Question: How can circulating coins reduce the government’s deficit?

According to recently introduced legislation, the key lies in seigniorage, or the difference between a coin’s face value and the cost to produce it.

While the price of copper makes the production of cents and 5-cent pieces unprofitable for the U.S. Mint today, the Mint produces dimes, quarter dollars and half dollars for less than the face values of the coins. This profit from coin production returns to the Treasury to reduce the federal deficit.

The new legislation, H.R. 2535, the “American Liberty Deficit Reduction through Coinage Act” may — according to projections by the Citizens Coinage Advisory Committee — reduce the deficit by $471 million to $606 million over 10 years if passed. In fact, the program would only move forward if the U.S. Mint shows that enacting it will reduce the deficit by at least $100 million over 10 years.

The bill provides a rather complex scenario where new Liberty-themed dimes and quarter dollars would be introduced into circulation in 2015 and 2016 respectively with designs “emblematic and allegoric of the concept of ‘American Liberty.’ ”

The Liberty-themed dimes and quarters would be issued alongside Roosevelt dimes and Washington quarters. For example, in 2015, a new Liberty dime would be released as would 2015 Roosevelt dimes. In 2016, no Liberty dimes would be struck, but new 2016 Liberty quarter dollars would be produced alongside 2016 Washington quarters. In 2017, production of new Liberty dimes would start.

Also starting in 2015, a Liberty half dollar would be produced in addition to existing Kennedy half dollars. This design would change every 10 years. Production of the Liberty design for all denominations would be between 40 and 50 percent of United States Mint production for that particular coin, in any given year.

Yes, it’s complicated. Perhaps unnecessarily so.

The premise is that the introduction of these new Liberty-themed coins will significantly increase demand beyond the normal needs of commerce, which would lead the U.S. Mint to strike more coins. According to Mint estimates, 147 million Americans collected the 50 State Quarters program.

The concept was developed with the CCAC, and the Liberty-themed designs should provide a nice educational opportunity to share the rich history of American coinage design while it potentially makes money for the government. Now it just has to pass!

Best,

Steve Roach

sroach@coinworld.com