annually or four years after the date of enactment of the Act. After this time, the Federal Reserve may not order additional $1 notes, but for one year may continue to place $1 notes in circulation from those on hand or deposited with it. The $1 notes would remain legal tender and new $1 notes are authorized to be produced solely to meet the needs of collectors.
The replacement process indicated in the USA Act is similar to the process outlined in previous bills introduced in the Senate and House, known as the COINS Act.