Legislation seeks to eliminate $1 Federal Reserve note, Lincoln cent

Changing composition of 5-cent coin also part of currency reform
By , Special to Coin World
Published : 03/31/17
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This article comes from our April 17, 2017, weekly issue of Coin World. Want to get all of our content, including special magazine exclusives?  Subscribe today!

Advocates of abolishing the $1 Federal Reserve note are at it again, this time hoping that President Donald Trump and conservative Republicans will finally side with their three-pronged approach to revamping the nation’s currency system.

Under S. 759, introduced March 29 by Sens. John McCain, R-Ariz., and Mike Enzi, R-Wyo., the government would end production of the $1 Federal Reserve note, revise the composition of the 5-cent coin, and suspend production of 1-cent coins.

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While the draft legislation calls for an end to paper dollar notes and the cent, it is silent on dollar coin production.

Backers of the legislation said they believe that the existing stocks of circulation-quality dollar coins stored in Federal Reserve Banks around the nation will be more than adequate to meet demand.

They also cite the success of Canada and other nations as proof that the public will accept the dollar coins once the paper dollar is eliminated.

S. 759 was referred to the Senate Committee on Banking, Housing and Urban Affairs.

Groups have pushed the end of the paper dollar for decades, but every time they have been quashed by a coalition of printing unions and the Crane & Co., a Massachusetts firm that has had a lock on supplying the specially blended paper used in printing Federal Reserve notes. Crane has supplied the paper for U.S. paper currency continually since 1878. Its cotton-based paper is “the most durable banknote paper in the world, achieving the longest life span of any paper currency,” the firm’s website states.

Although Crane has long opposed elimination of the $1 note, when the Dollar Coin Alliance, the organization leading the proposed changes, launched its new effort on March 29, it issued only a brief reference through former Rep. Jim Kolbe, R-Ariz., to “special interests” in the paper industry and to “sheer inertia” on Capitol Hill for killing his repeated efforts to end the paper dollar.

Without that change, Kolbe said, there is no question that a dollar coin cannot succeed.

Kolbe and another former congressman, Tim Penny, D-Minn., are co-chairmen of the Dollar Coin Alliance.

What has given the Dollar Coin Alliance hope, said the group’s executive director Shawn Smeallie, is that the new president and lawmakers will support and act upon the premise  that abolishing the paper dollar can produce $16 billion in savings.

“The administration, I think, is a little more receptive to this argument,” he told Coin World.

“Can you imagine Donald Trump seeing that pennies cost more than they are worth?” said Smeallie, a former aide to President George W. Bush.  

“Why are we doing this?” Smeallie said Trump would ask.

Smeallie said he also believes that the new Congress is filled with conservatives who want to devise ways for the federal government to cut its costs.

The use of coins instead of paper dollars will yield big savings, his group argued at their Capital Hill press briefing.

One new point they will raise is a Hart Research Associates and Public Opinion Strategies online poll of 1,001 registered voters.

That poll showed voters favored replacing the $1 bill with a $1 coin “when informed of the estimated savings for the government and taxpayers.”

When told the savings over 30 years could be $4.4 billion, “fully 70% of voters say they favor replacing the $1 bill, ...” a release from Hart Research said.

“Only 30 percent oppose it,” the release said.

Currency reform legislation

The Dollar Coin Alliance distributed fact sheets on S. 759 and said similar legislation will soon be introduced in the House.

The Senate bill is expected to call for suspending production of 1-cent coins, saying that a “sufficient” number of cents are stored in jars.

Taxpayers would saved the production costs, but the U.S. Mint would be authorized to “meet demands of numismatic collectors” wanting cents.

In addition, the comptroller general would be directed by the legislation to study the impact of the suspension of cent production.

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For 5-cent coins, the Mint would be directed to study a copper-nickel composition equal to 80 percent copper and 20 percent nickel. The current alloy is a homogenous mix of 75 percent copper and 25 percent nickel.

The new composition could remain in effect as long as it cuts costs to taxpayers, can be accepted by coin machines and has no impact on public or stakeholders.

The bill would also allow the Mint director to submit plans to increase the percentage of copper and decrease the amount of nickel in the coin after presenting the plan to Congress.

The bill would not allow the Federal Reserve to issue any more $1 Federal Reserve notes two years after the law is enacted. However, it would allow “some $1 bills” to be made and sold as collectibles.

The Dollar Coin Alliance describes itself as “composed of small businesses, mass transit agencies, watchdogs, trade associations and private companies.”

When asked who the companies are, Smeallie told Coin World, “They are copper related.”

Among the members of the alliance are the Arizona Mining Association, Copper and Brass Fabricators Council, and Copper Development Association.

The ties between copper interests and the dollar coin movement are noted in stories about Kolbe’s efforts to seek an end to the paper dollar in the 1990s. 

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Older Comments (5)
It is long overdue to get rid of these issues. We are the only country in the world to have a1 dollar note and a one cent piece. Time to step up to the 21st century.
I also would like to see the dollar bill and the cent eliminated. However, the present dollar coins, "oxidize" very rapidly, making them hideous looking within a couple of months. So much so in fact that looking at the details of the coin, (especially the "Sag" dollar) become difficult. There should be a way to prevent these coins from deteriorating so rapidly.
The COINS Act is missing a critical component: every other major country that successfully replaced its lowest-value note with a coin also has a $2 coin or bill in widespread use. Where both denominations are available, change in amounts less than $5 only requires one or two coins rather than the four that would be needed otherwise, effectively negating the "pocket full of $1 coins" objection commonly raised by opponents.

Ideally a revived US $2 denomination should also be a coin. It should be small like the Australian $2 piece (only slightly larger than a US cent), and it should be distinctive, either multi-sided and/or bimetallic. But if introducing a second new circulation coin is too radical to get past Congress maybe the Canadian approach could be taken - until the $1 coin is established in general use it could be accompanied by a redesigned $2 bill. Increased production would blunt Crane Paper's lobbying efforts and let naysayers keep some of their "foldin' money". True, it wouldn't save as much versus complete conversion to coins but with roughly 45% of the BEP's resources tied up in making $1 notes, cutting that amount in half would still be a significant benefit.