There is a problem that has been hanging over the American coinage system like a dark pall for about the past decade. With each passing year, the scale of the problem grows worse, but philosophical traditions and interest groups have made resolving the issue a challenge for Congress.
Now, two pieces of legislation aim to change our money in fundamental ways. Will our lawmakers finally take a step toward fixing our coins, or will the issue once again die at the hands of lobbyists?
An Important Philosophy
U.S. coinage has long been noted (and admired) for its consistency and stability of design. Make no mistake, this is a conscious decision: It mirrors the perceived stability of, and confidence in, the U.S. dollar abroad. More than any other single factor, trust in the dollar as a stable store of value (a debatable point) is the crux of the American economy’s central place in the global economic system. For this reason, Treasury is not usually inclined to make any sweeping changes to our currency.
However, aside from aesthetics and a philosophy about projecting a stable currency, our coinage system is facing a persistent problem. Both the 1¢ penny and the 5¢ nickel have been losing money for the Treasury Department (and thus the taxpayers) for the better part of the last decade. There has also been difficulty in getting consumers to adopt $1 coins, which a more cost-effective and durable than paper (cotton, actually) $1 bills.
CoinWeek editor Hubert Walker provides some great comprehensive coverage on the two bills that seek to address these issues. The first is the COINS Act being considered by the Senate, introduced by Senator John McCain. The corollary in the House of the Representatives is H.R. 2067, the Cents and Sensibility Act. If nothing else, the legislature has a knack for crafting clever titles to the laws.
So far in the process, both bills have been referred to committee for further debate and revision.
Resistance to the Bill
So if U.S. coin production is in obvious need of reform, why do people both inside and outside the numismatic community generally oppose this legislation?
The proposed legislation is not without its problems, of course. Some observers have pointed out that the bills make no provision for $2 coin production to complement the $1 coin, which has been done in Europe, Canada, and Australia. This would help ameliorate concerns about having to haul around a pocket full of heavy $1 coins to make everyday purchases.
The detractors have a few other strong points. The laws seem to favor switching the composition of the coins to steel, an idea that was used to replace the copper in pennies in 1943 during World War II. If this solution were so obvious and feasible, one wonders why it hasn’t been the straightforward solution over the last 70 years or more.
The legislation also prescribes that any changes should not burden the vending machine industry, or any others that rely on knowing the size, shape, and composition of coins. This would seem to be largely moot, however, since most vending machines already don’t accept pennies. Broadly, there are public concerns that the bills are silent on too many indirect implications of these changes.
It’s telling that nearly identical legislation has been introduced many times in previous sessions of Congress and failed long before reaching a vote each time. The general goal of coinage reform ought to be undertaken and supported, but until the lingering concerns about composition changes and an alternative $2 coin (or more $2 bills) are addressed, there’s unlikely to be a sufficient political will to push these bills through Congress.
The opinions and forecasts herein are provided solely for informational purposes, and should not be construed as an offer, solicitation, or recommendation to buy or sell any product.