United States $1 Coin Act of 1997
Encyclopedia
The United States $1 Coin Act of 1997 was legislation passed by the United States Congress
providing for a redesigned gold colored coin with a distinctive new rim. A major purpose of the Act was to allow for the replacement of the Susan B. Anthony dollar
. The stockpiles of that coin had been depleted to the point that minting new coins would soon be required. The Sacagawea dollar
was introduced as a result of the Act.
attributed the Susan B. Anthony dollar's failure to the fact that it looked and felt like the quarter and the simultaneous circulation of the dollar bill. Kolbe recommended phasing out the paper dollar, warning that the Sacagawea would face the same fate as its predecessor if the bill remained in circulation. He refuted his opponents arguments that forcing a switch from the paper dollar to the dollar coin would take away consumer's choice by declaring, "when they introduce legislation to create paper pennies, paper nickels, paper dimes, paper quarters, and when they have coins for one-, two-, five-, ten-, twenty-, fifty-, even one hundred-dollar bills, then I'll be convinced that they truly believe in giving choice to the American people – when we have a choice in every single piece of currency that we have. Where is the logic as to why only the one dollar bill should be the only choice?" Kolbe also pointed to the success of Canadian loonie
, which was extremely unpopular at the time it was introduced. He said that because of the US's antiquated currency system, more and more universities and other communities were switching to debit cards and other cashless methods of exchange.
Rep. Thomas M. Davis
then spoke against phasing out the dollar bill. He noted that numerous polls indicated strong public preference for the paper dollar. Davis pointed out that even countries with dollar coin equivalents were switching to smart cards. He also reiterated the argument, "The American people clearly don't want to be told what kind of money they're allowed to use."
Theodore E. Allison, Assistant to the Board of Governors of the Federal Reserve System, pointed out that focus groups of consumers and retailers had expressed reservations about the Susan B. Anthony dollar even before it was introduced, due its similarity to the quarter, and that replacing the coin with one of markedly different dimensions would be inappropriate, because it would require costly refitting of vending machine
s. Allison recommended against phasing out the paper dollar, citing public opposition to the phaseout. However, he noted that "the Government's financial position, and, therefore, taxpayers, would benefit financially if, and to the extent that, the availability of a more acceptable dollar coin either caused dollar coins to substitute for dollar notes more than would be the case without it or caused the total circulation of dollar notes and dollar coins to increase further than would have been the case otherwise." When asked to elaborate, Allison said:
Rep. Jack Metcalf
then began questioning Allison about these issues in more detail. Allison explained that when the United States Mint
produces a dollar coin, it spends 8 cents on production costs and issues the coin into circulation at face value (100 cents), depositing the coin in the Federal Reserve for 100 cents. The 92 cents difference is seignorage, essentially profit. In the case of a dollar bill, on the other hand, the cost of producing the bill is 4 cents, and the Federal Reserve issues the bill into circulation at face value, investing the 96 cents difference in U.S. Government bonds
. The interest the Federal Reserve receives goes to Federal Reserve expenses (about $2 billion), retained earnings (a few hundred million), dividends to member banks (another few hundred million); the rest goes back to the Treasury. Metcalf noted, "It seems like an arcane system that could have been invented only by somebody who was mentally deranged."
Alfred A. Outlaw of the Southeastern Pennsylvania Transportation Authority
then spoke in favor of eliminating the dollar bill. He explained:
He also pointed out, "The additional problems with paper currencies are it jams our fareboxes, and it is easy to steal. As a result, there is additional cost for theft deterrent equipment and an increase in maintenance costs associated with the use of one dollar bills. I speak without hesitation that transportation authorities across this Nation would love to substitute dollar coins for dollar bills."
Jim Benfield of the Coin Coalition
then spoke in favor of eliminating the dollar bill. He compared the situation to the situation video rental stores were in when both VHS
and Betamax
were circulating. It was inefficient to stock both, so eventually they scrapped Betamax and went with VHS. Similarly, retailers find it inefficient to handle both dollar bills and dollar coins, so they will not switch to dollar coins until dollar bills are phased out.
David Clayton, owner of Automatic Food Service in Nashville, Tennessee
, then spoke in favor of eliminating the paper dollar. He said, "Until the coin circulates widely, our industry will continue to be burdened by the capital investment, high operating costs and customer frustration and inconvenience in using the one dollar bill... In the early 1960s, one coin, a quarter, could buy a candy bar and a soft drink. Today, the average selling price of a single product is more than sixty cents, necessitating a minimum of three coins to make a single purchase. As a consequence, we have been forced to add bill acceptors costing nearly $400 to virtually every machine."
Clayton pointed out the continuing costs associated with bill validators, saying, "They have made great strides and improved the bill acceptors over the years, but, at the same time, the bulk of, I would say, about 40 percent of my service calls and maintenance and upkeep, those calls are still on bill acceptors. So, they're costing us not only to install, to accept the dollar bill in the beginning, but also to maintain and keep them working so that our customers aren't unhappy."
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
providing for a redesigned gold colored coin with a distinctive new rim. A major purpose of the Act was to allow for the replacement of the Susan B. Anthony dollar
Susan B. Anthony dollar
The Susan B. Anthony dollar is a United States coin minted from 1979 to 1981, and again in 1999. It depicts women's suffrage campaigner Susan B. Anthony on a dollar coin. It was the first circulating U.S. coin with the portrait of an actual woman rather than an allegorical female figure such as...
. The stockpiles of that coin had been depleted to the point that minting new coins would soon be required. The Sacagawea dollar
Sacagawea dollar
The Sacagawea dollar is a United States dollar coin that has been minted every year since 2000. These coins have a copper core clad by manganese brass, giving them a distinctive golden color. The coin features an obverse by Glenna Goodacre. The reverse design has varied, from 2000 to 2008...
was introduced as a result of the Act.
Debate
On October 21, 1997, Congress held hearings on the Act. The most contentious issue was whether or not to amend the Act to mandate phasing out the U.S. one dollar bill. Rep. Jim KolbeJim Kolbe
James Thomas "Jim" Kolbe is a former Republican member of the United States House of Representatives for Arizona's 8th congressional district, serving 11 terms from 1985 to 2007.-Early life:...
attributed the Susan B. Anthony dollar's failure to the fact that it looked and felt like the quarter and the simultaneous circulation of the dollar bill. Kolbe recommended phasing out the paper dollar, warning that the Sacagawea would face the same fate as its predecessor if the bill remained in circulation. He refuted his opponents arguments that forcing a switch from the paper dollar to the dollar coin would take away consumer's choice by declaring, "when they introduce legislation to create paper pennies, paper nickels, paper dimes, paper quarters, and when they have coins for one-, two-, five-, ten-, twenty-, fifty-, even one hundred-dollar bills, then I'll be convinced that they truly believe in giving choice to the American people – when we have a choice in every single piece of currency that we have. Where is the logic as to why only the one dollar bill should be the only choice?" Kolbe also pointed to the success of Canadian loonie
Loonie
The Canadian 1 dollar coin is a gold-coloured, bronze-plated, one-dollar coin introduced in 1987. It bears images of a common loon, a bird which is common and well known in Canada, on the reverse, and of Queen Elizabeth II on the obverse.The design for the coin was meant to be a voyageur theme,...
, which was extremely unpopular at the time it was introduced. He said that because of the US's antiquated currency system, more and more universities and other communities were switching to debit cards and other cashless methods of exchange.
Rep. Thomas M. Davis
Thomas M. Davis
Thomas Milburn "Tom" Davis III was a Republican member of the United States House of Representatives, representing Virginia's 11th congressional district in Northern Virginia. Davis was considering a run for the U.S. Senate seat being vacated by five-term incumbent and fellow Republican John...
then spoke against phasing out the dollar bill. He noted that numerous polls indicated strong public preference for the paper dollar. Davis pointed out that even countries with dollar coin equivalents were switching to smart cards. He also reiterated the argument, "The American people clearly don't want to be told what kind of money they're allowed to use."
Theodore E. Allison, Assistant to the Board of Governors of the Federal Reserve System, pointed out that focus groups of consumers and retailers had expressed reservations about the Susan B. Anthony dollar even before it was introduced, due its similarity to the quarter, and that replacing the coin with one of markedly different dimensions would be inappropriate, because it would require costly refitting of vending machine
Vending machine
A vending machine is a machine which dispenses items such as snacks, beverages, alcohol, cigarettes, lottery tickets, consumer products and even gold and gems to customers automatically, after the customer inserts currency or credit into the machine....
s. Allison recommended against phasing out the paper dollar, citing public opposition to the phaseout. However, he noted that "the Government's financial position, and, therefore, taxpayers, would benefit financially if, and to the extent that, the availability of a more acceptable dollar coin either caused dollar coins to substitute for dollar notes more than would be the case without it or caused the total circulation of dollar notes and dollar coins to increase further than would have been the case otherwise." When asked to elaborate, Allison said:
- Suppose the total amount of coins went up. That would provide a means of financing expenditures for the Treasury that didn't exist before; that is, the Treasury can in effect spend. Let's say there were another one billion coins, the Treasury could, in effect, spend—on goods, services, salaries, anything it wants to buy—a billion dollars without having to borrow the money to do it. And, therefore, it would save the interest cost on a billion dollars of debt that is avoided, in the case of a billion more coins. I'm not predicting that there would be a billion more coins, but just to put this in the perspective of some possible number.
Rep. Jack Metcalf
Jack Metcalf
Jack Metcalf was an American politician who served as a member of the United States House of Representatives from 1995 to 2001. He represented the 2nd Congressional District of Washington as a Republican....
then began questioning Allison about these issues in more detail. Allison explained that when the United States Mint
United States Mint
The United States Mint primarily produces circulating coinage for the United States to conduct its trade and commerce. The Mint was created by Congress with the Coinage Act of 1792, and placed within the Department of State...
produces a dollar coin, it spends 8 cents on production costs and issues the coin into circulation at face value (100 cents), depositing the coin in the Federal Reserve for 100 cents. The 92 cents difference is seignorage, essentially profit. In the case of a dollar bill, on the other hand, the cost of producing the bill is 4 cents, and the Federal Reserve issues the bill into circulation at face value, investing the 96 cents difference in U.S. Government bonds
Treasury security
A United States Treasury security is government debt issued by the United States Department of the Treasury through the Bureau of the Public Debt. Treasury securities are the debt financing instruments of the United States federal government, and they are often referred to simply as Treasuries...
. The interest the Federal Reserve receives goes to Federal Reserve expenses (about $2 billion), retained earnings (a few hundred million), dividends to member banks (another few hundred million); the rest goes back to the Treasury. Metcalf noted, "It seems like an arcane system that could have been invented only by somebody who was mentally deranged."
Alfred A. Outlaw of the Southeastern Pennsylvania Transportation Authority
Southeastern Pennsylvania Transportation Authority
The Southeastern Pennsylvania Transportation Authority is a metropolitan transportation authority that operates various forms of public transit—bus, subway and elevated rail, commuter rail, light rail, and electric trolley bus—that serve 3.9 million people in and around Philadelphia,...
then spoke in favor of eliminating the dollar bill. He explained:
- The cost to process one thousand dollars worth of one dollar bills at SEPTA is approximately $10.11. The cost to process the same amount in coins is $1.22. The reason for the large difference is that handling paper currency is more labor-intensive. Coin processing is more efficient due to the higher degree of technology and availability of counting machines. I don't know of any technology that will fully process paper currency and meet the Federal Reserve's acceptance requirements that all paper currency is faced when stacked. This simply means all one dollar bills must be stacked with the portrait of George Washington facing the same direction. Therefore, our note processors must stack and face all bills by hand.
He also pointed out, "The additional problems with paper currencies are it jams our fareboxes, and it is easy to steal. As a result, there is additional cost for theft deterrent equipment and an increase in maintenance costs associated with the use of one dollar bills. I speak without hesitation that transportation authorities across this Nation would love to substitute dollar coins for dollar bills."
Jim Benfield of the Coin Coalition
Coin Coalition
The Coin Coalition is an organization supporting the elimination of pennies and dollar bills from U.S. currency. It is funded by vending machine companies, video arcade owners, and the soft drink industry, who all have an interest in eliminating maintenance costs associated with dollar bill...
then spoke in favor of eliminating the dollar bill. He compared the situation to the situation video rental stores were in when both VHS
VHS
The Video Home System is a consumer-level analog recording videocassette standard developed by Victor Company of Japan ....
and Betamax
Betamax
Betamax was a consumer-level analog videocassette magnetic tape recording format developed by Sony, released on May 10, 1975. The cassettes contain -wide videotape in a design similar to the earlier, professional wide, U-matic format...
were circulating. It was inefficient to stock both, so eventually they scrapped Betamax and went with VHS. Similarly, retailers find it inefficient to handle both dollar bills and dollar coins, so they will not switch to dollar coins until dollar bills are phased out.
David Clayton, owner of Automatic Food Service in Nashville, Tennessee
Nashville, Tennessee
Nashville is the capital of the U.S. state of Tennessee and the county seat of Davidson County. It is located on the Cumberland River in Davidson County, in the north-central part of the state. The city is a center for the health care, publishing, banking and transportation industries, and is home...
, then spoke in favor of eliminating the paper dollar. He said, "Until the coin circulates widely, our industry will continue to be burdened by the capital investment, high operating costs and customer frustration and inconvenience in using the one dollar bill... In the early 1960s, one coin, a quarter, could buy a candy bar and a soft drink. Today, the average selling price of a single product is more than sixty cents, necessitating a minimum of three coins to make a single purchase. As a consequence, we have been forced to add bill acceptors costing nearly $400 to virtually every machine."
Clayton pointed out the continuing costs associated with bill validators, saying, "They have made great strides and improved the bill acceptors over the years, but, at the same time, the bulk of, I would say, about 40 percent of my service calls and maintenance and upkeep, those calls are still on bill acceptors. So, they're costing us not only to install, to accept the dollar bill in the beginning, but also to maintain and keep them working so that our customers aren't unhappy."
See also
- Dollar coin (United States)
- Presidential $1 Coin Program
- United States one-dollar billUnited States one-dollar billThe United States one-dollar bill is the most common denomination of US currency. The first president, George Washington, painted by Gilbert Stuart, is currently featured on the obverse, while the Great Seal of the United States is featured on the reverse. The one-dollar bill has the oldest...
- Save the Greenback ActSave the Greenback ActThe Save the Greenback Act was legislation proposed, but not passed, in the United States Congress in 1995 and 1997 forbidding the phase-out of the United States one-dollar bill....