Use access key #2 to skip to page content.
Skip to main content

kdakota630 (30.30)

U.S. Mint Is Making Cents, But At a Price Far More Than a Penny

Recs

9

March 12, 2008 – Comments (4)

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.

Copyright © 2008 MarketWatch, Inc.

4 Comments – Post Your Own

#1) On March 12, 2008 at 7:29 PM, ATWDLimited (< 20) wrote:

Well thats how the government functions, the postal system is also losing money, they spend like drunken sailors, they tax like  tyrants, they screw me and you and everybody by ruining the US. I just came back from Washing ton, DC, they do seem very slow on understanding that they are fiscally retarded.

I already knew of plans to abolish the coins, hey who cares what its made off, you think a 20$ bill is even worth 50 cents? any rate buy metals, metal miners and hedge the inflation, and beat the market.

Check my blog for gold analysis. 

Report this comment
#2) On March 12, 2008 at 7:58 PM, zygnoda (< 20) wrote:

yes.. they should get rid of the penny  

Report this comment
#3) On March 13, 2008 at 4:12 AM, StockSpreadsheet (64.22) wrote:

The Mint has tried to eliminate the penny in the past.  It has always led to a huge public outcry, so they have always backed down.  A lot of people said that it would unfairly burden the poor.  The reasoning is that a lot of things are priced with prices ending in $0.99, and that all of these prices would be rounded up to $1.00, which of course they would.  Since it is argued that the poor purchase a lot more goods with a value of less than $10.00 each, then this rounding up would mean that a lot of their purchases would go up by 1% or more.  The rich, able to afford things costing $10,000 or more, would only have their costs go up by 0.00001%, so the poor would be unfairly disproportionately disadvantaged by the price increases. 

Of course, it is not only prices that would make things cost more.  Most state sales taxes have fractions in them, from what I have seen.  (e.g. 7.5% sales tax)  The sales tax also accretes additional pennies to the price of an item when it is calculated.  All of these pennies would now become nickels, if everything is rounded up.  (And to be fair, most businesses probably would round everything up to the next nickel, (so $0.01 would become $0.05), as otherwise they would lose money they would otherwise have earned.  This would especially be true of the discount stores, (such as Target and Wal-Mart, where the poor disproportionately shop), since a lot of their items are of the lower-cost variety, thus the percentage increases would be much higher there than in a place like Tiffany's, where things are usually priced in the hundreds or thousands of dollars, so taxes would add dollars to the sale, not pennies.)

I admit that I tend to hoard pennies and nickels.  I don't do it for the metal.  It is just that so few things can be bought with them that they are almost worthless, and I don't like to carry around a whole pocket full of coins that I won't spend.  (I will keep quarters in my pocket, as they are good at the car wash, vending machines and other locations.)  Every now and then, when my change jars get full, I will roll them all up and take them to the bank to exchange them for dollar bills, (or if I am going to Vegas or Laughlin, I will take them with me and spend/exchange them in the casinos, where their counters can do the counting for me.  As a side note, I wish the banks had some of those machines, as then I would just take them directly to the bank and exchange them.  You can go to the grocery store and use one of the change machines to exchange them for bills, but they usually charge about 18%, so I think that is a rip-off and won't use those machines.)

During WWII, pennies were made out of steel, as copper was needed for the war effort.  Maybe we should just go back to our coins being made of steel and be done with it.  All the vending machines could then change themselves just once to take into account the new weight of the coins and then they wouldn't have to change them anymore, (like they have to do each time the governement changes the composition of coins).  Maybe our domestic steel companies could even get a little more work domestically supplying the Mint with flat rolled steel for the coins to be made out of.

My two cents.

Craig 

Report this comment
#4) On March 13, 2008 at 10:31 AM, FoolishChemist (94.50) wrote:

How many people have a penny hoard in their closet?  A quick google search says there are 140 billion pennies in circulation.  That works out to about 460 pennies for every man, woman and child in the US.  We could very easily stop making the penny and still have plenty left in circulation to keep 99 cents sales and not to mention the 41 cent stamps around for quite a long while.

Report this comment