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Why the U.S. Should Get Rid of the $1 Bill

Paper Dollar bill"Psst! Hey, buddy -- want to earn a dollar? How about 5.5 billion of 'em?"

According to the nonpartisan Government Accountability Office, if America gets rid of its $1 bill and replaces it with a dollar coin, the U.S. will save $5.5 billion on printing costs over the next 30 years.

Do the math. Putting a dollar coin in your pocket could save us $183.3 million a year. That's enough money to:
  • Buy two extra Lockheed Martin F-35 fighter jets a year.
  • Build a bridge most of the way to nowhere.
  • Ppay for every item of furniture sold by Ethan Allen last quarter.
  • Buy every man, woman, and child in America a can of Coca-Cola.
  • Or pay about seven hours' worth of interest on our national debt.
Perhaps most poetic of all, the simple act of switching to a dollar coin would save enough money to give a dollar to every American, once every other year.

laundry dayIt All Comes Down to Laundry Day

It sounds like magic -- free money. But where does it come from, and is it really true that the simple act of "changing" over from dollar bills to dollar coins can save $183.3 million a year?

Actually, yes, it is true. Just think about that dollar bill you forgot was in your pocket when you tossed it into the washing machine.

As currencies go, dollars are pretty flimsy things. Over time and through continued folding, spindling, and mutilation, that Federal Reserve note that began as a nice, crisp bill printed by the Treasury eventually devolves into a pathetic rag. Such damaged dollars are routinely vacuumed up at local savings banks, deposited in bags, and sent to a central processing facility for shredding -- to be replaced with more crisp, newly printed dollar bills.

Lather, rinse, and repeat enough, and the cost of printing all these dollar bills -- and of transporting them in armored trucks, of shredding them, and printing more -- adds up to a hefty bill for the U.S. taxpayer.

In contrast, a metal dollar coin, once minted, can stay in circulation, undamaged and perfectly useful, for decades... or until someone drops it down a storm drain. Specifically, the GAO estimates that the average lifespan of a dollar coin is 17 times that of a printed dollar bill.

The Math Behind Making Money

Printing dollar bills involves heavy reliance on a single commodity used to manufacture the notes -- cotton. When cotton prices spiked in 2010, that pushed up the cost of printing a dollar bill to 9.6 cents (in a more normal year, such as 2008, the cost is closer to 6 cents to print a dollar bill).

In contrast, the minting of coin-based dollars gives the government some flexibility in choosing the metals to mix and match to form the alloys that go into the coin. During WWII, for example, when copper became a strategic asset, the U.S. minted steel pennies for several years. In part due to this flexibility, the cost of minting a dollar coin in 2011 dropped to a mere 18 cents -- barely half what it cost to mint the same coin in 2010.

Result: We can mint a dollar coin for two to three times the cost of printing a dollar bill, but the coin will survive in circulation for about 10 times as long as the note.

Making Change

As you can imagine, the savings from such a switch add up pretty quick -- to $183.3 million a year. And yet a lot of folks still rebel instinctively at the idea of ditching the dollar bill. They tout its portability, the way it slips so easily into and (in our consumption driven society, more often) out of the wallet. They complain that dollar coins are too heavy, and too jingly in the pocket. They just don't like the darn things.

To me, though, these objections just don't carry any weight. So let me put this plainly, in terms any American taxpayer can understand: Would you rather switch to dollar coins, or would you rather have your taxes increased by $183.3 million to pay the price of nostalgia?

Well? Which is it? Sound off below.

True story: As a young child, Motley Fool contributor Rich Smith raided his coin collection of silver dollars to fund his addiction to Goetze's Caramel Creams. He regrets it to this day. The Motley Fool owns shares of Coca-Cola. Motley Fool newsletter services have recommended buying shares of Coca-Cola.

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