Judd Gregg, one of our state's former Senators, recently
took to the
of my local newspaper, Foster's Daily
Democrat, to advocate a Big Idea, that will… well, let him tell
In the parlance of Congressional budgeting, if you have an idea that
scores positively — in other words, if it raises money without raising
taxes — you have struck gold.
In the words of Kenny Bania:
Such an item allows you, should your colleagues accept it, to either
reduce the deficit or spend money on some program that has general
support but no funds to pay for it.
Expressed another way, if something scores positively, it creates
opportunities for action by the Congress. And this is particularly
appealing because Congress is generally wedged into a straitjacket of
inaction when it comes to new initiatives or reducing the deficit
because it has no way to pay for either effort.
Judd's ex-colleagues are demonstrably
inept at making difficult
fiscal choices, and would much prefer to discover a flock of
gold-egg-laying geese, or maybe lay claim to whatever loose
change they can find in the US Capitol seat cushions.
So what's Judd's Big Idea?
Sell the Post
Terminate the Small
Well, sorry. None of that for Judd.
Instead, the loose-change thing turns out to be close.
Here is an idea that involves small change but translates into budgeting
It is currency modernization.
Warning to the reader: "Modernization" will turn out to be a marketing
Our present currency system is illogical. We produce coins that cost
more than they are worth. Yet, at the same time, we rely far more
excessively than other industrialized nations on paper currency. We
simply have not modernized our approach to managing our currency to
catch up with a 21st century market society.
Judd's argument contains a smidgen of fact: it's probably true
and nickels cost more to make than they're worth. (He elides
the "to make" part.)
[It's also worth pointing out that penny and nickel face values are
still greater their melt-value. When that stops being true, they
will immediately vanish from general circulation.]
But in absolute terms, the amounts involved are capital-T Trivial.
(for FY2014) a yearly loss of $91 million for making pennies and
nickels. But making dimes and quarters more than made up for that;
the US Mint realized a total profit ("seignorage")
of $315 million from its overall
So "we" (actually: the Mint)
could at best
save about $91 million a year by not producing pennies and
nickels. With Your Federal Government spending $3.8 trillion per year,
this represents about 13 minutes of spending.
We'll look at the paper currency argument later. Back to Judd:
It is a bit embarrassing to have the world’s largest and most important
economy but yet be so far behind our competition in the simple act of
managing our physical money.
What can Judd possibly mean here? There's close to zero "competition"
for US currency in the domestic economy. (Although
could change.) In recent years, the US dollar has been
most commonly used currency worldwide, the Euro coming in a distant
second. It's the
It's hard to find any symptoms whatsoever of a "competition" problem.
So there's no need for Judd to be embarrassed. But let him ramble for a
while, he'll eventually get around to what he's actually talking about:
On the bright side, some moves are being made toward addressing this
problem. If those moves translate into real action, we stand to realize
benefits both from making day-to-day economic activity more efficient
and rational, and from saving the taxpayers considerable sums.
The Treasury has announced sweeping changes to our paper currency. The
Government Accountability Office (GAO), the Congressional audit group,
has supported major modernization 10 times in the last 25 years.
Most importantly, a group of thoughtful and respected legislators led by
Sens. Mike Enzi, R-Wyo., and John McCain, R-Ariz., and Reps. Kyrsten
Sinema, D-Ariz., and Robert Pittenger, R-N.C., have made fixing our
currency system a priority.
They are pushing for a dollar coin to be included in a package of
GAO-recommended savings measures with their bill, the United Savings and
Accountability Act (USA Act).
Enzi, the chairman of the Senate Budget Committee, has also pushed to
make sure that savings generated from this modernization will be able to
be scored in the budget process.
Ah, there it is: the dollar coin.
A majority of the American people likes this reasonable approach.
Sixty-one percent of Americans support going to a more coin-dominated
system when they are told of the savings it would generate.
But in actual fact, US dollar coins have proven to be
unpopular. "The American people" have had the option to
use them, on and off, for decades, and the lack of acceptance has been
Simply, when given a choice, "the American people" prefer
the paper dollar. This strongly suggests that there are hidden costs
to dollar coin usage (primarily convenience, I would suspect),
and those unremunerated costs would be borne by the citizenry.
Gregg's Big Idea: remove the choice. "We tried to be nice, but
you didn't behave as you were supposed to. So now we're going to do this
for your own good."
How much would this currency reform save us?
Yeah, how much would it save "us"?
It is estimated that switching from the one-dollar note to a one-dollar
coin could save the country up to $13.5 billion. Additional savings
could be made from suspending the production of the penny and
redesigning the nickel. This is a lot of money that could go to reducing
the deficit or to funding programs that have broad bipartisan support.
Note the bullshit signifiers here: "could" and "up to". And (most
important) no mention of the timeframe for those savings.
And, in any relevant context, despite Judd's dishonest claims otherwise,
it turns out to be not a "lot of money".
recent GAO study
is easy to find. They have a more conservative estimate of the savings
to the federal government: not $13.5 billion, but ("potentially")
$4.4 billion. (I don't
know where the $13.5 billion number comes from. I suspect it's fantasy.)
And how long would it take for those "potential"
savings to be realized? 30
That averages to about $147 million per year. In the same ballpark as
the savings from penny/nickel abolition. And in terms of a $3.8
trillion yearly budget, that works out to about 20 minutes worth of
Also note: it's not as if the government loses money printing
dollar bills. That would be hard to do; they take at best a few cents
worth of paper, ink, and labor and turn it into something "worth" a
dollar by fiat. It's just that they could make more money
with coins instead, due to their longer lifespan. (Again: "seignorage",
a word worth knowing.)
Canada, our neighbor to the north and a good place to try out ideas like
this, has successfully made this switch. Canadians experienced cost
savings 10 times higher then their initial estimates.
Judd demonstrates, again, his telling aversion to meaningful numbers.
According to the
the Canadian government saved $450 million over 5 years in its
switchover. So an average of $90 million/year, about 0.028% of their
Given Canada's smaller budget, that's a slightly bigger
deal than we'd see in the US:
A whole 2.5 hours out of the year!
In an election year like this, big things are not going to happen in
Congress. But positive, incremental initiatives that can help pave the
way for broader reforms of budget and governance should be doable.
Actually, big things will never happen in Congress as long as
they are distracted by time-wasting penny (heh!)-ante schemes like this.
Currency modernization is an opportunity to get real savings that can be
used by this Congress as it wrestles with paying for government and
reducing the debt.
As shown above, the savings are at best trivial and the
It is a small change, in small change. But it does score positively, so
it is actually a fairly big deal for a Congress that urgently needs some
Change, change, change. Get it? This clever play on words will no doubt
Now, in the grand scheme of things, this is probably not a huge deal. I
could learn to live without pennies, nickels, and dollar bills. I am
simply tired of pols like Judd Gregg making stupid and dishonest
arguments for decreasing Americans' currency choices.