There is no one smarter, better experienced, or more capable of wise financial management than the United States government.
Whoa! Mom wasn’t kidding when she told us what would happen if we told a fib! OK, let’s back up and clarify that earlier statement: Just about everyone is smarter, better experienced, or more capable of wise financial management than the United States government. There is one area in the realm of finances where the feds can excel — making massive mistakes.
We’ve already seen how the U.S. Mint spent 2.06 cents to make each penny and 7.53 cents for each nickel back in 2020. Let’s face it, though. Not everyone is cut out to deal with financial matters, and everyone is entitled to one mistake. At least they learned their lesson, because it now spends — oh dear… 2.1 cents per penny and 8.52 cents per nickel.
We shouldn’t be too surprised to learn about some poor decisions regarding the rollout of the $1 presidential coin. This initiative came on the heels of the successful production of quarters that featured each of the states and territories. In 2005 the Presidential $1 Coin Act (Public Law 109-145) sought to build upon the popularity of the commemorative quarters. The legislation authorized the Mint to produce $1 coins, featuring the faces of deceased presidents.
In passing this legislation, the goal of Congress was to do more than educate the public about America’s chief executives. It hoped to promote the use of coins over paper. Although it costs more to produce coins, they last longer. In the long term, it saves the government money. If people would stop using paper dollars and switch exclusively to coins, the government would save $5 billion over 30 years. That $5 billion sure would come in handy, too. It’s enough to fund the operations of the federal government for about 9 hours. (See the National Debt Clock for details.)
From 2007 to 2016, the Mint issued coins with four different presidents each year, and it turned them out in the billions. Federal law required that they be accepted at all federal buildings, national parks, military bases, and embassies. Vending machines, toll booths, and laundry facilities were retooled to accept the new coinage.
Although the government loved the new coins, the public wasn’t very keen on them. Coins are heavier and less convenient to carry around. Besides, this is the 21st century. Does anyone really use actual money these days?
To encourage the use of the coins, the Mint developed a program to get them into circulation. Its website offered the coins for sale at the fabulous rate of $1 per $1 coin, shipping included. Emphasizing the point made in the last paragraph, the Mint accepted credit cards as payment.
Here’s the thing about credit cards: they make money by charging fees. This not only includes the interest and late fees you rack up when you don’t pay off your balance on time but it also comes in the form of fees charged to vendors. Those who accept credit cards for payment get charged a fee of 1.5 – 3.5% on every transaction. Right from the start, this meant the Mint was going to bring in less than it sent out.
Another thing about credit cards is that many come with incentives for their use. Credit card companies award points that can be used for frequent flier miles and other programs. These points are typically worth one or two cents each. In other words, it cost the Mint between $1.02 and $1.04 for every dollar it sold. From the consumers’ standpoint, they received something worth about $1.02 for every $1 spent.
Once people figured this out, the U.S. Mint effectively became a free money machine. In 2009, $88 million of coins were purchased under this program. One man ordered $2.4 million coins, weighing a staggering 43,000 pounds (19,504 kg).
The Mint was quick to catch on. Sort of. The Mint changed the program to limit purchases to $1,000 every thirty days. Even so, this allowed savvy consumers to acquire as much as 36,500 points per year. Two years after the program was started, the Mint pulled the plug.
While the Mint was successful in getting coins into the hands of the public, it was less than successful in getting them into circulation. Most of the people who availed themselves of the free money scheme received their coins and promptly redeposited them in the bank so they could pay their credit card bills.
But surely out of all of those billions of coins, they must have been successful in getting some into circulation, right?
When is the last time you used a $1 coin?
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Categories: Faux Pas, Government, History, Laws and Lawyers, Money, Presidents, Stupidity, US History
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