Neal S. Wolin
The Treasury Department has taken a number of important steps in recent years to improve its efficiency and cut costs. We've increased the use of electronic transactions through our “Paperless Treasury” campaign, significantly reduced energy consumption, identified ways to use existing workspace more effectively, and implemented other critical savings initiatives.
But there's more work to be done to build on that progress. In June, President Obama issued an Executive Order establishing the Campaign to Cut Government Waste, charging federal agencies with scouring their operations from top to bottom for further ways to streamline government and cut costs. And Vice President Biden has been leading the effort to make government more efficient and effective, ensuring that we are responsible stewards of taxpayer dollars.
One area where there's an additional opportunity to cut taxpayer costs is reducing the current surplus inventory of $1 coins. That's why we're announcing today that – effective immediately – the United States Mint is suspending the production of new Presidential $1 Coins for circulation.
To understand why we are taking this action, it's important to start with some background on the issue.
In 2005, Congress enacted the Presidential $1 Coin Act. That law mandated that the United States Mint issue four new Presidential $1 Coins each year from 2007 to 2016.
When each new Presidential $1 Coin is introduced, Federal Reserve Banks order enough coins from the United States Mint to meet initial demand from financial institutions. For a variety of reasons, however, the demand for each of the new Presidential $1 Coins usually drops significantly soon after they are introduced. As a result, financial institutions have ended up returning a substantial amount of the $1 Coins that were initially minted – about 40 percent – to Federal Reserve Banks.
At the end of the most recent fiscal year, the Federal Reserve Banks held nearly 1.4 billion surplus dollar coins in their vaults – enough to meet current levels of circulating demand for more than a decade. Based on current trends, the Federal Reserve estimates that its surplus inventory of $1 coins will grow to 2 billion by the end of the program in 2016.
Source: Board of Governors of the Federal Reserve
Minting $1 coins that ultimately end up sitting in Federal Reserve Bank vaults – and serve no useful purpose for businesses, financial institutions, and consumers – is simply not a prudent use of taxpayer resources. In fact, a number of members of Congress have expressed concerns over the growing inventories, and some have introduced legislation to suspend or end outright the Presidential $1 Coin Program.
The U.S. Mint has taken steps to help address the growing inventory of $1 coins. But stronger action is necessary, particularly at a time when it's critical that we cut waste and improve efficiency across all areas of government.
Under existing law, the Secretary of the Treasury has the authority to “mint and issue coins . . . in amounts the Secretary decides are necessary to meet the needs of the United States.” Given the substantial, growing inventory of $1 coins, it is clear that the minting of hundreds of millions of additional $1 coins over the next several years is not necessary and is not an effective use of taxpayer dollars.
As such, Secretary Geithner is ordering the immediate suspension of the minting of the Presidential $1 Coin for circulation. Regular circulating demand will be met through the Federal Reserve Banks' existing inventory of nearly 1.4 billion $1 coins, which will be drawn down over time.
Consistent with the Presidential $1 Coin Act, those who would like to obtain future Presidential $1 Coins can purchase them directly from the U.S. Mint during specified periods. The next coin in the series, the President Chester A. Arthur $1 Coin, will be released in the Spring of 2012 and is expected to a have a dramatically lower production run, which will be set based on collector demand. Prices and shipping costs for future $1 Coins will be announced in the near future and will be set at a level that ensures that they do not result in a cost to taxpayers.
The steps we're announcing today will save at least $50 million annually over the next several years. That's the right decision for taxpayers. And going forward, we'll continue our work to identify additional opportunities to support President Obama's critical objective to cut waste and improve efficiency across government.
Neal S. Wolin is Deputy Secretary of the Treasury