Kennedy objected because Crane & Co., the only source of the cotton-based paper for American paper money, did not want to lose the half of its currency paper business represented by dollar bills. Lott objected because the cotton that goes into that paper is from Mississippi.
That explains why the paper dollar is still around, but why is the Mint cranking out more dollar coins if there's no demand for the ones that exist? That is also because of legislators. Planet Money:
In 2005, Congress decided that a new series of dollar coins should be minted to engage the public. These coins would bear the likeness of every former president, starting with George Washington. There would be a new one every quarter. So, far, the Mint has produced coins through the 18th president, Ulysses S. Grant.My modest proposal? Give them all away. Every person in America would get four; seven if you keep handing them out until the presidential coin series ends. Warehousing problem solved. If no one wants to use them, so be it.
Members of Congress reasoned that a coin series that changed frequently and had educational appeal would make dollar coins more popular. The idea came from the successful program that put each of the 50 states on the backs of quarters.
But as the new presidential dollar coins rolled out, the greenback lost none of its dominance in Americans' hearts and wallets.
If the mandate to make presidential coins wasn't enough to generate a growing heap of unwanted coins, a political deal ensured that even more unwanted coins would be produced.
It was easier for the bill's sponsor, then-Rep. Mike Castle (R-DE), to move the presidential coin bill forward if it didn't displace other dollar coins honoring Sacagawea, the teenage Native American guide to Lewis and Clark.
The deal: The mint would be required to make a quota of Sacagawea coins. Currently, the law says 20 percent of dollar coins made must have Sacagawea on them.
So, there are now about 1.2 billion dollar-coin "assets" chilling in Federal Reserve vaults, unloved and bearing no interest. By the time the presidential coin series finishes, and there are coins honoring all past presidents, there could be 2 billion.
Several congressional leaders contacted by NPR declined to comment for this story.
Then the Federal government doesn't incur the expense of keeping and guarding them for however many years it will take to get rid of them all, or worse yet, melt them back down. Which probably means money will be saved in the long term.