You have to spend money to make money. And one former Georgia lawmaker offers that advice to the federal government.
Charlie Smith, a former state representative from St. Mary’s, says if the U.S. really wants to save money, it would replace the $1 bill with the not-so-popular $1 coin. Smith, now an attorney with a Brunswick firm, has been beating this drum for years. He kept the momentum going this month in a newspaper article.
Smith told a Brunswick News reporter that the federal government could save $500 million a year by circulating $1 coins instead of $1 bills, and that there were four studies to support the savings claim.
At PolitiFact, we’re fond of money, be it paper or coin. So Smith’s savings claim was intriguing. We decided to investigate further.
During his 10 years in the state Legislature, Smith was a floor leader for then-Gov. Roy Barnes. These days he’s still leading, but he admits his coin cause is almost unwinnable.
"They’ve started calling me Charlie ‘Don Quixote’ Smith because I’m fighting windmills," he told us about his campaign to phase out $1 bills.
Smith said he was slightly misquoted in the Brunswick News article. He did say the government could save $500 million a year with the $1 coins, but that amount was cited in just one study. And since then the savings figure has been revised downward.
The studies that Smith references are those done by the independent, nonpartisan U.S. Government Accountability Office, which works for Congress and acts as a watchdog for how the federal government spends taxpayers’ money.
The GAO has released several reports over the past decade on the net benefit to the government of replacing the $1 bill with a $1 coin. A report released in 2000 included the $500 million annual savings figure that Smith mentions. But since that year, the GAO studies have estimated less in annual savings.
Last year, in testimony before a congressional committee, the GAO estimated a savings of about $4.4 billion over 30 years, or an average of about $150 million per year. It also repeated a recommendation that the dollar bill be phased out over a four-year transition period.
The savings included in the studies is based on economics. Coins last longer than paper bills, and dollar coins don’t cost more than they are worth to produce (for example, it costs more than twice the face value of the penny and nickel to produce them).
Despite the savings, there’s a problem. People don’t like the coins. Toward the end of last year, there were $1.4 billion in dollar coins piled up in Federal Reserve vaults.
Like Smith, other proponents of the $1 coin disagree with the GAO’s latest and much lower annual savings figures.
A GAO report released in November said the $1 coin hadn’t really caught on with the public because the $1 bill was still in circulation. Also, savings were lower partly because new equipment to process the bills was allowing for a longer life span. (Early studies had listed the $1 bill’s life span at about 18 months). And the government was going to cut back on production of the coins and use the extra coins already in storage.
"We think (the federal government) is gaming the numbers a bit," Shawn Smeallie, executive
director of the Dollar Coin Alliance, says about the lower savings figures. The Federal Reserve improvements to increase the dollar bill’s life span haven’t been implemented yet, Smeallie says, and he thinks the costs for producing the coins is overstated.
His group estimates the annual savings of the bill-to-coin switch would be about $366 million. The Dollar Coin Alliance -- a mix of vendors, mass transit agencies and trade associations that could benefit from the change -- is pushing for a Senate hearing this session for a bill on the change.
Whatever happens, Smith is doing his best to circulate the coins in his hometown. But even there, where his crusade is well-known, he gets some pushback from people who don’t want the "Charlie coins." And when he travels to Atlanta and passes the coins off to cashiers, they usually ask whether he’s been riding MARTA. The public transit agency gives change in the $1 coins.
So does Smith’s claim add up?
The former state lawmaker said that circulating $1 coins instead of $1 bills could save the federal government $500 million a year. A newspaper featuring Smith’s story and statements misquoted the former state lawmaker and overstated his claim.
One of the several federal studies, completed over a decade ago, about the bill-to-coin switch does include the $500 million savings estimate. Other studies since then have included lower savings claims.
The overarching point of Smith’s statement was the potential savings of the $1 currency change. This is true. Moving to coins from paper money would save taxpayers’ money in the long run.
But Smith cherry-picked the study with the largest amount of savings. He cited $500 million. The most recent study showed the saving at about $150 million, far less than Smith cited.
We rated Smith’s claim Half True.