In its most recent report, the GAO recommends switching to coins, which could make $4.4 billion for the government over 30 years. But the report says the government benefit does not come from the fact that coins are more cost effective. Instead the benefit comes from something called "seigniorage."
Seigniorage is the profit the government makes from having money out in the economy. More money out there means more profit for the government.
Over time, coins earn more seigniorage for the government, but only because we don’t like using them.
"Lots of people when they take coins out of their pocket or purse at the end of the day put them in what we call a coin jar," says the GAO’s Lorelei St. James, who oversaw the agency’s most recent study.
As a result, the GAO estimates that if the government were to eliminate $1 bills and switch to coins, it would have to replace every two bills with three coins, because one of the coins would sit idle.
So more coins means more profit for the government. But where does that profit come from? It comes from us — the public.
I decided not to include the bit where they talk about the fact that the senators proposing the switch to coins are from states where… coins or their raw materials are produced. Surprise!