The dire fiscal circumstances facing the country are enough to drive Americans to drink.  But when it comes to the billions of dollars that could be saved for taxpayers, currency modernization represents a much-needed tonic, as well as a partial cure for the spending-like-drunken-sailors hangover that seriously threatens the country’s well-being.

Citizens Against Government Waste (CAGW) has long understood the merits of modernizing currency to both meet the demands of the time and, more importantly, realize significant cost savings in the production of the nation’s legal tender.  Several forays toward this goal have been attempted legislatively.  On September 20, 2011, Rep. Dave Schweikert (R-Ariz.) introduced H.R. 2977, the Currency Optimization, Innovation, and National Savings (COINS) Act, which called for a “transition to the more economical and environmentally friendly dollar coin, a change that the U.S. Government Accountability Office (GAO) has been advocating for more than two decades to help reduce government waste.”

More recent efforts were included in H.R. 3300, the Unified Savings and Accountability (USA) Act, sponsored by Reps. Robert Pittenger (R-N.C.) and Kyrsten Sinema (D-Ariz.) on July 29, 2015.  The USA Act incorporated a number of GAO recommendations (including transition to the dollar coin) to reduce, eliminate, or better manage several federal programs, while saving significant taxpayer dollars in the process.  Former Rep. Jim Kolbe (R-Ariz.), an honorary co-chair of the Dollar Coin Alliance (DCA), noted that, “For years, Congress has been struggling to enact real, meaningful budget reform.  The USA Act is common sense legislation that will be a significant step forward in these efforts; saving nearly $200 billion by eliminating wasteful spending and making the government more efficient.”  In the words of Kolbe’s DCA co-chair, former Rep. Tim Penny (DFL-Minn.), “This legislation recognizes the critical need for budget-saving measures such as currency modernization… a common sense plan both parties can get behind.”

Currently, legislators in both the Senate and the House are preparing to introduce a currency modernization bill that seeks to generate savings from the production of the penny, the nickel, and the dollar.  Specifically, the bill is expected to propose the following reforms to save taxpayers money:  temporarily suspending production of the one-cent coin; changing the composition of the nickel; and replacing $1 notes with $1 coins.  Furthermore, the proposed legislation aims to facilitate the implementation of such commonsense reforms by eliminating bureaucratic obstacles, such as the arcane (and short-sighted) way that the Congress currently accounts for the cost of conversion from notes to coinage.

The proposed changes for the penny, the nickel, and the dollar have been studied extensively.  For instance, CAGW has worked closely with Aaron Klein, a former Deputy Assistant Secretary for Economic Policy at the Treasury Department and a past chief economist on the Senate’s banking committee.  In 2013, Klein published, “Time for Change:  Modernizing to the Dollar Coin Saves Taxpayers Billions.”  Among his conclusions at the time:  “…the budget impact of modernizing to the dollar coin is likely more than $13 billion in savings over 30 years.”

The benefits of currency modernization are underscored by more recent research.  For instance, the production cost of the penny has been the subject of debate for several years.  And those costs have not been insubstantial:  2.4 cents per penny in 2011, 1.83 cents per penny in 2013, and 1.43 cents per penny in 2015.  While few people seem to want pennies, the U.S. Mint has actually increased their production:  up 58 percent since 2012!  At the same time, GAO reported that almost two-thirds of pennies are out of circulation.  According to Klein, “Despite continuing to cut costs for penny production, the Mint has lost over $200 million producing the penny this decade.”

By suspending (not necessarily ending) production of the penny, taxpayers would reap over $1 billion in savings over the next decade.  Those pennies already in circulation would most likely satisfy any demand for them in the meantime.  And if there is a demand for pennies after the hiatus, the infrastructure would still be in place to resume production.

While any current demand for the penny may be overstated, that for the nickel is not in question:  it remains an important unit of cash.  But it costs more than five cents to produce.  By the same token, there are costs to vendors to retrofit machines if currency is changed significantly.  Given the fact that vending machines are programmed to perceive certain coin weights and dimensions, any new nickel would need to approximate those characteristics.  By transition to a composition of 80 percent nickel and 20 percent alloy, and based on the Mint’s 2015 rate of production, Klein estimates more than $90 million saved over the next decade.

Finally, with regard to the dollar, CAGW has written extensively over the years about the benefits of converting from a note to a coin.  While the initial costs of production are higher for the coin than the dollar (18 cents for the former, 5.5 cents for the latter), the much greater lifespan of the coin over the dollar (30 years versus 6 years) means that the replacement cost of the note far outweighs that of the coin.  As Klein stated in his 2013 paper,  “With both political parties currently focused on efforts to reduce the federal deficit, the dollar coin presents a unique opportunity for Congress to take action and produce billions in budget savings without raising a single tax or cutting a single program.”

So, the penny, the nickel, and the dollar walked into a bar.  After a few drinks, over which most vexing problems are usually solved, the penny decided to retire (for at least ten years).  The nickel decided to go on a diet:  after losing twenty percent of its former self, it further contributed to society by no longer costing more than it was worth.  And the dollar joined its industrialized-world peers, by morphing from the old tired greenback to the new, more efficient coin.  Taxpayers and teetotalers alike would be well-served by more pubs like this one.