U.S. Mint Is Making Cents, But At a Price Far More Than a Penny
Ruth Mantell MarketWatch
WASHINGTON -- Who else but the government would shell out almost two cents for a penny?
In fiscal 2007, it cost the U.S. Mint 1.7 cents to make and distribute a one-cent coin, according to an annual audit that cited rising metal prices, while the nickel cost 9.5 cents. To grapple with high costs for metals, Washington is looking at ways to cut spending on money.
"With each new penny and nickel we issue, we also increase the national debt by almost as much as the coin is worth, and these losses are rapidly mounting," Edmund Moy, director of the Mint, told House lawmakers at a hearing this week.
Changing the composition of pennies and nickels could save up to $100 million per year, according to Moy. He added that he supports a proposal in Congress to enable the U.S. Treasury to determine the weight and composition of coins "because it would ultimately result in significant taxpayer savings by providing the department with the flexibility to respond to changing market conditions through an open, fair and deliberative process."
However, he takes issue with a provision that would mandate five years of consecutive losses before materials could be changed.
Pennies are made of copper and zinc, while nickels are made of nickel and copper. Since early 2003, high demand worldwide has driven up prices, with copper rising 440%, nickel up 310% and zinc up 260%, according to Moy. The recently introduced legislation in Congress would allow Treasury to sanction the use of cheaper metals for U.S. coins.
Dean Baker, co-director of the Center for Economic and Policy Research, said there's no reason to spend more making coins than necessary.
"If we could mint something at a lower cost, we might as well do it," he said. "How much do we want to spend to mint our coins?"
Baker added that producing coins that are worth more than their face value could lead to hoarding.
Some are ready to dump the penny altogether, with high metal costs adding fodder to their push.
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