Judd Gregg, one of our state's former Senators, recently took to the op-ed page of my local newspaper, Foster's Daily Democrat, to advocate a Big Idea, that will… well, let him tell you:
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: "That's gold, Jerry! Gold!".
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.
The subtext: Judd's ex-colleagues are demonstrably inept at making difficult fiscal choices, and would much prefer to discover a gaggle of gold-egg-laying geese, or maybe lay claim to whatever loose change they can find in the US Capitol seat cushions.
It is currency modernization.
Warning to the reader: "Modernization" will turn out to be a marketing euphemism.
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 that pennies 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. The GAO estimated (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 coin production.
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 that could change.) In recent years, the US dollar has been the most commonly used currency worldwide, the Euro coming in a distant second. It's the most widely held currency, period. 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:
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 dreadfully unpopular. "The American people" have had the option to use them, on and off, for decades, and the lack of acceptance has been spectacular. 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". The 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 years.
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 spending.
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 GAO, the Canadian government saved $450 million over 5 years in its switchover. So an average of $90 million/year, about 0.028% of their current yearly spending. 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 debt will continue growing.
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, change. Get it? This clever play on words will no doubt convince dozens.
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.