Financial Impact of Issuing the New $1 Coin

GGD-00-111R: Published: Apr 7, 2000. Publicly Released: Apr 7, 2000.

Additional Materials:

Contact:

Bernard L. Ungar
(202) 512-4232
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a congressional request, GAO reviewed the financial impact of issuing the new $1 coin, focusing on the benefits of: (1) issuing 1 billion of the new $1 coins to circulate with the $1 Federal Reserve notes now issued; and (2) replacing all $1 Federal Reserve notes now in circulation with $1 coins.

GAO noted that: (1) the net benefit to the government of issuing 1 billion $1 coins this year will be $49.9 million; (2) according to the Bureau of the Mint, each dollar coin will cost an estimated $0.12 to produce, leaving about $880 million in gross proceeds; (3) from gross proceeds, GAO subtracted $2.8 million of Mint start-up costs, $44.5 million of Mint advertising and promotion costs, and $0.4 million of Federal Reserve processing costs, for net proceeds of $832.2 million for 1 year; (4) although the accounting and budgeting presentations of the net proceeds differ, in substance the $832.2 million net proceeds represent the amount of debt held by the public that the government will avoid by issuing coins; (5) at the current government long-term borrowing rate of 6 percent, this represents an interest avoidance, or net government benefit, of $49.9 million this year; (6) GAO also estimates that the benefit to the government of replacing all $1 Federal Reserve notes with $1 coins would be $522.2 million per year; (7) GAO arrived at this calculation by first estimating the net government benefit of issuing $1 notes only, which is $225.3 million, and then estimating the net government benefit of issuing $1 coins only, which is $747.5 million; (8) the difference is $522.2 million; (9) because $1 notes last only about 18 months before having to be replaced, the government has to produce about 5 billion of them per year to maintain the pool of 7.5 billion $1 notes now in circulation; (10) at a per unit production cost of $0.035, this costs $175.0 million, and it also costs the Federal Reserve about $49.7 million to process the $1 notes each year--for a combined production and processing cost of $224.7 million; (11) from these costs, GAO subtracted the amount of interest the government would avoid by issuing the 7.5 billion $1 notes rather than Treasury debt, which at the current 6 percent government long-term borrowing rate amounts to $450 million, for a net benefit from issuing the $1 notes of $225.3 million per year; (12) coins typically last 30 years before needing replacement; (13) the annual net benefit of issuing $1 coins, $747.5 million, thus would be $522.2 million greater than the net benefit of issuing $1 notes; and (14) the $1 coin would be less costly to the government because: (a) production costs for coins are lower over time than for $1 notes; (b) the government would have lower processing costs with a $1 coin; and (c) the government would avoid more interest costs because of the higher number of coins than notes held by the public.

Sep 28, 2016

Sep 27, 2016

Sep 26, 2016

Sep 23, 2016

Sep 21, 2016

Sep 7, 2016

Aug 30, 2016

Aug 11, 2016

Jul 22, 2016

Looking for more? Browse all our products here