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Subway riders here in Washington were recently the target audience for an unusual ad campaign. The ads show giant one dollar bills and asked, do you heart the dollar? They're part of a small lobbying war over the fate of the dollar bill. There's legislation in the House and Senate that would eliminate all $1 bills and replace them with dollar coins.

NPR's investigative unit and our Planet Money team checked into the debate over coins versus bills. And David Kestenbaum and Robert Benincasa think they have a winner.

DAVID KESTENBAUM, BYLINE: Here's the question. Given that we need to have some form of money out there worth a dollar, which is more cost effective, a bill or a coin?

ROBERT BENINCASA, BYLINE: Before we tell you who the winner is, let's hear each side's case.

KESTENBAUM: In one corner, arguing on behalf of the dollar coin, Senator Tom Harkin, Democrat from Iowa. He told us coins are a clear win. They last much longer than bills.

SENATOR TOM HARKIN: The most important thing is it's just more efficient. It's way more efficient than a paper dollar.

BENINCASA: Dollar coins last something like 30 years and he says switching to coins would save hundreds of millions of dollars a year.

KESTENBAUM: Coins are also, he says, easier to stick into vending machines. Harkin's office put out a video of him struggling to buy a snack with a worn out $1 bill.

(SOUNDBITE OF AD)

HARKIN: Has this ever happened to you? You try o put a dollar bill in the tray, but it won't take it. Well, that's why I've introduced bipartisan legislation to replace the dollar bill with a dollar coin.

KESTENBAUM: Harkin can rattle off a long list of countries that have replaced bills with coins.

HARKIN: Canada has a coin that's worth $2. England has a coin worth about $3 U.S. Switzerland has one worth about $5 U.S. And yet, what have we got? We got a 25-cent piece.

KESTENBAUM: Republican Senator John McCain has also signed onto the bill. And it's worth noting that businesses in both senators' states would benefit if this bill passes.

BENINCASA: Harkins' state, Iowa, is home to a company called PMX, which makes the metal sheets that get turned into coins.

KESTENBAUM: Senator John McCain's state of Arizona is home to some big companies that mine copper, the main ingredient in dollar coins.

BENINCASA: So, that's the coin side of the fight. In the other corner, fighting for paper, you'll find an organization called Americans for George.

KESTENBAUM: Because George Washington is on the $1 bill. Americans for George put those ads in the D.C. subway and again, here you find a lot of money behind the arguments over money. Americans for George was started by the company that makes the paper the $1 bill is printed on. Crane & Company.

BENINCASA: Doug Crane is a vice president there. As you might imagine, he says paper dollars are better than coins.

DOUGLAS CRANE: A dollar bill is made from a blend of cotton and linen fiber.

KESTENBAUM: Paper bills are cheaper to manufacture than coins, he says, and they last surprisingly long. According to the U.S. Federal Reserve, a $1 bill lasts about four and a half years.

CRANE: U.S. currency, you know, it's some of the most durable banknotes on the planet. And, you know, the $1 bill is probably the hardest-working note there is.

KESTENBAUM: So, what to make of this. The coin people say coins are better. The paper people say paper is better. Both cannot be true.

BENINCASA: And to make things more confusing, both sides point to the same official report to make their case.

KESTENBAUM: The report was written by the Government Accountability Office, a non-partisan arm of Congress that's often called on to settle questions like this.

BENINCASA: We talked with the GAO's Lorelei St. James who oversaw the report. The GAO has recommended switching to coins.

LORELEI ST. JAMES: That still stands.

KESTENBAUM: She says switching to coins would make the government money. Over 30 years, a lot of money.

JAMES: We show that there would be a $4.4 billion net benefit to the federal government.

KESTENBAUM: But it turns out that $4.4 billion does not come from the fact that coins are more cost effective to make. Coins do last longer, but they also cost more to manufacture. No, according to the GAO, the extra money for the government comes from this other weird thing. It's going to take us a minute to explain.

BENINCASA: It turns out if you switch from dollar bills to dollar coins, you can't just do a one for one replacement. You actually need more coins than you would bills. Why? Because people don't like carrying coins around.

JAMES: A lot of people when they take their coins out of their pockets at the end of the day or their purses, they'll put in what we call a coin jar.

KESTENBAUM: The coin jar effect. In Canada and the U.K., the governments had to put out all these extra coins, over 50 percent more, just to keep enough money circulating. The GAO says these extra coins mean extra money for the government.

BENINCASA: Because the government makes a profit from every bill or coin out there, so more coins, more profit. It's called seigniorage.

KESTENBAUM: So case closed, right? Not so fast. We're here to tell you there is something big missing from that GAO report, which is where all that money the government is getting comes from. It turns out it comes from us.

BENINCASA: To help explain how this works, and to render the final judgment, let's meet one more person, Robert Whaples. He's an economist at Wake Forest University.

KESTENBAUM: Whaples weirdly came to us via the dollar coin lobby, a group called the Dollar Coin Alliance. The Dollar Coin Alliance said make sure you talk to him; he's a pro-coin guy.

BENINCASA: So, we called Whaples up. He read the GAO report, thought about it, and he said the choice is very clear: The paper dollar wins, the coin loses.

ROBERT WHAPLES: It's clearly an inferior substitute. People are going to be putting them on top of their bureaus instead of spending them for transactions. And that seems like a big waste of resources to me.

BENINCASA: Whaples says all that money the government makes on the dollar coin, all that extra money, it doesn't come from nowhere. It comes from us.

KESTENBAUM: Think about it this way, if I have a paper dollar, I'll probably use it or put in the bank. But if stick a coin in a jar, I'm not getting anything from it. I'm not earning any interest on it. It's like we're paying a tax.

WHAPLES: That is exactly how I would see it.

KESTENBAUM: Well, but the Dollar Coin Alliance said I should talk to you because you favor the...

WHAPLES: Yeah, I guess they made a mistake.

(SOUNDBITE OF LAUGHTER)

KESTENBAUM: There you have it.

I'm David Kestenbaum.

BENINCASA: And I'm Robert Benincasa, NPR News.

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