Now for something completely out of left field… This. Is. Crazy. There was a congressional hearing last week on a bipartisan bill to replace paper dollars with dollar coins. Swell idea I’m sure, however if it passes (probably too late this year but its budgetary savings might get it slipped into a budget deal), Congress would do the scarcely imaginable, it make the Trillion Dollar Coin an even more powerful tool for the Secretary of the Treasury.
“WASHINGTON – A House Financial Services subcommittee will hold a hearing tomorrow [November 29] to examine the budget savings benefits of modernizing U.S. currency from the one-dollar bill to the one-dollar coin… The Currency Optimization, Innovation and National Savings (COINS) Act (H.R. 2977 and S. 2049), is designed to save the country billions of dollars by eliminating the wasteful, inefficient $1 note. The COINS Act was introduced earlier this year by a bipartisan group including Sens. Tom Harkin (D-IA), John McCain (R-AZ), Tom Coburn (R-OK) and Mike Enzi (R-WY). Congressman David Schweikert (R-AZ) introduced the companion bill to the COINS Act in the House with the bipartisan support of fourteen co-sponsors.”
HOUSE COMMITTEE TO EXAMINE BUDGET SAVINGS IMPACT OF DOLLAR COIN
Now the timing on this is crazy because there’s one provision of the bill (Section 2(d)) in particular you should check out; the part where it amends the Mint Public Enterprise Fund, which has been on the books, minding its own business, since 1995.
“(d) Clarification With Respect to Seigniorage- The ninth proviso of section 5136 of title 31, United States Code, is amended, by inserting after ‘miscellaneous receipts’ the following: ‘and such amount shall be included as an estimated receipt of the Government and a receipt of the Government under paragraphs (6) and (7), respectively, of section 1105(a) in any budget submitted under such section’.” (emphasis added)
The long and the short of it is this: If this bill passes, every dollar created by coin seigniorage REDUCES THE DEFICIT (currently coins sold to the Fed are off-budget, like the proceeds from a bond sale). Ha ha, that’s great, but I would file this under too good a deal.
For our purposes, this isn’t a very good idea since the most straightforward way to treat the Trillion Dollar Coin is as a Treasury bond, not subject to the debt limit, whose de facto interest rate is the Fed’s 0.25% interest on reserves rate (more than double the 3 month T-bill’s 0.10%, yes it is actually cheaper to borrow money than to create it out of thin air). None of us are safe while Congress is in session, I guess. So if the COINS Act passes, minting $2 trillion in platinum coins would eliminate the ($1.2T) budget deficit and leave us with a $800 billion surplus. That makes my head hurt just thinking about. If nothing else it would make the proposed Balanced Budget Amendment kind of a dead letter.
Maybe its just me (and, perhaps, you too), but I just KNOW the Canadians have a hand in all this. Let’s see how last week’s congressional hearing turned out… Yeah, if Lorne Greene ends up on the platinum coin, don’t say I didn’t warn you. )
“Many appeared to be awed by the Royal Canadian Mint’s successful move away from paper currency to $1 and $2 coins. In what was a rare appearance of a foreign official before a congressional committee, Beverley Lepine, the RCM’s chief operating officer, captivated the American lawmakers with her account of how smoothly — and profitably — Canada made the transition to coins.”
RCM success steals show at House hearing
Legislators ponder $1 coin versus $1 note opinions
By Bill McAllister-Special to Coin World | Dec. 03, 2012 7:00 a.m.
—– BACKFILL I
Here’s the Mint Public Enterprise Fund statute as it stands now (the COINS Act would add language after ‘miscellaneous receipt’):
31 USC 5136
“There shall be established in the Treasury of the United States, a United States Mint Public Enterprise Fund (the “Fund”) for fiscal year 1996 and hereafter: Provided, That all receipts from Mint operations and programs, including the production and sale of numismatic items, the production and sale of circulating coinage, the protection of Government assets, and gifts and bequests of property, real or personal shall be deposited into the Fund and shall be available without fiscal year limitations… Provided further, That at such times as the Secretary of the Treasury determines appropriate, but not less than annually, any amount in the Fund that is determined to be in excess of the amount required by the Fund shall be transferred to the Treasury for deposit as miscellaneous receipts…”
—– Backfill II
Here’s the statutory requirements for the President’s Budget the COINS Act references (putting coin seigniorage on-budget):
31 USC 1105(a)
“(6) estimated receipts of the Government in the fiscal year for which the budget is submitted and the 4 fiscal years after that year under—
(A) laws in effect when the budget is submitted; and
(B) proposals in the budget to increase revenues.
(7) appropriations, expenditures, and receipts of the Government in the prior fiscal year.”