Commems Collection Modern: American Gold Eagle Program / 1982 Proposals - Part II

For Part I of this story, see: 1982 American Gold Eagle Program


The House Subcommittee on Consumer Affairs and Coinage Hearing on the House 1982 American Gold Eagle bill was held in September 1982.

Subcommittee Chairman Frank Annunzio (D-IL) opened the Hearing with several background comments regarding US Gold Coinage. One that stood out to me was:

"The issuance of gold coins by the United States is a topic that has been much debated. In March of this year the Gold Commission issued its report, which contained a number of controversial recommendations. The major and, certainly the most controversial, recommendation was that the Treasury issue gold bullion coins with dollar denominations or legal tender status to be sold with a small markup over the market value of the gold content. (Emphasis added)

"Furthermore, the Commission recommended that the coins be exempt from capital gains taxes and sales taxes."

As Annunzio's denomination/legal tender comments on the coins recommended by the Gold Commission are 180 degrees from what the Commission actually recommended, I've assumed that either Annunzio misspoke or the published Hearing transcript has an error of omission - the correct statement would be

"...issue gold bullion coins without dollar denominations or legal tender status."

Annunzio continued:

"It is these recommendations which form the basis for [the House bill] The tax recommendations were immediately controversial, and 30 members of the House Banking Committee, including myself, and 6 members of the subcommittee signed a letter to the Commission opposing the tax exemption.

"As we pointed out, the exemption from capital gains taxes would tend to divert capital from productive investments to speculation in gold. At a time when we so desperately need capital investments to modernize our factories and build new ones, this provision seems particularly unwise."

The Hearing's first witness was Dr. Manuel H. Johnson, Assistant Secretary for Economic Policy, Department of the Treasury who provided details regarding the Treasury Department's position on the Gold Commission Report and the Ron Paul House bill that was introduced as a result of it.

Note: I've included extended excerpts from Dr. Johnson's testimony due to my belief of the importance of the Treasury Department's views on the proposed gold bullion coins.

Dr. Johnson began by noting that Angela Buchanan, US Treasurer and Dr. Jacob Dreyer, Assistant Deputy to the Under Secretary for Monetary Affairs, Department of the Treasury had accompanied him and stood ready to answer Subcommittee questions.

Dr. Johnson then briefly positioned the role of the Gold Commission:

"The Gold Commission was directed by the Congress to assess the role of gold in the domestic international monetary systems and to study the U.S. policies related to gold. This report was transmitted to Congress on March 31, 1982. The bill being considered this morning is the direct outcome of the work of the Gold Commission."

After this, he began outlining the Treasury's position regarding US gold coinage and the House bill:

"The Treasury supports basic elements of the bill even though it contains some provisions which concern us. We agree that the coin should be specified solely by weight without dollar denomination and that they be sold at the market value of the gold content plus a markup covering the cost of minting and distribution."

"We also agree the coin should be issued without legal tender status. Legal tender status for gold coins would compel their acceptance by private creditors for debts or by the Treasury in satisfaction of taxes. With the fluctuating market value of gold, that would require a complex system for reestablishing and announcing a fluctuating legal tender value for the coins on a continuous basis, with attendant formidable problems of operating such a system. Instead, the intent of the bill as we interpret it is to provide the private sector with an additional alternative not to impose on the economy a dual monetary standard."

After discussing the background regarding such 'technical' legal tender matters, Dr. Johnson turned his attention to the proposed designs for the coins:

"We support the proposed design of the coin. The American eagle and the double eagle were among the most attractive, popular and widely distributed coins ever minted by the United States. Return to these classic designs would be expected to enhance their popularity and acceptance."

Dr. Johnson then offered counters to several of the coin bill's provisions:

"We would anticipate a strong demand for the proposed one ounce and one -half ounce coins. However, in our view there is likely to be little demand for one -fourth ounce and one -tenth ounce coins.

"The Treasury Department recommends that provisions for minting one -fourth and one -tenth ounce coins be deleted from the bill.

[...]

"The proposed American eagle coins could be expected to be good substitutes for the gold medallions being minted under the American Arts Gold Medallion Act. Therefore, the Treasury recommends that the medallion program be terminated with the introduction of the new gold coins."

Dr. Johnson then offered a counter-proposal to the bill's model for setting the sales price of the coins:

"We believe that the pricing formula proposed in [the bill], which requires that prices be based on the previous day's 4 p.m. COMEX price, is unnecessarily restrictive. If on a given day the market price of gold is significantly in excess of the previous day's closing COMEX price, as is frequently the case, opportunities will arise for risk-free profits accruing to those who would happen to enjoy on this day convenient access to the Treasury window.

"We feel, therefore, that greater flexibility is needed to deal with rapid changes in gold prices. Accordingly, we propose that the price be determined by the Secretary of the Treasury based on a daily market price and with frequency dictated by the circumstances."

While the Treasury's position is a reasonable and justifiable one, I can only imagine the logistical problems that would have been encountered circa 1985 in attempting to keep 'current' with the market's gold prices.

Dr. Johnson then turned attentions to the tax issues of the proposed coinage:

"I now wish to turn to the most important and difficult of the issues associated with the proposals for the issuance of gold coins, that of taxation, an issue which was among the most complex confronted by the Gold Commission. Within the Commission, there was a large majority in favor of a bullion coin as provided." [No capital gains taxes, no sales or excise taxes]

Dr. Johnson related how the Commission was divided on the legal tender and tax issues:

"Several felt that a gold coin should have the opportunity to develop as a circulating means of payment if there was public interest in it. Some favored a coin to compete with foreign coins like the krugerrand, and some favored a greater role for gold in the monetary system, and some held no strong view at all.

"There was less agreement over the characteristics of the coin, that is, whether it should have legal tender status, whether it should be minted in unlimited amounts, whether the Treasury should replace gold used in minting the coins, whether the Treasury should have an obligation to redeem the coins for dollars, and whether it should be exempt from capital gains and sales taxation.

"The Commission finally adopted recommendations that the coin not have legal tender status, that the Treasury should mint the coins from existing gold stocks and that it should be exempt from capital gains and sales taxes."

In the Treasury Department's view, the tax issue was a 'make or break' provision of the bill. Dr. Johnson stated:

"Should the Congress decide against the tax exemption for the American eagle, the Treasury recommends that the entire proposal be dropped."

He then went on to back up the Treasury's position by detailing some of the potential ramifications of making the coins legal tender and taxable:

"The reason underlying the legal tender and tax recommendations had two elements. First , there was a general view that the Government should not be in the position of legally obligating people to accept gold coins in payment at a fluctuating market value, which would be the result if they were given legal tender status. At the same time, there was a desire to facilitate their use as money on a voluntary basis and to eliminate impediments that would stand in the way of that development.

"This led to the recommendation for tax exemption. The Secretary of the Treasury, on whose behalf I am testifying today, in his position as Chairman of the Commission supported these recommendations and the gold coin proposal in general. However, these issues were not studied exhaustively by the Commission, and its own recommendations indicate there remain a number of serious considerations that need to be fully explored by the Congress."

The extensive details regarding potential tax issues presented by Dr. Johnson is too long to cover here. Suffice it to say, he recommended multi-faceted additional study by Congress.

A panel consisting of Dr. Joseph Salerno, Economics Professor, Rutgers University, Luis Vigdor, Vice President, Manfra, Tortella & Brookes ("MTB"), Edwin Vieira, Jr., Attorney, Adna Wilde, Jr., President of the American Numismatic Association (" ANA") and Mrs. George S. Busiek, Coin Designer was then called to assemble and testify.

Mrs. Busiek was the first to be called by Chairman Annunzio. Her testimony was short on factual content, but long on patriotic rhetoric and belief that the "distinguished body" of Congress would find a solution for the economic issues facing the US at the time (e.g., high interest rates, record high unemployment - ~10%).

In addition, she presented the Subcommittee with a coin design that was her gift to the nation - she sought no remuneration for it

Miley Busiek Eagle Design


Note: The design was later used as the initial reverse design for the coins of the American Gold Eagle bullion coin program.

During the Q&A at the end of the Hearing's testimony, Chairman Annunzio asked Buziek:

"What inspired you to develop this design?"

She responded:

"Well, basically, my inspiration came from the fact that I love my country, that I am a wife and a mother, and those are the priorities in my life, but to be more specific, I was inspired to submit this design by a small article I happened to read in the Wall Street Journal announcing the formation of the Gold Commission, and as an artist and a creative person, it seemed to me this would raise the opportunity as a means of doing the very thing I stated here, as a way of stating to the world what America stands for, and I cannot think of a finer and more dignified place to do that than on the face of a solid gold coin."

I'll finish my discussion of the Hearing held to review the House bill in American Gold Eagle Program / 1982 Proposals - Part III


For other of my posts about commemorative coins and medals, including other US modern-era US coin stories, see: Commems Collection