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THE FUTURE OF MONEY: DOLLARS AND SENSE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

DOMESTIC MONETARY POLICY 

AND TECHNOLOGY 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

NOVEMBER 29, 2012 

Printed for the use of the Committee on Financial Services 

Serial No. 112–162 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO R. CANSECO, Texas 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

FRANK C. GUINTA, New Hampshire 

BARNEY FRANK, Massachusetts, Ranking 

Member 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

JAMES H. CLINGER, Staff Director and Chief Counsel 

(III) 

SUBCOMMITTEE ON DOMESTIC MONETARY POLICY AND TECHNOLOGY

RON PAUL, Texas, Chairman 

WALTER B. JONES, North Carolina, Vice 

Chairman 

FRANK D. LUCAS, Oklahoma 

PATRICK T. MCHENRY, North Carolina 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

NAN A. S. HAYWORTH, New York 

DAVID SCHWEIKERT, Arizona 

WM. LACY CLAY, Missouri, Ranking 

Member 

CAROLYN B. MALONEY, New York 

GREGORY W. MEEKS, New York 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GARY C. PETERS, Michigan 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

November 29, 2012 ........................................................................................... 1 

Appendix: 

November 29, 2012 ........................................................................................... 35 

WITNESSES 

THURSDAY, NOVEMBER 29, 2012 

Diehl, Hon. Philip N., former Director, United States Mint ................................ 22 

Lepine, Beverley, Chief Operating Officer, Royal Canadian Mint ...................... 5 

Miller, James C. III, former Director, Office of Management and Budget ......... 20 

Peterson, Richard A., Acting Director, United States Mint ................................. 2 

St. James, Lorelei, Director, Physical Infrastructure Team, U.S. Government 

Accountability Office ............................................................................................ 3 

Weller, Mark, Executive Director, Americans for Common Cents ...................... 23 

APPENDIX 

Prepared statements: 

Diehl, Hon. Philip N. ........................................................................................ 36 

Lepine, Beverley ............................................................................................... 41 

Miller, James C. III .......................................................................................... 49 

Peterson, Richard A. ......................................................................................... 52 

St. James, Lorelei ............................................................................................. 58 

Weller, Mark ..................................................................................................... 71 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Luetkemeyer, Hon. Blaine: 

Written statement of Thomas A. Schatz, President, Citizens Against Government Waste .............................................................................................. 80 

Schweikert, Hon. David: 

Written responses to questions submitted to Lorelei St. James .................. 85 

(1) 

THE FUTURE OF MONEY: 

DOLLARS AND SENSE 

Thursday, November 29, 2012 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON DOMESTIC MONETARY

POLICY AND TECHNOLOGY, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2 p.m., in room 

2220, Rayburn House Office Building, Hon. David Schweikert 

[member of the subcommittee] presiding. 

Members present: Representatives Schweikert, Leutkemeyer, 

Huizenga; Clay, Maloney, and Green. 

Also present: Representative Stivers. 

Mr. SCHWEIKERT [presiding]. This hearing will come to order. I 

ask for unanimous consent that Mr. Stivers of Ohio, as a member 

of the Financial Services Committee, be permitted to sit with members of the Subcommittee on Domestic Monetary Policy and Technology for the purposes of delivering a statement, hearing testimony, and questioning witnesses today. 

Hearing no objection, it is so ordered. 

We have an agreement already of a limitation of 10 minutes on 

each side for opening statements. Without objection, the Members’ 

opening statements will be made a part of the record. 

Let me just start with some opening comments, because in many 

ways I am much more interested in hearing your comments, some 

education for us, than hearing me go through a 5-minute hyperbole. 

This is one of those issues that on the face should be almost blatantly simple. Out of the things we deal with here in Washington, 

trying to find a way to save money for this country shouldn’t be 

political theater. I am, in many ways, on a personal level, almost 

heartbroken. I accept that we have industries out there that make 

their living making paper for currency, people who have sort of 

unique sole source contracts and they use the political process to 

defend those. But to engage in some of the levels of political theater have bordered on just absurd. I really want this to be one of 

those where let’s deal with the truth, let’s deal with the math. 

What was it—the 2012 GAO study had $4.4 billion savings over 30 

years. And if we actually take a look at what happened in Canada, 

they blew past their projections of savings. As both of us even on 

a bipartisan basis are trying to find ways to keep this government 

marginally solvent, this is maybe just one of those little grains of 

2 

sand that we need to step up and embrace if it drives us in the 

right direction. 

I now recognize Mr. Clay for an opening statement. 

Mr. CLAY. Thank you so much, Chairman Schweikert. Let me 

also thank you for conducting this hearing which is entitled, ‘‘The 

Future of Money.’’ This hearing will look into the cost of replacing 

the dollar bill with a $1 coin, which I am looking forward to hearing the testimony on. It is always good to have you here, but I also 

wanted to mention the current chairman of this subcommittee, Ron 

Paul, and I wanted to thank him for his long-term service to this 

Nation. And of course, this is one of the key issues in which he has 

always been interested. Hopefully, I will get to see him before we 

have finished our work here in the Congress. 

I will stop there so that we can take testimony, and again, thank 

you for conducting the hearing. 

Mr. SCHWEIKERT. Mr. Clay, you actually—maybe that is my failing—for all of you who have never had the chance to really get to 

know Congressman Paul, he truly is one of the nicest individuals 

you can ever make acquaintance of. I was a little nervous when 

they first put me on this subcommittee, but it turned out to be one 

of my great joys. 

I know Congressman Stivers is on his way up. 

Do we break a little bit of protocol, let Mr. Peterson start, and 

then maybe we will have another opening statement? Okay. We are 

going to play this somewhat on the fly. 

Mr. Peterson, you are recognized for 5 minutes for a summary 

of your testimony. 

STATEMENT OF RICHARD A. PETERSON, ACTING DIRECTOR, 

UNITED STATES MINT 

Mr. PETERSON. Good afternoon, Mr. Chairman, Ranking Member 

Clay, and members of the subcommittee. I am pleased to testify 

this afternoon on behalf of the United States Mint and its vibrant 

team of 1,800 men and women located in 6 facilities across the Nation. I especially look forward to the discussion about the production of both $1 coins and $1 notes, as well as the metal composition 

of our circulating coins. 

First, with regard to the ongoing production of dollar coins and 

Federal Reserve $1 notes simultaneously, I want to stress that the 

United States Mint continuously looks for ways to manufacture efficiently without compromising quality. I also want to stress that 

we have fulfilled our statutory requirement to aggressively promote 

the use of $1 coins. 

However, in spite of our thorough and creative efforts, the Federal Reserve Bank still had significant inventories of dollar coins 

in 2011, and as a result, production of the dollar coins for circulation was suspended last December. We still offer $1 coins, however, 

through several numismatic products. 

Even with the reduction in seigniorage from the suspension of 

Presidential $1 coins, we believe that we will continue to realize 

positive seigniorage for the circulating program overall since we expect production of the one-quarter dollar coin to continue to rebound in Fiscal Year 2013. 

3 

On the issue of the metallic composition of our circulating coins, 

the Mint made significant progress this year on a research and development program to examine possible metallic alternatives for 

our Nation’s coins. To do so, we established and staffed a separate 

and secure research and development laboratory within the United 

States Mint at Philadelphia. 

At this point, what I can say is that we have conducted two sets 

of trial strikes on a variety of metallic compositions and evaluated 

them for such things as hardness, ductility, corrosion, wear resistance, electromagnetic signature, the availability of raw materials, 

and, of course, cost. 

In December, the Mint will provide its first biennial report to 

Congress under the provisions of the Coin Modernization Oversight 

and Continuity Act of 2010. This report will provide the results of 

our research and development efforts over the last 18 months. 

We recognize that there are many stakeholders’ challenges and 

other issues associated with adopting alternative metals, and we 

will continue to engage these parties throughout the process. 

Mr. Chairman, this concludes my oral testimony. My entire written statement has been submitted for the record. I am happy to answer your questions or questions of other members of the subcommittee. 

Thank you very much. 

[The prepared statement of Acting Director Peterson can be 

found on page 52 of the appendix.] 

Mr. SCHWEIKERT. Thank you, Mr. Peterson. 

Ms. St. James? 

STATEMENT OF LORELEI ST. JAMES, DIRECTOR, PHYSICAL INFRASTRUCTURE TEAM, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Ms. ST. JAMES. Mr. Schweikert, Ranking Member Clay, and 

members of the subcommittee, I am pleased to be here today as 

you examine the potential savings from replacing the $1 note with 

the $1 coin. GAO has reported 6 times over the last 22 years that 

this replacement would provide millions of dollars in net financial 

benefits to the government every year. 

Today, I would like to share with you our latest findings, experiences from other countries that have gone through such replacements, and public and private sector considerations in moving forward if the dollar note is replaced with the dollar coin. 

This year, we reported that transitioning to the dollar coin would 

potentially offer $4.4 billion in net benefits to the government over 

30 years. This amount consists solely of increased seigniorage, and 

not lower production costs, as you might expect. Seigniorage is the 

financial gain to the Federal Government when it issues notes or 

coins because both forms of currency usually cost less to produce 

than their face value. This financial transfer from the public to the 

government reduces the government’s need to raise revenue 

through borrowing. With less borrowing, the government pays less 

in interest, hence the financial benefit. 

Before I discuss the experiences of other countries, I want to 

mention two items that are important to know about our estimates. 

4 

First, our estimates are based on several assumptions, and when 

assumptions are changed, the estimates change. 

Second, we assume that it would take 11⁄2 coins to replace each 

note. This ratio has the largest impact on determining the net financial benefits to the government. 

That said, let me discuss the experiences of other countries. Over 

the last 48 years, many countries have replaced notes with coins 

to save money. For example, Canada replaced its $1 note and $2 

note with coins in 1987 and 1996 and reported saving millions of 

dollars because of seigniorage and lower coin production costs. 

Canada and the United Kingdom experienced public resistance 

when they transitioned but took actions that overcame it within a 

few years. For example, in Canada, the Royal Canadian Mint conducted a public relations campaign to inform the public that the 

conversion would save money. In 2011, Canadian officials told us 

that the $1 and $2 coins were the most popular coins in circulation 

and were heavily used by businesses and the public. Canada and 

the United Kingdom used the transition period to implement the 

conversion and to gradually phase out the currency being replaced. 

The United Kingdom issued the 1 pound coin in early 1983 and 

continued to issue the 1 pound note until 1984. Canada used a 2- 

year transition period for its $1 coin. 

Let me turn to my last topic on considerations moving forward. 

In the past, we recommended that Congress proceed with replacing 

the $1 note with the coin only if the note was eliminated and negative public reaction to the replacement was effectively managed 

through outreach and public education. 

In 2011, we reported that some private businesses had already 

made changes to accommodate the coin. Officials representing the 

vending industry said many of its members had already modified 

their vending machines for dollar coins, and many of the larger 

transit agencies had already modified their equipment as a result 

of the Presidential Coin Act of 2005. 

Retail sales, banking and currency, and transportation officials, 

however, cited additional costs for modifying vending machines and 

cash register drawers, and increased costs for transportation and 

storage. They stated that the transition could be done, but that it 

would take 1 to 2 years to make the transition. 

In summary, we have found that the government would receive 

a financial benefit from replacing the note with the coin, but it is 

not without challenges, one being public opposition. However, many 

other countries have managed such replacements with success, and 

some U.S. companies have already made changes to accommodate 

the dollar coin. 

This concludes my statement. I would be happy to answer any 

questions at this time. 

[The prepared statement of Director St. James can be found on 

page 58 of the appendix.] 

Mr. SCHWEIKERT. Thank you, Ms. St. James. 

Ms. Lepine, thank you for being here. I have actually been particularly looking forward to your testimony. And I will beg of you, 

as you begin your testimony, to describe your position with the Canadian Mint. 

5 

STATEMENT OF BEVERLEY LEPINE, CHIEF OPERATING 

OFFICER, ROYAL CANADIAN MINT 

Ms. LEPINE. Thank you very much, Mr. Chairman. I am chief operating officer of the Royal Canadian Mint, and I have been with 

the organization for 25 years. 

Mr. SCHWEIKERT. Thank you. 

Ms. LEPINE. Good afternoon, and I want to thank the chairman 

and the respected members of this subcommittee for inviting the 

Royal Canadian Mint to speak on Canada’s experience with replacing the $1 bank note with the circulation coin as well as with the 

introduction of innovative Multi-Ply Plated Steel material, which 

has dramatically improved the cost-effectiveness of circulation coins 

in Canada and around the world while also improving their reliability and security. 

After twice successfully replacing a low denomination bank note 

with a circulation coin—first, with the $1 coin in 1987; and second, 

with the $2 coin in 1996—we have continued to maximize the benefits to users of our circulation coins through innovations such as: 

our Multi-Ply Plated Steel technology, the most economical, durable, and secure coins on the market, now used on all Canadian circulating denominations and over 70 other denominations in 30 

countries around the world; our alloy recovery program, which replaces older alloys with Multi-Ply Plated Steel coins, reducing the 

number of coin compositions in the Canadian marketplace; our coin 

recycling program, which puts coins back into circulation in a more 

efficient and environmentally friendly way; our high-speed circulation coin coloring process first introduced in 2004 on a design commemorating our veterans; and our virtual image and laser mark 

security features ideally suited to high value circulation coins. Our 

DNA anti-counterfeiting technology currently used on our new $1 

and $2 coins works like a fingerprint to ensure the authenticity of 

every new coin. Our Mint chip project is testing a digital currency 

solution with all the features of cash, and our coin forecasting and 

distribution systems manage Canadian coin distribution across the 

country for financial institutions without incurring any coin shortages or building excess inventories. 

Our strong focus on innovation helps the Mint compete for the 

profits we need to fund our operations without taxpayer support. 

But its most important outcome is our enhanced ability to meet 

changing customer needs while making our coinage system more 

robust, efficient, and reliable. 

Primarily a cost saving measure when it was announced in 1985, 

several businesses and special interest groups supported a $1 coin 

for the many advantages it offered in areas such as transit and 

vending. Public opinion surveys confirmed wide customer acceptance of this new coin, and instead of a requirement of 250 million 

coins over the first 3 years, almost 600 million coins had to be produced to adequately meet the marketplace demand. 

Mass adoption of the $1 coin occurred 2 years later in 1989 after 

the last dollar note was printed. In hindsight, we found that the 

phased approach was not, after all, necessary, and with that lesson 

learned, we introduced the $2 circulation coin in conjunction with 

the end of the $2 bank note production. 

6 

Lasting 25 years or more instead of 1 year for a bank note, the $1 coin has saved the Canadian Government $175 million over its 

first 20 years. In the United States, we usually say it is 10 times 

that number. 

The Multi-Ply Plated Steel version introduced this year, along with the $2 Multi-Ply Plated Steel coin offering equal or better durability at less cost, will produce a combined additional $15 million 

annual savings to the Canadian Government. 

Our successful introduction of this technology depended on communicating early and often to all our stakeholders, particularly the 

vending industry, and collaborating closely with them. To quote the 

president of the Canadian Automatic Merchandising Association 

(CAMA), ‘‘While no one in our industry wants to see a change that 

will cost us money, we do applaud the effort of our government to 

find cost savings. Our relationship with the Mint is strong, and we 

value them as a partner in our industry.’’ 

Central banks and treasuries have much to gain from emulating the $250 million savings Canada has so far realized through MultiPly Plated Steel, and we now count customers on every continent, 

including an Asian jurisdiction whose current order is the largest 

foreign circulation contract in our history. 

The Mint, along with its many strategic partners, is committed 

to advancing the science of coin and engineering and manufacturing for the benefit of all of its customers and stakeholders while 

meeting its duty to support Canadian commerce by producing and 

distributing Canada’s circulation coinage cost effectively and profitably. We have more than met this goal with the combined profits 

of the last 5 years eclipsing those of the previous 25 years. We 

achieved record revenues of $3.2 billion in 2011, netted profits of 

over $43 million, and paid a record dividend of $10 million to our 

exclusive shareholder, the Government of Canada. We will continue 

to reinvest our profits in researching and developing coin technologies which meet the ever-changing needs of the marketplace, 

and we are committed to providing commonsense answers to the 

challenge of issuing coinage in today’s world. 

Thank you again for inviting me to appear before your committee, and it will be my pleasure to answer your questions. 

[The prepared statement of Ms. Lepine can be found on page 41 

of the appendix.] 

Mr. SCHWEIKERT. Thank you for coming south, Ms. Lepine. I now 

recognize Congressman Stivers. 

Mr. STIVERS. Thank you, Mr. Chairman. I apologize that I wasn’t 

here in time to give an opening statement. I would like to ask your 

consent to be able to read that statement before I ask questions. 

Mr. SCHWEIKERT. Why don’t you make an opening statement and 

then just roll right into questions. 

Mr. STIVERS. Thank you. I just wanted to make sure that was 

okay. Thank you, Mr. Chairman. I appreciate you, and I appreciate 

Chairman Bachus allowing this important hearing today. 

In these times of fiscal strain, we can save millions of dollars by 

simply changing the composition of our coins from an alloy to 

multi-ply American steel. Since 2006, the cost of minting 1-cent 

and 5-cent coins has exceeded their face value. In fact, a penny 

costs about 2.4 cents to mint and a nickel costs 11.1 cents to mint, 

7 

and last year the Mint produced, I believe, 4.3 billion pennies and 

914 million nickels. I will follow up with Mr. Peterson to make sure 

my math is correct on that. 

But focusing on the content alone ignores some other issues, and 

I think we do need to look at issues like the overhead costs at the 

Mint. And I really appreciate Mr. Peterson’s being here today. I 

think he has experience in manufacturing, experience in coins. 

That said, I am not sure he is the perfect witness for both pieces 

of the testimony. He is a great witness for my bill on coins, but on 

the transition to the coin from the dollar bill, I think this committee asked Rosie Rios—who oversees both the Mint and the Bureau of Engraving—to testify. And so I wish she would have been 

here, but I am glad you are here, Mr. Peterson, and I do want the 

folks at Treasury to understand that these coinage issues aren’t 

going to go away and this committee is committed to focusing on 

this issue, and, in fact, there is a constitutional requirement for 

Congress to deal with coinage issues and regulate our currency. 

In a study in April of 2012, Navigant Consulting estimated that we could save between $182 million and $207 million annually by 

moving to a plated multi-ply steel composition for our coins the 

way Canada did, as Ms. Lepine discussed. They could easily co-circulate with our current coins, which hopefully would be something 

that we would be able to work through with the vending machine 

industry. I know that is going to be an issue, and I want to talk 

to Ms. Lepine about how that worked in Canada, and Mr. Peterson 

about how we can do that. But as Congress considers various alternatives to what to do on currency and how to make the coinage as 

efficient as we can, I hope we will look at the Royal Canadian 

Mint’s example of using multi-ply steel, a cheaper raw material 

that is actually more durable. And I want to talk to Ms. Lepine 

about that in a second, because it will save taxpayers’ money. 

But I do think there are other issues that I want to get to over 

time, including how we can reduce the overhead at the U.S. Mint, 

and I may ask Mr. Peterson some questions about that. If it is 

okay, I would like to start some questions. 

Ms. Lepine, do you want to talk about the cost of multi-ply steel 

versus the alloys that you are using in Canada? 

Ms. LEPINE. With pleasure. The Mint introduced Multi-Ply Plated Steel for its 5, 10, 25, and 50-cent denominations in 2000. This 

was really driven based on a look at costs where we believe the 

costs are 55 percent of the alloyed costs, and it really is changing 

to a material that has a steel core, so 94 percent of the coin, on 

average, is steel with only 6 percent more expensive nickel and copper. 

The second part related, I think, to costs is metal and price volatility. So we recognize that there is metal sensitivities, particularly 

if you look at the markets over the last 6 or 7 years. By going to 

steel, we have reduced that sensitivity and enabled central banks 

around the world, treasuries around the world to be able to maintain their budgets for coinage. 

In addition to the cost issue on Multi-Ply Plated Steel, the other 

benefits are related to the security around Multi-Ply Plated Steel, 

which offers a more unique and definite electromagnetic signature 

which aids in vending and/or cost processing machines, and the 

8 

ability to tailor that signal in terms of meeting the needs of a given 

country. 

Mr. STIVERS. Can you talk about, because the vending machine 

industry is something that will come up I think in this process, 

what the Royal Canadian Mint did to work with the vending machine industry to ensure that the transition was as easy as possible 

for them? Obviously, they have some capital replacement that happens naturally. Did you work the cycle into their capital replacement cycle, extend the notice? Tell me how that worked to help 

allay their concerns. 

Ms. LEPINE. If we look at our most recent change in 2012 which put the $1 and the $2, our final high denomination coins into 

Multi-Ply Plated Steel, we started working with the vending industry in about 2008. So the issue here is to let the stakeholders know, 

give them an opportunity to be able to work with you at developing 

what the specification partially might be. So we also allowed 6 

months towards the end of that period to let them calibrate the 

machines and in fact made changes with the vending industry that 

would ensure that we didn’t have overlap over our high denomination coins or the 50-cent coin in our next denomination. 

Absolutely critical in doing that, there is no doubt there are always costs to changing software and their machines, but we know 

for a fact that in Canada about 90 percent of the machines are already at the upper end of the software capability so it really isn’t 

that complicated of an issue to change the software. 

Mr. STIVERS. And for a period of time, and I think even currently, Canada has had both multi-ply steel and alloyed coins in 

circulation at the same time. Did that present any issues and how 

were those issues addressed with maybe any vending machine folks 

or just folks in the general population? 

Ms. LEPINE. Vending machines are very capable at reading more 

than one composition in terms of the material on the coins that 

may be in the marketplace at any point in time, and so there were 

no difficulties in reading both an alloyed coin and a Multi-Ply Plated Steel coin in terms of the, I will call it windows of ability, for 

the software to read those. That was not an issue for us at all. 

Mr. STIVERS. And for the consumer, the look and feel of these 

coins can essentially look and feel the same as they do today but 

the core is different, is that correct? 

Ms. LEPINE. That is correct. It is a steel core with a layer of nickel, copper-nickel on top of the steel core. 

Mr. STIVERS. And today, the Royal Canadian Mint is working 

with several countries on a similar conversion. Can you talk about 

that and maybe why those countries have gone that route? It is 

going to get to the same point that I have been getting at all day. 

Ms. LEPINE. In fact, New Zealand in 2006 converted all of their 

coins or three of their denomination coins to Multi-Ply Plated Steel 

and did an extensive review working with the vending industry, 

which we also helped them with in ensuring that their vending industry in their country would have a chance to calibrate and be 

able to understand and modify their machines. 

The other part of work that we do with central banks around the 

world, and we have completed some and we have some under way 

now, is working with the central bank to look at what the countries 

9 

around their borders may be using, looking at the purchasing 

power of those countries around the border, looking at any of their 

trade relationships or vacation volumes of flows of coin and making 

sure that we take the multi-ply and design that middle copper 

layer which is probably the most key layer in this for EMS purposes, that we design that layer to try and mitigate any overlaps 

on coinage around the country. And in fact, in some cases the work 

with the central bank can be a year or longer as they develop the 

specification for the coin to convert their coins to Multi-Ply Plated 

Steel. 

Mr. STIVERS. Great, and I hate to use all your time. I am out of 

time. I was going to ask Mr. Peterson some questions, but I will 

yield back and hope there is a second round. 

Mr. SCHWEIKERT. Thank you, Mr. Stivers. 

Mr. Clay. 

Mr. CLAY. Thank you so much. Mr. Peterson, in discussing the 

Coin Modernization and Taxpayer Savings Act at a hearing in 

2008, a former Mint Director, Edmund Moy, said that steel may 

not be the panacea, it doesn’t make sense to reduce the cost of materials used in the penny if they are offset by higher manufacturing 

costs. 

Mr. Peterson, do you believe that changing the composition of the 

penny and the nickel to plated steel would save the taxpayer 

money? 

Mr. PETERSON. Ranking Member Clay, in 2010, Congress passed 

and the President signed into law a bill that allowed us to go conduct research and development on alternative coin compositions. 

We don’t do this very often. The last time we did this on a comprehensive basis was 1965, and back then we hired a third-party 

consultant to assist us. We did the same over the last 2 years. If 

you look, if you remember your high school chemistry class and the 

periodic table of elements on the wall, there are 80 metals on the 

periodic table. Many of them are radioactive, many of them are 

more expensive than we are going to be able to use on our coins. 

And you rapidly distill that down to four elements: aluminum; iron 

in the form of steel; zinc; and lead. We are not going to make our 

coins out of lead, so we have aluminum, steel, and zinc. 

The Mint has done, over the last 2 years, a very nice job in establishing momentum on conducting research and development. We 

established within the Philadelphia Mint the research and development laboratory, we conducted two sets of trial strikes on 29 different coin compositions of aluminum, steel, and zinc, some of 

which were the plated steel compositions, and our report to Congress is due within the next several weeks. We look forward to getting that up to Congress, and I just want to leave you with the 

message that the men and women at the United States Mint have 

done the Nation proud with the research and development effort 

that we have taken on over the last 2 years. 

Mr. CLAY. Thank you for that response. 

Let me ask Ms. St. James, benefits of the $1 coin were not realized until after 10 years in response to your February 2012 analysis of the benefits and losses from replacing the $1 note with a 

$1 coin, the Federal Reserve raised concerns with the fact that the 

10 

U.S. Government would face losses up to $31 million, and $1.8 billion over the first 10 years of the program. 

The Federal Reserve went on to say that they are concerned that 

the 30-year savings projections may overstate the net financial benefit, perhaps substantially. 

In your view, how would you expect the U.S. Mint to pay for a $1.8 billion loss in the first decade? 

Ms. ST. JAMES. First of all, the model that we use looks at the 

net benefits between two different scenarios, one is today’s scenario, in which the dollar note predominates, and then we have the 

other scenario in which the coin would predominate, and we looked 

at it over 30 years. And looking at it in a 10-year timeframe, we 

estimated that the Mint would need, conservatively, about 4 years 

to ramp up production because we would need more coins to replace—11⁄2 more coins to replace $1 notes. 

So you would have to have the Mint go from producing, I believe, 

about 3 billion coins, around that amount today, to about 13 billion 

coins to meet demand. 

So looking at it in a 10-year timeframe, the benefits of switching 

to the coin, are they are front-loaded with the cost and back-loaded 

with the benefits? 

Mr. CLAY. With the savings? 

Ms. ST. JAMES. Right. So the savings only comes in after that 10- 

year period. 

Mr. CLAY. All right, thank you for that response. Quickly, Ms. 

Lepine, what factors should Congress consider in order to ensure 

public acceptance of any changes to the composition of circulating 

coinage? And in your experience, do weight, size, color or other factors matter? 

Ms. LEPINE. Certainly, I think market research—you want to 

conduct focus groups, which the Canadian Government did in 

terms of understanding what the Canadian public and the business 

community needs. We wanted to make sure that the coins were 

very visible for the visually impaired and ensure that a new coin 

could be easily used by that group. 

Promoting the message of cost reduction was really the key message that the Canadian Government followed, and it was obviously 

well-received, as I think was mentioned. The Canadian $1 had its 

25th anniversary this year and a public poll done by the CBC said 

that it is an icon for Canada just like the RCMP or the beaver, et 

cetera. 

Making sure the coin, people understand that saving and visually get to see the coin, understand the coin’s visual characteristics is very important. 

Mr. CLAY. Thank you. 

Mr. SCHWEIKERT. Thank you, Mr. Clay. 

Mr. Luetkmeyer? 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

Ms. Lepine, I am just kind of curious, in the last 2 years, I have 

had 2 interns from Australia. I had one a year ago, and I had one 

this past year. And when we got done with their internship, we 

had a little pizza party for them and we sat there and asked them 

what is the thing that is kind of interesting or different or something that struck you about our country. And each one of them 

11 

said, you guys have pennies. We don’t have pennies in Australia. 

We just round to the nearest nickel. And I noticed that you have 

done the same thing in Canada, have you not? 

Ms. LEPINE. Correct. 

Mr. LUETKEMEYER. What are the effects of that? 

Ms. LEPINE. The decision on our 1-cent coin just to clarify, is a 

decision by our Department of Finance. And that decision was very 

much based on public opinion which, close to the time when this 

decision was done, was running anywhere from 44 to 67 percent in 

terms of positive reaction and/or neutral reaction to the penny. 

The second part is obviously looking at the savings that came from the penny, which were about $11 million per year. 

I think what is important about the penny decision for us is it 

was an evolutionary process in terms of coinage introduction. 

First, Canada introduced Multi-Ply Plated Steel coinage, which 

reduced the cost of our coinage, meaning that all of our denominations had positive seigniorage. It was the penny that had gone into 

negative seigniorage in the 2008–2009 period, and that message 

was very important for the Canadian public in terms of understanding that there was a negative aspect to producing that penny, 

and therefore it would be not a bad idea to eliminate that denomination. 

In terms of impact on the Mint itself, we have been recycling 

since 2004, and as a result of those recycling operations, in partnership with Coinstar, over 50 percent of our production volume, 

or the demand in the country for coin, was actually met through 

recycling. So interestingly, for us, we had already started to reduce 

overheads and manage the issue of having coinage, pennies recirculating and coming back in through a recycling mechanism. 

Mr. LUETKEMEYER. Was it accepted by the public? 

Ms. LEPINE. Very much so. 

Mr. LUETKEMEYER. How have the businesses reacted? Just round 

it up or round it down, is that what they did? 

Ms. LEPINE. In fact, the decision was made in May. And back 

again to thinking about stakeholder reaction, the Department of Finance listened to some of the big coin processing, coin heavy retailers, so think of fast food, and the result of that was, although we 

stopped production in May, the decision was made by our Department of Finance to delay the actual end of distribution instead of 

September to the month of February so that retailers weren’t having to deal with this change and the training associated with it and 

the rounding with it over this Christmas period. 

Mr. LUETKEMEYER. Did you see a net increase or net decrease in 

level of taxation as a result of the coin or was it neutral? 

Ms. LEPINE. In the first place, the coin is still in distribution 

right now, so I think the Department of Finance, which I would 

want answering that particular question, but the coin will actually 

only stop distributing on February 4th. 

Mr. LUETKEMEYER. Thank you. And with that, I will yield the 

balance of my time to the gentleman from Ohio. 

Mr. STIVERS. Thank you for yielding the balance of your time. I 

have a question for Mr. Peterson. You alluded to the report that 

is coming out in a couple of weeks. Is there any chance you could 

give us a Reader’s Digest version? Sneak preview? Anything? 

12 

Mr. PETERSON. The report will be up here on or about December 

13th. I will say that this committee has previously heard testimony 

that if the metal for the penny were free, we would still exceed 1 

cent. On the nickel, I will say that we looked at the 29 different 

compositions that I mentioned, and there were several promising 

alternatives. We look forward to continuing the R&D in the coming 

months and years and have an active plan for 2013. 

Mr. STIVERS. Thank you for that. Can you give us an insight 

into, of the penny, what percent of the current, and my math says 

2.4 cents, what percent of that cost is raw material versus overhead at the Mint? 

Mr. PETERSON. Our numbers for 2012 are at the auditors right 

now but they are going to come in very close to 2 cents for a total 

cost to make the penny in 2012. And we have lowered our costs of 

manufacturing in the circulating business since 2009. It cost us 

$230 million to run our circulating business then, it cost us $180 

million this year in 2012. We have cut the cost in real dollars by 

20 percent over the last 3 years. And so on the cost of the penny, 

the metal right now is very close to a penny: 47 percent of the cost 

is metal; mint production costs are 35 percent; and then the general and administrative allocation is 16 percent. 

Mr. STIVERS. Thank you. I yield back because there is no time 

left. 

Mr. SCHWEIKERT. So in other words, you are not really yielding 

back anything. Thank you, Mr. Stivers. 

I want to do two things before I actually—one thing before I start 

to ask questions. If anyone feels trapped over on that side and you 

want to scurry across, because I have had the occasion where I got 

trapped over there. So if anyone needs to move one more time, I 

accept that this is a big crowd in a small room. Okay. If not, then 

we are going to move on. 

Mr. Peterson, help me understand, because I want to make sure 

that I have my understanding of it. If we were to go to the clad 

multi-layer type coin do we have to get a license from Canada? Is 

this a patented process? Do we have to contract or have we developed something that we hold rights to? 

Mr. PETERSON. I believe Canada’s process is patented. We need 

to go investigate a supply chain for the plated technology. Steel, if 

we were to have authorization to convert to steel, it needs to be 

plated with some kind of coating. Electroplating in a large industrial environment is a complex and capital intensive process. The 

United States Mint does not have that capability internally today. 

To develop that capability would require several hundred million 

dollars. And imagine, if you will, what electroplating really is. 

Imagine a football field, a building that size filled about 4 or 5 feet 

deep with sulfuric acid and then electric current is passed through 

the acid to have the plating material deposited onto the steel. We 

are not going to build one of those in Denver or downtown Denver 

or downtown Philadelphia. So we would need to go find a site to 

if we wanted to vertically integrate and if this business case 

panned out, we would have to go find a site and develop that on 

our own. 

Mr. SCHWEIKERT. From your understanding of the Canadian 

process, they hold copyrights, patents to the mechanics? 

13 

Mr. PETERSON. I believe they do. 

Mr. SCHWEIKERT. Ms. Lepine, is this something you have been 

selling rights to, your intellectual property? 

Ms. LEPINE. The R&D that obviously went into the development 

of Multi-Ply Plated Steel and then the construction of a facility in 

our Winnipeg operation, which is expanding, almost doubling right 

now under construction in Winnipeg. Obviously, that R&D is under 

patent, patent pending in some cases depending on the technology, 

and we do license. So for us, that R&D would have to be recovered. 

However, I look at what the 5-cent coin costs are and they are a 

bit under 3 cents. We believe that the opportunities for that cost 

in whatever manner is quite appropriate. 

Mr. SCHWEIKERT. Any special deals for your good friends to the 

south? 

Ms. LEPINE. I would like to add that we have licensed that multiply process to Jardens, Inc., which is, of course, a U.S. corporation, 

and they have been significant partners over many years in terms 

of helping us meet the marketplace demand with 30 countries 

wanting multi-ply steel, 10 of them who wanted in their high denominations already sold and done. The demand for multi-ply steel 

has been very high. In fact as we look at our foreign business, almost 95 to 97 percent of the business in the last 2 years has been 

plated material and not alloyed coins from the countries around the 

world. 

Mr. SCHWEIKERT. Ms. St. James, one of those little things, as we 

sort of go through this process and being someone who has been 

trying to make sure they are doing the right thing, one time I get 

a report that says, okay, a U.S. dollar, a paper dollar survives 18 

to 24 months. Then I come across a report that is a little bit older 

that I think said as short as 13 months. And then, I have seen 

some other reports bounce around where the Fed was using a much 

longer model. Am I safe continuing that sort of 18 to 24 months, 

which seems to be the mean in reports and data I come across? 

Ms. ST. JAMES. When we looked at it in 2011 and then again in 

2012, in 2012 we were told that the lifespan of a note was 40 

months. And then in 2012, we were informed by the Fed that they 

had changed the technology in how they read the notes when they 

are processing them, and that the lifespan had increased to 56 

months. So, in other words, when the dollars come in, for example, 

if the dollar is facedown in 2011, it would have pulled that note 

out and it would have had to have been replaced, and the technology they have now allows more dollars to remain in circulation. 

So the average life has increased. 

We have been looking at those lifespans since we have been interested in this topic, and we don’t feel that change is within scope. 

Mr. SCHWEIKERT. Okay, and I think with that I am actually out 

of time. Congressman Huizenga, are you ready to ask a question? 

Mr. HUIZENGA. I am not. 

I was at a hearing downstairs, Mr. Chairman. 

Mr. SCHWEIKERT. And please, forgive us. It is just sort of the nature of this time of year. 

Mr. Stivers, did you want to continue? 

Mr. STIVERS. I would love to, if I am allowed to. 

Thank you. 

14 

Mr. Peterson, can you tell us what the output of the Mint has 

been over the last say 10 years of coins? Are you staying pretty 

constant with the number of pennies and nickels you are making? 

Are you reducing them? 

Mr. PETERSON. Circulating production at the Mint over the last 

several years has been quite a volatile experience. I first joined the 

Mint 4 years ago, and our production in 2008 was 9.9 billion circulating coins. In 2009 and 2010, in response to the soft economy, 

people would go into their coin jars and piggy banks and turn in 

those coins to pay for basics such as groceries and gasoline. And 

the Federal Reserve vaults were filled up in 2009 and 2010 and our 

production volumes in those years were 5.2 billion coins and 5.4 

billion coins respectively in 2009 and 2010. In 2011, we saw an increase to 7.4 billion coins, and in Fiscal Year 2012, our unaudited 

results are at 9.1 billion coins. And of that, and it has been pretty 

consistent, pennies and nickels have comprised between 60 to 70 

percent of that circulating volume. 

Mr. STIVERS. And you talked about how you have two facilities, 

you have a facility in Philadelphia and you have a facility in Denver, both in downtown as I recall. How old are those facilities? 

Mr. PETERSON. The Denver facility was built in 1904— 

Mr. STIVERS. I am sorry, how old is the manufacturing machinery and capacity, the stuff you use typically? I don’t care how old 

the plant is but how old is the stuff inside it that you use to make 

coins? 

Mr. PETERSON. Our peak production year was back in 1999, and 

we made some 23 billion coins in that fiscal year in response to 

Y2K and the Sacagawea golden dollar, and we really ramped up 

our production capacity between Denver and Philadelphia then. So 

most of the capital equipment in those two buildings was sourced 

in the 1997, 1998, 1999 timeframe. 

Mr. STIVERS. Great, and you said you increased the efficiency of 

the Mint over the last 2 years, or was it 4 years, by 20 or 30 percent? 

Mr. PETERSON. Absolutely. Our production volumes are up and 

our costs are down. It is the very definition of productivity. 

Mr. STIVERS. So do you see future productivity gains outside of 

materials costs that you can do to reduce overhead? 

And I guess the ultimate question is, do we need two facilities? 

Maybe we do, and maybe we don’t. I guess I will just ask you that 

question as well. 

Mr. PETERSON. Absolutely, we see continued cost improvements 

possible. We have been on our Lean Six Sigma Five S journey, and 

we have a good manufacturing team that knows how to do this. 

Our plant manager in Denver came to us from General Motors, our 

plant manager in Philadelphia came to us from Ford Motor, and 

I came from General Electric. We get this stuff. And we are going 

to continue driving overhead costs down. 

Mr. STIVERS. I appreciate your commitment to that as well. I did 

think it was really interesting—Mr. Schweikert’s question about licensing the Canadian technology instead of doing your own R&D. 

Obviously, you have to do a cost-benefit analysis to see what makes 

the most sense, but if our friends up north would give us a great 

deal on their technology, that would be great. 

15 

So I will encourage you to talk to them and I will yield back the 

balance of my time. I have asked a lot of questions. 

Mr. SCHWEIKERT. Thank you, Mr. Stivers. Love the holiday tie. 

Mr. STIVERS. Thank you. Merry Christmas, happy holidays. 

Mr. HUIZENGA. Mr. Chairman, can I just interject, for some of us, 

those of us from Michigan, it would be our neighbors to the east 

and not just to the north. So thank you. 

Mr. SCHWEIKERT. And there goes my geography. Mr. Huizenga, 

if you are from the Scottsdale area, there are neighbors all around 

us. 

Mr. Clay? 

Mr. CLAY. Okay. Mr. Peterson, the Federal Reserve has raised 

concerns that increased production of the $1 coin could result in an 

increased risk of counterfeiting. Given that the $1 coin, unlike the 

$1 note, does not have effective, machine-readable, publicly usable 

counterfeit deterrent features, is this a concern you are familiar 

with? 

Mr. PETERSON. I understand the question, sir. The dollar coin 

does have anti-counterfeit devices built into it. It has—I am not at 

liberty to go into those right now and probably shouldn’t in this 

forum. But there are devices that are built into the dollar coin. We 

could go further and perhaps look at some additional technologies 

to make them even more secure. 

Mr. CLAY. All right. Ms. St. James, how many years would it 

take before the government would earn enough from issuing dollar 

coins to break even? 

Ms. ST. JAMES. Break even? 

Mr. CLAY. Yes. 

Ms. ST. JAMES. We have shown that if you look at 30 years, there 

is certainly a benefit, and if you work your way through the transition period, depending upon the assumptions that you have, is that 

once we work through the transition period and the amount of 

coins necessary is out there, then you would begin to break even 

and that was usually in a 10-year period or more. 

Mr. CLAY. What is your response to the Federal Reserve’s position that you may have substantially overstated the financial benefits of eliminating the dollar bill in favor of the dollar coin? 

Ms. ST. JAMES. The response that we got from the Federal Reserve in terms of both our 2011 and 2012 reports was that, in fact, 

we did not include cost to the private industry in there. And the 

model that we developed is only measuring the benefit or loss to 

the Federal Government. So their overstatement of seigniorage for 

us, we believe seigniorage is a valid measure and a valid benefit 

to the government, and I believe Canada recognizes seigniorage as 

well. So I can only state that we feel it is valid. 

Mr. CLAY. Something a little different in my line of questioning, 

to be able to convert from the paper dollar to the coinage I think 

will take a cultural change in this country. When you think about 

it, most men don’t want a lot of coins in their pocket, in their suit, 

it may make our suit sag or something. A lot of my constituents 

like to have the paper money. Maybe Ms. Lepine can help us on 

how Canada got accustomed, the consumers became accustomed to 

actually having more coins in their pocket, how women put more 

16 

coins in their purse, I guess it is not too difficult to do, but how 

did they adjust? 

Ms. LEPINE. I don’t want to get into a discussion about the suit 

pockets; however, certainly in Canada the savings, the seigniorage 

savings on the $1 coin when it was issued was $450 million and 

on the $2 coin, remembering that you probably combine them because you don’t have an active working $2 note and coin in the 

United States, was $695 million. So the savings message was very, 

very important in Canada. And if you look at what the polls, the 

recent poll is saying about our $1 and $2 coin, the loonie, as it was 

named, and the toonie, which is the $2, became and are icons in 

Canadian society. And so, they are actively used. 

We have had a steady volume of coins of the 1 and the 2 since 

their introduction, and we only produce to demand for trade and 

commerce. We do not build inventories across the country. We run 

online forecasting systems such that I can tell you if a casino 

opens, if a new toll road opens, I know how much coin I am going 

to need and I know where I need to put it in the country. So, in 

fact, if I take just the demand that the market is looking for on 

$1 and $2 coins, Canadians are actively using them. We don’t get 

complaints in terms of the $1 and $2 coin usage at all. 

Mr. CLAY. Thank you for your response. 

Mr. SCHWEIKERT. Thank you, Mr. Clay. Interesting questions. 

Mr. Huizenga? 

Mr. HUIZENGA. Thank you, Mr. Chairman. Actually, that follows 

right into what I was going to be saying, and Michigan does have 

a unique relationship with our neighbors to the east. In all fairness, they are to the north as well, but once you go up to Sault Ste. 

Marie—I have a special working relationship with Canada in that 

I married one. Not a country, I mean a person from the country, 

I should say. Sorry, honey, if you are watching on C-SPAN. But I 

know my lovely bride is from the Toronto area. And when we started dating and I started crossing the border on a more regular 

basis, I said, what in the heck is this coin, the loonie, and I couldn’t 

figure out why they would give it quite the moniker and was in the 

picture when the $2 coin, the toonie replaced the $2 paper bill. And 

through that family experience, I can tell my colleagues, it is absolutely considered ‘‘the thing’’ and I don’t know anyone who would 

go back to the paper dollar and $2 bills. You get $5 bills and up 

in those denominations. We have enough of a both formal and informal trade back and forth with Canada that if you go into many 

places in the State of Michigan, Canadian coins are commonly accepted. And it used to be everybody would try and figure out how 

they could cheat the system and how many ‘‘Canadian quarters’’ 

they could use to pay for an American dollar whatever when it was 

65 cents. Now that we are basically on parity, you will see Canadian coins being, $1 and $2 coins being exchanged in a number of 

places as well. 

So I have never quite understood the reluctance from a personal 

basis that we have had, other than some of the obvious challenges 

we are going to have with our vending machines and some of those 

things. And I was hoping that you would—you have to refresh my 

memory, but the loonie has been around how long? And then, the 

toonie came in around the mid-1990s, is that correct? 

17 

Ms. LEPINE. 1987 for the loon and 1996 for the toon for the 

toonie. 

Mr. HUIZENGA. Okay. I actually have some memory left of that. And what was the conversion going to a $2 coin, which for those 

of you who haven’t seen it, is substantially bigger and actually has 

almost two strikes to it. I am assuming it is some kind of blank 

that was inserted into another silver part with a copper-looking 

centerpiece to it, so it is some construction to that $2 coin. But how 

did that conversion to a $2 coin that clearly was a different size 

and all of those things, how did that go? 

Ms. LEPINE. The $2 is a bimetallic coin, meaning there is a double strike of the ring and the center core. So at the time, the look 

at the coin denomination was to have the $2 psychologically slightly bigger than the $1, but it is a much lighter coin in terms of— 

or thinner coin in terms of the next one up. 

Again, publicity was done, obviously a lot of awareness with the 

Canadian public. And the same message of savings, I just said it 

was $695 million in terms of straight seigniorage savings, and it 

is about $34 million a year, and the volume has stayed constant. 

So Canadians had already been used to the first message on the 

$1 coin. On the $2 coin, that message was repeated and was in the 

same vein and once again, very well-accepted. 

Mr. HUIZENGA. So just to recap, within a period of 9 years, you had introduced two separate coin denominations, a $1 and a $2 

coin, and you saw those savings quickly? 

Ms. LEPINE. Correct. And in the case of the $2 coin, it was because of our learnings on the $1 coin, we did an immediate withdrawal of the $2 note on the $2 coin. 

Mr. HUIZENGA. So, there was very little phase-in? It just happened? 

Ms. LEPINE. Correct. 

Mr. HUIZENGA. Okay. Thank you. 

Mr. SCHWEIKERT. Mr. Luetkemeyer? 

Mr. LUETKEMEYER. I pass. 

Mr. SCHWEIKERT. In that case, it is my turn, because there are 

a couple of other things I want to understand. Ms. Lepine, my understanding is the Canadian experience, what you had modeled, 

you had actually much more aggressive, much faster adoption and 

much faster savings than your original modeling. Is my understanding correct? 

Ms. LEPINE. Correct. When we launched the $1 coin in 1987, the 

feeling was that the demand would be about 250 million pieces. 

What actually happened is over a period of 21⁄2 years, the demand 

was 600 million pieces, so far bigger acceptance and volume rate 

going into the marketplace. Certainly, that acceptance happened 

even closer as we got to the 1989 date when the $1 note was actually withdrawn from circulation. So if you look at the movement of 

volume, the mass adoption of the $1 coin improved as we got closer 

to the date that the $1 note was dropped. 

Mr. SCHWEIKERT. And your instinct, why did, in many ways, you 

blow there through your projections and do so much better? 

Ms. LEPINE. I guess I will use the word ‘‘change’’ and not in the 

sense of we are talking about coin. And I commend this committee 

for the perseverance in looking at this issue. Change is never easy. 

18 

It isn’t easy for us, it isn’t easy for organizations, and it isn’t easy 

for the consumer. And so, I think it was just we touched on something that in the $1 coin, the vending industry was struggling, particularly the transit, with paper notes going in and getting jammed. 

So the industry was very, very motivated to see a coin coming in 

for the $1 coin. 

The Canadian public, we talked about this a lot, we talked about 

the savings a lot, and it was a matter of getting over that issue of 

change, and as we got closer to the $1 note and as the $1 note was 

removed, obviously at that point in time, the ability to adapt to 

that change, it is the dollar coin that is now the vehicle for trade 

and commerce and the Canadian public were prepared for that. 

Mr. SCHWEIKERT. Was there anything unique you did in the way 

you told the story of the savings, any brilliant insight in how you 

communicated with the Canadian public? 

Ms. LEPINE. I would love to say that there was great brilliant insight and the history is probably known on the $1 coin. When the 

$1 coin concept was conceived, and ready to go, dies were shipped 

to Winnipeg and were lost. And it was not a loon that was supposed to be the design on the $1 coin, it was supposed to be a voyager. The dies have never been found. There was a major snowstorm. Nobody has ever known. 

As a result of that, the Canadian Government immediately made 

the decision to bring the loon design up. The loon design caught on 

and was called a loonie, and I have to say if you look at the pickup 

from that moment in time, it became a name, it became a symbol, 

and it just grew from there. We won an award for the damage control in terms of dealing with that issue, and I hate to even mention 

it, because I wouldn’t want to have to repeat it. 

Mr. SCHWEIKERT. If you were sitting up here and had to go on 

to the next question after that, where do you start? I am trying to 

figure out what would be a loonie for the United States besides myself? Okay, come on, guys, that was almost funny. 

Ms. St. James, did you ever do, in your modeling, a test that said 

okay, here is our model for the United States, but if we build the 

model, if we had the Canadian experience, how fast you get to even 

cost, if you had the same very aggressive adoption and substantially larger production. Or my understanding, wasn’t there something similar also in Australia, New Zealand, other countries who 

also have done this? 

Ms. ST. JAMES. We didn’t necessarily look at that transition period from Canada, but in determining the—short of that transition 

period for the Mint, the sooner you would have benefits in seigniorage. 

Mr. SCHWEIKERT. Ms. St. James, in your model, what was the 

shortest and what was the longest to break even? 

Ms. ST. JAMES. I would say that the shortest was probably, 

again, based on 4-year transition, would still be around— 

Mr. SCHWEIKERT. But did you ever model something where you 

had a faster transition? 

Ms. ST. JAMES. No. No. 

Mr. SCHWEIKERT. Okay. When is the next cycle? Are you obligated to continue to analyze this or update your data? 

19 

Ms. ST. JAMES. We would be happy to entertain a request to do 

that again. 

Mr. SCHWEIKERT. We may have to talk offline because I want to 

know what the cost of such a thing is. I hate asking for data when 

I feel like I am adding cost on the taxpayers. But it would be interesting in what would happen if we had a similar adoption from our 

friends to the north, or to the east, and what that cost curve would 

end up looking like. 

Ms. ST. JAMES. I am sure we could use the model we have and 

shorten that timeframe and get back to you. 

Mr. SCHWEIKERT. Forgive me, I am going to go over a couple of 

seconds here. 

Mr. Peterson, as efficient as the Mint seems to have become the 

last few years, and we appreciate the diligence there, and I am delighted you are using Six Sigma and the production focus, if that 

production time was squeezed down because there was much more 

aggressive adoption and transition, could you handle it? 

Mr. PETERSON. Currently in the Federal Reserve vaults, there 

are approximately 1.4 billion dollar coins. Our capacity in Denver 

and Philadelphia is a billion coins per year apiece right now. We 

could probably—add that together, there is 2 billion. We could 

probably do some overtime and get to 2.2 billion right now. If we 

got the green light tomorrow, we would need to go investigate and 

purchase some additional capital equipment to the tune of about $8 

million to $10 million. It takes time to get that in place and set 

up. But we could be manufacturing double the capacity of dollar 

coins within a few years. 

Mr. SCHWEIKERT. I am going to annoy my brethren here. How 

many quarters do we have in storage? 

Mr. PETERSON. Quarters in storage right now, they are down 

from the peak that we saw in 2009 and 2010. The Federal Reserve 

inventory numbers right now are about 1.7 billion. 

Mr. SCHWEIKERT. So holding 1 billion is not something extraordinary? We actually do that in other denominations of coinage. 

Mr. PETERSON. Yes. 

Mr. SCHWEIKERT. Okay. I have always wanted to ask that. Gentlemen, anyone with any additional questions they would like to 

ask? Mr. Stivers? 

Mr. STIVERS. Just one additional question. I have already asked 

a lot. But this is for Mr. Peterson. Mr. Weller, who is going to testify in the second panel, in his written testimony claims that the 

Mint’s accounting inflates the cost of the penny by unfairly doublecharging for portions of the penny’s fabrication. I guess I wanted 

to give you, while you were sitting on the panel, a chance to respond to that, since his testimony will be after yours. I figured I 

would let you know. I don’t know if you saw that in his testimony 

and if you have any response to it. 

Mr. PETERSON. I did. A few years ago, we saw the penny and the 

nickel were not bearing any of the general administrative expenses 

of the Mint. Circulating coins, the penny and the nickel, make up 

75 percent of the circulating coins that we manufacture and they 

were not bearing any of the overhead. We saw that. We developed 

a new overhead allocation model in 2009. We fully communicated 

that through Treasury, the Office of Management and Budget, this 

20 

committee, and other Members here on the Hill, and we implemented that change in 2011. 

Mr. STIVERS. I just wanted to give you a chance to respond to 

that. 

Mr. SCHWEIKERT. Okay, Mr. Stivers, thank you. For this first 

panel, thank you. We truly appreciate your coming down and sharing with us. 

I guess we are going to move on to the second panel. 

[brief recess]. 

Mr. LUETKEMEYER [presiding]. Okay, are we ready to go? Let’s 

reconvene. We thank the second panel for being here, and you will 

each be recognized for a 5-minute summary of your testimony.We 

will begin with you, Mr. Miller. 

STATEMENTS OF JAMES C. MILLER III, FORMER DIRECTOR, 

OFFICE OF MANAGEMENT AND BUDGET 

Mr. MILLER. Thank you, Mr. Chairman. I thank you for inviting 

me. I would like to submit a short statement for the record. 

Mr. LUETKEMEYER. Without objection, it is so ordered. 

Mr. MILLER. This is a matter I have followed for over a decade, 

and I must say I think the proposal to replace all dollar bills with 

dollar coins doesn’t make any more sense today than it did 10 

years ago. The fact is, Americans like having available both coins 

and bills and they reject the forced replacement of the dollar bill 

with dollar coins. 

We know this from numerous polls. We also know this because 

consumers view dollar coins as a novelty, not as something they 

use every day, as some $1.4 billion now languish in Federal Reserve Bank vaults. So why does this dollar coin replacement proposal keep coming back? Because proponents allege it would save 

money. 

Now, let’s look at that. According to the GAO’s most recent report summarized in Ms. St. James’ testimony, production costs of 

converting to the dollar coin would far exceed the production costs 

of the dollar bill. So where would the claimed savings come from? 

According to GAO testimony, and it is accurate, by the way, solely 

from seigniorage. 

Now, seigniorage is a fancy term for the difference between the 

nominal value of the coin and the government’s cost of producing 

it. If production costs are higher for coins than for bills, then the 

government’s interest gained from seigniorage would be less for 

coins, right? That would be true if the government issued the same 

number of coins as bills. But what we know from experience is that 

to maintain commerce, you need three coins to replace every two 

bills, given the lower circulation rate of coins due to their inconvenience. People drop them out of their pockets, they fall into the 

cushions of sofas, they fall under the seats of cars, et cetera. 

This 3-to-2 ratio would increase seigniorage interest savings a lot 

more than the increase in the cost of producing the coins. That is 

what is responsible, solely responsible, for the so-called savings to 

government, as GAO has attested, and not until a decade has 

passed would there be any such savings, as if we would be massively using dollar coins 10 years from now, given the escalation in 

the use of debit cards and credit cards and electronic payments, et 

21 

cetera. But where does that increased seigniorage money come 

from? It comes from the private sector businesses and consumers. 

It surely doesn’t come from the tooth fairy. 

So we have a change in the monetary medium of exchange imposed by government where dollar bills are withdrawn from circulation and replaced by dollar coins and the gain to government 

is wholly due to increased costs to the private sector. This, by almost anyone’s definition, is a tax. 

Now, I realize that GAO takes issue with calling it a tax because 

it is ‘‘voluntary.’’ But our system of income taxes in this country 

is often characterized as ‘‘voluntary,’’ but no one would argue that 

what they are coerced to pay voluntarily are not taxes. When 

money flows from the private sector to the government, that is a 

tax. When the Federal Government, which has a monopoly on the 

medium of exchange, mandates the use of a particular means of exchange, clearly in its favor, that too is a tax. And in terms of the 

use of resources, the compulsory dollar coin proposal is clearly inferior since production costs of dollar coins are higher than for dollar 

bills. 

Moreover, as GAO points out, its analysis does not consider the 

cost to the private sector from adjusting from dollar bills to dollar 

coins, nor does it consider the environmental cost associated with 

the increased use of dollar coins, which could be considerable. 

Finally, as Ms. St. James points out in her statement, the cost 

of the coins are up-front and certain, fairly certain, whereas the 

savings would come only in later years and are not nearly as certain. 

I was Budget Director and I can tell you this: Anybody who was 

Budget Director, Secretary of the Treasury, anybody involved in 

forecasting what government is going to do, revenues and expenses 

the next year out, you can be fairly certain; the next year out, you 

will be pretty good; the next year out, you are not so sure. Ten 

years out, or 30 years out? Great uncertainty is attendant with 

that. 

In summary, the proposal to replace dollar bills with dollar coins 

is a loser. It requires more real resources measured by production 

costs and it can claim lower costs to government only by taxing the 

private sector and calling this a savings. It is just a matter of 

arithmetic. And it would be certain to increase the deficit and the 

debt in the next few years, hundreds of millions of dollars increase, 

increase in the debt and increase in the deficit. And it would realize savings to the government only many years from now, if at all. 

Finally, there is a disutility factor. Are you really prepared to 

force users, voters, to use a means of exchange they clearly reject 

out of hand? According to a survey by Frank Luntz, members of the 

public think they should be the ones deciding whether to use dollar 

coins or dollar bills. Some like one, and some like the other. But 

they think they ought to be the one deciding. Moreover, three out 

of four Americans think all this business about replacing the dollar 

bill is at best a budget gimmick. 

Mr. Chairman, thank you for your attention. I would be glad to 

respond to any question you or your colleagues may have. 

[The prepared statement of Mr. Miller can be found on page 49 

of the appendix.] 

22 

Mr. LUETKEMEYER. Thank you, Mr. Miller. 

Mr. Diehl? 

STATEMENT OF THE HONORABLE PHILIP N. DIEHL, FORMER 

DIRECTOR, UNITED STATES MINT 

Mr. DIEHL. Thank you, Mr. Chairman, for the opportunity to testify today. For background, I was the Director of the United States 

Mint from 1994 to the year 2000, during the time the Sacagawea 

dollar was launched. 

Since 1990, GAO has issued 7 reports on this matter, all reaching the same conclusion: Replacing the dollar note with a dollar 

coin will save American taxpayers billions of dollars, with estimated savings between $4.4 billion and $15.7 billion over 30 years. 

Based on my experience, I can say that claims that the public 

will never accept a dollar coin are false. When the Sacagawea dollar was launched in 2000, public demand was so strong that the 

Mint shipped more coins in its first year than it did in the entire 

20-year history of the Susan B. Anthony. In other words, our experience was very similar to the experience that Ms. Lepine described 

with the launch of the toonie. 

Opponents will also cite research as we heard which they claim 

shows the public opposes substituting a dollar coin for a dollar 

note. What they don’t reveal, however, is that if respondents are 

first informed that this will mean millions in savings, two-thirds of 

them support it. 

Opponents also question how long it will take to manufacture the 

9 billion coins needed to add to those already in circulation. I have 

doubts about these objections. During my last year as Director, we 

produced 28 billion coins, with additional capacity to produce another 2 billion. I understand the Mint will produce around 9 billion 

coins this year. So, there appears to be significant unused capacity 

to produce more dollar coins. 

Today’s conventional wisdom is that the Sacagawea dollar was a 

failure, but it certainly wasn’t at the time. As I said, demand was 

much stronger than we anticipated. In fact, we had to increase production and develop a direct shipment program to reduce delays 

through the FRB. But demand for the new dollar coin ultimately 

flagged due to resistance within the government and the banking 

sector, which I will describe momentarily, and competition from the 

dollar note. Frankly, you will never overcome this resistance without removing the dollar note. 

For many years, the dollar coin has faced a significant obstacle, 

the FRB’s strong preference for the dollar note. I discovered this 

myself when we launched the Sacagawea dollar in 2000. The FRB 

is the sole channel through which the Mint distributes coins to 

banks and ultimately to businesses and consumers. If the FRB 

doesn’t order a coin, it doesn’t get into the hands of the public. 

We did an extensive survey of banks and the FRB to prepare for 

launching the Sacagawea dollar. They confronted us with a dilemma. They would not order the Sacagawea dollar unless we first 

demonstrated there was demand for it, and market research wasn’t 

sufficient. This presented us with a Catch-22 since we couldn’t 

prove there was public demand unless we could get the coin into 

the market. 

23 

We solved this dilemma by shipping the coins directly to thousands of Wal-Mart stores all over the country. In just a few weeks, 

Wal-Mart distributed 100 million Sacagawea coins as change in 

routine retail transactions. Lines formed outside the stores before 

they opened in order to get the coins. In fact, Wal-Mart wanted another 100 million to distribute over the next several weeks. But 

when the banks started receiving calls from customers asking for 

the coins, they insisted on receiving shipments immediately and we 

accommodated them. 

As GAO has reported, and as Ms. Lepine described, both notes 

and coins make a profit, and this profit is called ‘‘seigniorage.’’ But 

the profit from coins and notes is accounted for differently and this 

difference is important to the FRB’s preference for notes. 

The bottom line is that the Mint earns the profits for dollar 

coins, and the FRB earns the profits from dollar notes. In 2011, the 

FRB’s note seigniorage was estimated at nearly $200 billion. In 

other words, eliminating the dollar note denies the FRB an important source of its profits that would be lost as a result of this legislation. However, this loss would be offset by a much larger benefit 

for the taxpayer. 

I was surprised, as some of you may have been, by the dramatic 

reduction in GAO’s savings estimate reported in its 2012 report. A 

significant part of this reduction is related to the FRB’s remarkable 

increase in the estimated lifespan of the dollar note. For the past 

20 years or so, the FRB cited a lifespan of between 13 and 18 

months. Then over the past 2 years, they increased the note’s lifespan three- to fourfold to 56 months. It is hard for me to imagine 

what accounts for the dollar note’s sudden immunity to wear and 

tear in circulation, but frankly for me it strains credulity. 

Now, I would like to speak to a few points we heard earlier. Mr. 

Miller says, in his written testimony, that the taxpayer benefits 

from this legislation are actually taxes imposed on consumers. For 

me, this is not evidently true and it is difficult to see how this conclusion is reached since there is very little support in the testimony. But let’s say, for the sake of argument, it is a tax. In that 

case, the profits from the note are also a tax on consumers, are 

they not? Why ignore these taxes in the analysis? 

Also, he says that between the tax benefits and the tax on consumers, there is no net savings here. But if there is no net savings, 

how can there be a net tax? And if there is no net tax, his next 

argument that the tax is regressive is invalid as well. 

Thank you, Mr. Chairman, for the opportunity to testify. 

[The prepared statement of Mr. Diehl can be found on page 36 

of the appendix.] 

Mr. LUETKEMEYER. Thank you, Mr. Diehl. 

Mr. Weller? 

STATEMENT OF MARK WELLER, EXECUTIVE DIRECTOR, 

AMERICANS FOR COMMON CENTS 

Mr. WELLER. Mr. Chairman, members of the subcommittee, my 

name is Mark Weller. I am a partner at S&R Denton and executive 

director of Americans for Common Cents. Thank you for inviting 

our organization to appear before the committee today. I am excited to talk to you about the one cent coin, the metal content of 

24 

our coins, and the role that the penny plays in our economy and 

culture. Americans for Common Cents was formed in 1990 to conduct research and provide information to the Executive Branch and 

Congress about the value of the U.S. penny. 

There are three points I would like to make today. First, ACC 

does not have a preference regarding which metals are used to create our coins. Our focus is directly looking at the broader fact that 

consumers benefit with a low denomination coin. The penny is important for our economy. Working families benefit from the penny, 

and America’s many charities thrive on it. 

Second, steel is a coin material that saves money and it has been 

used successfully in Canada and other countries. We are excited to 

see what the Treasury Department recommends to this committee 

next month when they produce their report, not just on the content 

of the penny, but on our other circulating coins. 

Third, a focus on metal content alone ignores the Mint’s substantial overhead as well as cost accounting changes that inflate the 

cost of the penny and the nickel. Metal content is just one component in the rising costs of our circulating coins. In fact, metal actually has become less of a factor since the prices have lowered from 

their highs of 2006. And last year, the Mint reallocated the costs 

of the penny looking at the number of coins produced rather than 

their traditional accounting that looked at Mint labor costs. 

So these findings together suggest that Congress is on the right 

track in looking for ways to make our coins less expensively. However, in addition to coin composition, there needs to be an additional focus on Mint overhead and those costs and how they are allocated. 

Let me just take a minute to specifically address one of the topics 

of this hearing, H.R. 3693, Congressman Stivers’ Cents and Sensibility Act, that is going to require the pennies to be made from 

steel; and H.R. 3694, the STEEL Nickel Act to require nickels to 

be made out of steel and resemble the current 5-cent coin. 

Multi-ply plated steel compositions have been successfully used 

by the Royal Canadian Mint, as we heard from Ms. Lepine this 

afternoon, to manufacture circulating coins in Canada as well as a 

number of other countries for over a decade. And as Congressman 

Stivers mentioned in his opening statement, a February 2012 

Navigant Consulting study looked at the raw material cost savings 

the U.S. Mint could achieve if we substituted the compositions currently in use with steel coin compositions that have been successfully used in Canada. 

There are two findings in this Navigant report. First, they found 

that the adoption of a multi-ply plated steel technology for the 

nickel, the dime, and the quarter would reduce the per unit raw 

material costs by over 85 percent. Second, applied to the historic 

Mint production levels for these denominations, the raw material 

cost savings alone by making this change to the multi-plated steel 

would run between $183 and $207 million. So based on these findings, Congress and the Mint should consider changing the composition of the vending coins to multi-ply plated steel. 

The metal we use in our coins is just part of the picture. While 

metal prices have stabilized since 2006, the reported costs of the 

penny and nickel have increased dramatically. Why is this so? The 

25 

Mint has spread costs over a smaller number of circulating coins, 

and an accounting change by the Mint in 2011 exacerbated the 

Mint’s cost allocation for the penny. This accounting change unfairly doubled charges, the costs for the penny fabrication process, 

since the Mint receives a finished, ready-to-strike blank from a private sector firm, and only a small fraction of the overall penny operations are performed by the Mint. 

So here is the key point: Metal prices have decreased from their 

highs of 6 years ago and the penny production and transport costs 

have remained relatively constant, but low coin demand and the allocation of Mint costs across a smaller number of circulating coins 

have negatively impacted the penny’s reported unit production cost. 

In summary, as the Mint and Congress explore options to make 

our coins more cost-effective, several factors should be paramount. 

First, steel is a coin material that saves money and has been used 

successfully in Canada and other countries. Second, the metal content is just one component in the rising cost of our circulating coins 

and a focus on metal content alone ignores the Mint’s substantial 

overhead as well as cost accounting changes that inflate the reported costs of the penny and the nickel. And, third, we need to ensure that the Mint and congressional discussions about alternative 

metals don’t become a pretext for an ill-considered decision to remove the penny from circulation. The alternative to the penny, 

which is rounding transactions to the nickel, is bad for consumers 

and it is bad for the economy. It will hurt those who can least afford it because they make more cash purchases than others. 

Americans overwhelmingly want to keep the penny. No one has 

explained how we would replace the millions of dollars that are 

raised by charities and charity drives every year if we didn’t have 

the penny around. In these uncertain economic times, the last 

thing consumers need is price rounding and inflation and reduced 

charitable assistance. But with the changes outlined above, I think 

we can retain the penny and achieve the other cost benefits for our 

circulating coins. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Weller can be found on page 71 

of the appendix.] 

Mr. LUETKEMEYER. Thank you, Mr. Weller. 

Let me begin with you, Mr. Weller. You probably heard my questions awhile ago to Ms. Lepine with regards to doing away with the 

penny altogether, and you made some comments within your testimony here with regards to that. Can you expound on that? 

I guess, number one, how many other countries in the world do 

not have pennies that have similar monetary structures as we do? 

I guess the second question is you made the comment that it impacts the poor, and if you round it up, it looks to me like half the 

time you are going to win, and half the time you are going to lose, 

regardless of what you do. Can you expound on why it is going to 

impact somebody in a negative way? 

Mr. WELLER. Sure, I would be happy to. Thank you. There are 

a couple of responses. There are some countries that have been 

mentioned, New Zealand and Australia. I think you mentioned 

Australia. Our economy is 16 times larger than Australia’s, so I 

think it is difficult to make those comparisons on what that would 

26 

mean. We have the largest economy in the world with millions of 

transactions that are taking place. 

Britain still has a one pence coin—it is about 11⁄2 the value of 

the penny—in existence. And the European Union, when they were 

created, Mr. Chairman, had a number of coin options they could 

look at and they felt it was important to have both a one- and a 

two-cent Euro coin. Why? Because they were concerned about inflationary impacts and the impacts of rounding. 

I think it was interesting in Ms. Lepine’s testimony that when 

she was talking about their experience with the Canadian penny, 

they have actually stopped production but they are continuing to 

circulate that coin and they have delayed any change until February of next year because the merchants were concerned about 

rounding and the public reaction to rounding over the holiday shopping season. 

So I think the answer is that unlike Canada, we have consistently seen that over 60 to 70 percent of the American public wants 

to keep the coin. Americans abhor the idea of rounding, and over 

77 percent think merchants would use that opportunity to raise 

prices, and they are probably right. 

The misconception is that rounding is going to work out and even 

out and be done fairly, and the fact is if there is one proposition 

that economists can agree on, it is that merchants have an incentive to make a profit. So if you talk to retail grocers and convenience stores and others, they work on very small margins and that 

cent up or down, one way or another, really does make a difference. 

The poor, just to finish, and I am taking probably more of your 

time, are affected the most because they rely predominantly on 

cash transactions. They don’t have credit cards. They don’t have 

checking accounts. They are using cash and payday lenders. So you 

are not only having an a broad impact on the economy, but you are 

affecting those who can least afford it. 

Mr. LUETKEMEYER. Okay. Have you checked New Zealand and 

Australia on their doing away with the penny? What were the 

problems that they had with that? Did they see inflationary effects 

with smaller purchases? 

Mr. WELLER. We have not spoken to them specifically on what 

the inflation impact is. I think there is a real impact on inflation 

and a perceived impact. The studies we have seen showed that 

there would be a very small actual impact on inflation. However, 

there are a number of programs that are tied to the CPI, Social Security and other wage programs, and so even a small change in inflation has a dramatic impact on the cost. 

But more so, I think, as The Wall Street Journal editorialized in 

2006, doing away with the penny would be waving a white flag to 

the forces of inflation. We are not a South American country that 

devalues its pesos. I think it is a real tribute to our economy that 

we have had a low denomination coin as long as we have, and I 

think it sends all the wrong signals that we are doing away with 

the penny, rounding to the nickel, for these perceived cost issues 

when the nickel is costing 11 cents, and the logical conclusion is 

you do away with the penny and the nickel and then you have your 

dime as the lowest denomination, and that doesn’t really make 

much sense. 

27 

Mr. LUETKEMEYER. Interesting. My local utility company at home 

rounds it to the nearest dollar. I don’t have any pennies, I don’t 

have any quarters or anything. It is always rounded to the nearest 

dollar. 

Along this line, Mr. Miller, would you like to just give an opinion 

on this? 

Mr. MILLER. I don’t have any comments on that, no, sir. I do 

have— 

Mr. LUETKEMEYER. Mr. Diehl? 

Mr. DIEHL. I really don’t have an opinion on this either. 

Mr. LUETKEMEYER. One way or another? Okay. I know we are 

talking about the different make-ups of the coins themselves. Have 

we looked at other countries with regards to how they do their 

metal coins, other than Canada? Have any of you done any studies 

or looked at other countries? Mr. Weller? 

Mr. WELLER. We have looked at other countries. I think as was 

pointed out in the first panel that you have a limited option of coin 

materials that produce a cost savings. But certainly those countries 

that we are looking at, copper and nickel that were really higher 

cost coins, were all looking at ways to try to make their coins less 

expensively. I know that the multi-ply steel not only has been used 

in Canada, but we are seeing that in, I think, about 20 or 30 other 

countries, which would indicate that is an option which has been 

popular. But I think there are other technologies out there that the 

Mint is examining that can produce similar cost savings and aren’t 

necessarily just that steel approach. 

Mr. LUETKEMEYER. Very good. Thank you for your testimony. I 

recognize the gentlelady from New York. 

Mrs. MALONEY. Thank you, and first of all, I would like to welcome Mr. Diehl, the former Director of the U.S. Mint, and also Mr. 

Miller, and thank you for your former service to our country. 

I was on this committee when we came out with the dollar coin, 

and one of the reasons we did it is that we had a dollar coin, the 

Sacagawea coin. It wasn’t popular; no one wanted it. So we thought 

if we had an innovative, creative dollar coin series, the collectors 

would want it and it would move forward. Well, that didn’t happen. 

Then what happened is that people didn’t want them, so they went 

out of circulation back to the Fed and the Fed had to spend all this 

money to store them. 

I just know one factor that I didn’t like about the dollar coin was 

that it was the exact same size as the quarter, so I was constantly 

moving fast and handing out dollars like they were quarters. And 

a number of people tell me they don’t like the fact that the size is 

the same as the quarter. They confuse them when they are working fast. And also the weight of it, of carrying around dollars that 

are in coins, is heavier than carrying the paper. But the whole 

thing about we stopped the dollar coin because they were just going 

to the Fed. 

Now, if the people don’t want it and they don’t want to use it, 

and I hear complaints that it is the same size as the quarter, they 

don’t want to put it in their pocketbooks because they hand the dollar out as a quarter, the collectors don’t want it, why in the world 

are we even talking about changing it if it has failed? We tried to 

make this the most exciting dollar coin series with all kinds of creVerDate Nov 24 2008 18:12 Mar 26, 2013 Jkt 079692 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 K:\DOCS\79692.TXT TERRI
28 

ative things. The people didn’t want them and the collectors didn’t 

want them, and it ended up costing taxpayers more money to sit 

there and store them. 

I know that the weight is something to me, someone who leaves 

at 6 o’clock in the morning, you get back late. I carry a lot of paper 

dollar bills with me and use them. If I turn them into quarters, or 

rather dollar bills, it is added weight you are carrying around. And 

it seems like the cost is basically the same. So why bother to 

change it? I will ask Mr. Diehl first, and then Mr. Miller. 

Mr. DIEHL. Let me address several things because you have 

raised a number of issues. We learned the lesson from the Susan 

B. Anthony dollar that you have to produce a dollar coin that is 

easily distinguishable from the quarter because the Susan B. Anthony was the same color, and like the quarter, it had a smooth 

edge. 

So the Sacagawea coin was produced as a gold colored coin with 

a reeded edge so that it was easy to tell the difference, and, excuse 

me, but it is not the same size as the quarter. It is larger than a 

quarter. And once you get used to handling it, it is easy for me to 

reach into my pocket and actually pick out the Sacagawea coin 

from a quarter. And it is really a matter of just sort of getting used 

to it. 

Now, in terms of whether or not the Sacagawea dollar was a success, I addressed this in my testimony. It was a hugely popular 

coin when we launched it. But we knew from the very beginning, 

and in fact, we knew from before we launched the Susan B. Anthony because of market research that was done in 1978 and 1979 

by the Treasury Department that a dollar coin would never successfully circulate unless you remove the dollar bill. We have never 

bitten the bullet to remove the dollar bill, as every other western 

economy has done. If we do that, I am absolutely convinced we will 

have the same success as the Canadians have had with removing 

their dollar note and substituting a dollar coin. 

They found that the seigniorage profits from that substitution 

were 10 times what the original estimates were. That doesn’t surprise me, because I think the natural result— 

Mrs. MALONEY. What year was it when they found that out in 

Canada? 

Mr. DIEHL. That was in 1986, and then they had so much suc- cess, they subsequently introduced a $2 coin to replace the $2 note 

in 1997 and they reaped similar kinds of benefits. I don’t see any 

reason why the passage of time would make any difference in that 

regard. 

Mrs. MALONEY. I would say that there is a difference, Mr. Diehl, 

because we are really moving to an electronic system in banking. 

We are moving to paying everything electronically, debit cards, 

charge cards, all kinds of different cards. They now have phone 

cards, they have meal cards, they have prepaid cards. We are moving to cards over the traditional notes that we had. 

And I would say also when the American public, and I guess 

elected officials listen more to the American public than appointed 

officials because we have to answer to them, elected officials hear 

from our constituents that they like the dollar bill, and they don’t 

want it changed. And Sacagawea, when it came out, it was sort of 

29 

exciting, we have this new dollar coin. But then that was also 

stockpiled at the Federal Reserve because people were not using it. 

It didn’t stay in the currency. It wasn’t being collected. And it really got to a point where it was costing us money keeping all that 

material there. 

And I would venture to say the fact that we are moving to really 

a card situation, particularly with younger people, my daughters 

don’t carry money, they don’t carry a phone, everything is on a 

card. And I think that might be a change that will affect the finances of it quite dramatically. 

Your comment on that, moving to the prepaid cards? 

Mr. LUETKEMEYER. Very quickly, if you can respond to that? We 

need to move on. 

Mr. DIEHL. That change will have the same effect on currency as 

it will on coins, and as a result, there will be a net wash between 

the two. The big advantage of a coin is while, in fact, it is more 

expensive to produce, it has a much longer lifespan, a 30-year lifespan, and Ms. Lepine spoke to that in her testimony on the first 

panel. 

Mrs. MALONEY. Versus a paper dollar is what, 5 years? 

Mr. DIEHL. It depends on when you asked. The estimates have 

ranged between 13 months and 56 months over the last several 

years. 

Mrs. MALONEY. Thank you for your testimony. Thank you for 

your service. 

Mr. LUETKEMEYER. Thank you. The gentleman from Ohio. 

Mr. STIVERS. Thank you so much, and thank you all for your testimony. Most of the second panel is about the dollar, and I appreciate Mr. Weller’s comments about the penny. I did appreciate your 

points about the overhead at the Mint. You may have heard Mr. 

Peterson earlier respond to your statement about the accounting 

changes at the U.S. Mint which changed the cost, listed cost and 

overhead which is assigned to the penny and the nickel. 

Did you want to comment on his points earlier where he said all 

it was is general and administrative expenses being assigned to the 

penny and the nickel? 

Mr. WELLER. Yes. I think the response, Congressman, is still 

that you have in the situation of the penny a ready-to-strike blank 

that is produced for the Mint and all they do then is mint Abe Lincoln’s head on that that coin. If you look at the Navigant report 

from earlier this year, and they looked at some of these costs in 

more detail, the costs of taking the metal, melting that down, rolling it, stamping it up, setting it, delivering that finished blank was 

around a cent or 1.1 cents, and then we move from that to 2.4 by 

the Mint cost. And I think that inflated cost, at least for the 2011 

situation we are discussing, is due to the fact that the Mint reallocated their costs and looked at those GS&A costs based on the percentage of coins produced. And since the penny is 60 to 70 percent 

of the Mint production, they were getting a large portion of those 

overhead costs, when, in fact, that ready-to-strike blank, in our 

view, does not really require all the overhead that is being put on 

it. 

So that when you saw that penny cost go from 1.5 to 1.7 to 1.9 

and now to 2.4, and who knows what it is going to be if the dollar 

30 

coin costs are now distributed over a smaller number of coins. I 

think that is what is causing this inflation we are seeing. 

Mr. STIVERS. Sure. And as an example of what you are talking 

about, the Royal Canadian Mint’s production costs for their coins 

are actually lower on a per unit basis than the U.S. Mint. However, 

their volume is approximately one-tenth the U.S. Mint’s. Do you 

have any explanation for that, and then do you have any recommendations or a prescription for increasing the efficiency of the 

U.S. Mint? 

Mr. WELLER. Yes. I believe that the Royal Canadian Mint doesn’t 

allocate their costs on a per-unit basis, so that would be one difference. I think Mr. Peterson did a nice job of explaining how they 

have made some significant reductions over time. I think what was 

interesting in Ms. Lepine’s testimony was just more broadly not 

looking specifically at one denomination of the penny or the nickel, 

but the number of the steps the RCM has taken to reduce their 

overall costs of production. They instituted a $1 and $2 coin that 

extracted savings. They moved their nickel, dime, and quarter to 

a multi-ply steel and saved money. They moved their penny to a 

steel coin. They changed the size of their coins. So all these steps 

were a part of the whole effort I think that reduced their costs and 

their production and helped in their efficiencies. 

Mr. STIVERS. Would you normally expect somebody with more 

volume or less volume to have a lower unit cost? 

Mr. WELLER. You would assume that the higher volume would 

produce the lower cost. 

Mr. STIVERS. It kind of defies logic. 

Mr. WELLER. Yes. 

Mr. STIVERS. Thank you for that. I really appreciate it. Do you 

have any other prescriptions or advice for the U.S. Mint on how 

they could do what needs to be done to make themselves more efficient? And if you don’t, that is fine. 

Mr. WELLER. I think I will probably pass on that. It is a little 

outside of the mission of the Americans for Common Cents. 

Mr. STIVERS. Sure. But you do talk about the overhead in your 

testimony. I wanted to give you an opportunity to talk about the— 

if you had any specific recommendations, I felt that was only fair. 

Mr. WELLER. Thank you. I think the point would be that a lot 

of this focus has been on metal content, and I simply wanted to 

raise for the chairman and the members of the committee that 

there is a second side to the coin, if you will, which is there is an 

allocation of cost here that plays into this certainly with the penny 

and the nickel. 

I am sorry that Congresswoman Maloney left. Several years ago, 

she submitted a question to the Mint that asked what would happen to nickel production if you didn’t have the penny, and the Mint 

came back in response to that and said that their nickel production 

would double. So this whole idea we are going to save money if we 

eliminate the penny really doesn’t pan out. Navigant found out 

that there is actually an $11 million cost to the Mint without the 

penny because you have fixed costs that are applying to our other 

coins and then you have more nickels that are also being produced 

at a loss. 

31 

So I wanted to just say that if you look at the RCM experience, 

they made a number of changes across a number of coins. I think 

the way to address this is holistically. 

Mr. STIVERS. Sure. And I think that makes a lot of sense, and 

the report coming out of the U.S. Mint in December is something 

we are all going to anxiously await. 

It looks like my time is up. I appreciate the opportunity, and I 

yield back. 

Mr. LUETKEMEYER. Thank you. We are going to also, if there are 

no objections, enter into the record the testimony of Thomas 

Schatz, president of Citizens Against Government Waste. They 

have some comments to make on this issue as well. 

I have one or two questions myself yet, and then we will keep 

going here. Mrs. Maloney made the comment with regards to a lot 

of transactions being done electronically, and I was talking to 

someone in the financial services industry just yesterday and they 

said that in 5 years, 50 percent of transactions are going to be 

made on this thing right here. Now, I don’t know if that is true or 

not. I am the least tech savvy person in this room, I will guarantee 

you. 

But if that is the case, where do we go with our coinage and our 

paper money? Is there going to be the need for it? Are we really 

looking at long-term, long-range needs for these sort of things? Can 

you gentlemen, each one of you, give an answer to that? Where do 

you see it is going? 

Mr. MILLER. I would say if we do that, it is going to really increase the cost of converting to coins, because then we will have 

paid all the up-front costs and we don’t get the benefits. So I think 

it makes this proposal that is outstanding really a much worse 

deal. 

Mr. LUETKEMEYER. You are talking about the proposal going to 

the $1 coin, or going to the steel-plated coins? 

Mr. MILLER. No, I am talking about replacing the bills with the 

$1 coin. 

Mr. LUETKEMEYER. Mr. Diehl? 

Mr. DIEHL. If estimates of the budgetary effects of legislation 

over the next several years are relatively accurate, but the further 

out you look, the more speculative they become, then it is certainly 

speculative to say what the future of money will be. 

It has been 13 years since I was at the Mint and I testified in 

front of this committee about the future of money, the very same 

title of this hearing, where we discussed whether coins and notes 

would be replaced by other forms of money. I don’t believe money 

is going to go away. There is a bigger role, no doubt, for electronic 

forms of money. I think you are absolutely right, there will be more 

transactions on cell phones. 

But it took me 5 minutes this afternoon to get in a taxicab at 

my hotel because the people who were in the taxicab were trying 

to pay using a cell phone and it wouldn’t work. It was the only 

taxicab available, and as a result, I was almost late today. So count 

me as a bit of a skeptic that electronic forms of money will replace 

coins anytime soon. 

Mr. LUETKEMEYER. Very good. Mr. Weller? 

32 

Mr. WELLER. Certainly, the technology trends are moving in that 

direction, Mr. Chairman. Who would have thought 10 years ago 

that anybody going to a fast food restaurant would be using plastic? But we have micro-transactions under $10 or $5 that were predominantly the world of cash that are now debit and credit. So I 

think you could see a continuing use of cash and currency in the 

economy as the changes that you outlined occur. 

That said, I think there is always a need for cash and coin, predominantly in the lower-income populations who don’t have credit 

cards, they don’t have checking accounts, and those people are the 

ones who rely predominantly on cash and currency. So we have to 

make sure we are not taking any steps that are going to have a 

harmful effect on those populations. 

Mr. LUETKEMEYER. For the record, they said the same thing 

about checks 30 or 40 years ago when they introduced credit cards 

and debit cards. They said, well, the checks are all going to go 

away. We are going to have a checkless society. Now, the level of 

checks is about the same as it was 30 years ago. However, there 

are still a lot more transactions being done, but the level of checks 

is still relatively the same. So it is interesting that comment was 

made and I was interested in your thoughts on that. 

With that, I will yield to the gentleman from Ohio, if he has any 

further questions. 

Mr. STIVERS. I think we have kept these people busy a long time. 

I am good. Thank you so much, Mr. Chairman. 

Mr. MILLER. Mr. Chairman, could I respond to do Mr. Diehl, because he did point me out in his testimony. 

Mr. LUETKEMEYER. He did mention you, but I did not see him 

physically point to you. 

Mr. MILLER. Mr. Diehl said that he didn’t see how the seigniorage interest was a tax on consumers and businesses. Let me just 

give you another—I thought I explained it, but let me give you another analogy. 

I am sitting in my office surrounded by my associates at OMB, 

and we are trying to put the budget to bed, and we are trying to 

meet Gramm-Rudman-Hollings deficit reduction requirements and 

we are about $20 billion short, and I say, I have an idea. We will 

get Congress to pass a law that will force everybody to pay all of 

their income tax on the first of January. Then we will have that 

money through the whole year where we can effectively earn interest on it by not borrowing or not turning over debt that otherwise 

we would have to turn over, et cetera. Isn’t that a great idea? It would certainly solve the $20 billion revenue shortfall. But 

who would argue that it is not an inconvenience and a tax on people to have to pay all of their income tax up front? So it doesn’t— 

it seems to me that might be a distinction without a difference. 

Also, the question of whether it is regressive, I cite a study in 

my testimony, and I will be glad to share that study with the committee. If Mr. Diehl has studies showing otherwise, he should share 

that. 

Mr. Diehl also said that people would support the coin if they are 

told up front that it would save money. There was a survey that 

was taken by Frank Luntz that I cited in my testimony, where 

even though people were told that it would save the government 

33 

half a billion dollars a year, they still opposed converting or forced 

conversion from coins to dollars. 

Mr. Diehl said the coin would be successful only if you withdrew 

the dollar bill. Yes, I agree. I agree. But why is that? The government is a monopoly. If they withdraw from consumers a choice, 

then the consumers would have to go with the other thing. But 

suppose that you are a monopoly producer of automobiles in the 

United States or any other country and you have two models: one 

that we will call the Lion, it is really a great model; and the other 

we will call a Dog. And the Lion is a really good vehicle and the 

Dog is a bad vehicle, but the Dog earns a whole lot more money 

than the Lion. So somebody says, why don’t we just withdraw the 

Lion? People don’t have any choice. They will have to buy the Dog. 

Well, that is true. If they buy the Dog, the company will make 

more money. But that is not good policy. And I don’t think the Federal Government should be taking away the choice from consumers 

whether they hold their cash in coins or dollars, and the public 

agrees with that position. 

Mr. LUETKEMEYER. So you are advocating the penny be called 

the Fido. Mr. Diehl, would you like to respond? I will give you 30 

seconds. 

Mr. DIEHL. Great. This bill would impose virtually no pain on 

American taxpayers and minimum inconvenience. Congress is considering cuts that represent enormous pain to virtually every taxpayer in America, and I think it is sort of silly for us to make such 

a big deal out of reaping the benefits that are available that are 

difficult to argue with, because the GAO has documented it 7 

times. And we had testimony from Ms. Lepine today that the benefits were 10 times what they expected in Canada. I think it is an 

open-and-shut case. 

Mr. LUETKEMEYER. Very good. With that, we want to thank the 

panel and the members of the former panel for their testimony 

today. It has been enlightening and it has been lively. Obviously, 

there are two distinct sides to this, and we will continue to work 

on it. Thank you again for your enlightened testimony and we appreciate your participation. 

The Chair notes that some Members may have additional questions for today’s witnesses, which they may wish to submit in writing. Without objection, the hearing record will remain open for 30 

days for Members to submit written questions to these witnesses 

and to place their responses in the record. 

With that, the hearing is adjourned. 

[Whereupon, at 4:01 p.m., the hearing was adjourned.] 

(35) 

A P P E N D I X 

November 29, 2012 

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