A penny saved is 1.38 cents lost
When you're stuck in a recession
with a rising unemployment rate, you learn to take what money you can
get. Unfortunately, as people work
to save money and the federal government tries to figure out ways to
keep people earning it, the cost of manufacturing money has increased to unsustainable levels.
Ever hear the saying "it costs more than a penny to make a penny?" It's true—and not just for the penny.
According to U.S. Mint spokesman
Michael White, in the 2008 fiscal year, it cost 1.38 cents to manufacture a penny, which of course
is only worth one cent. To make a five-cent nickel, it cost 8.83 cents.
The extra change doesn't
go to the machinery and isn't solely attributable to the diminishing value of the dollar. Instead, it covers the cost of the materials
in coins themselves.
"A penny is made of copper-plated
zinc," White said. "Due to the world need for these metals,
the cost of the penny went up in the past few years."
According to the U.S. Mint, the 6.6 billion pennies produced in the 2007 fiscal year netted a $31 million net loss. The same year, nickel production caused a $70 million loss. Keep that up, and the Mint will soon be in line for a bailout.
The price of the raw materials that make up the coins fluctuate with the
world commodities market. Since March 2003, increasing metal prices
have driven up the cost of copper by 300 percent, while zinc has
increased by 450 percent. Pennies have a zinc core and copper plating, nickels are made of a copper-nickel alloy.
In March of 2008, the
Chicago Tribune headlined that it was costing almost 10 cents to make
a nickel, and 1.7 cents to make a penny. And while the prices
of the coins seem to have gone down since then, it is nothing short of absurd
to keep manufacturing coins at a loss.
Who's running this business, anyway?
The penny and the nickel are
the only U.S. coins that are worth less than their manufacturing and
material costs. For instance, in FY-08 it cost 4.36 cents to make
a dime, and only 29.6 cents to make a golden dollar.
But if we are to make sense of cents, the government needs to stop saddling Americans with unsustainable business practices.
"Well, from our perspective
at the United States Mint, it's unsustainable. You can't sustain losses
on pennies and nickels and expect to be a viable organization that benefits
the American people," said U.S. Mint Director Edmund Moy in a 2008
60 Minutes interview.
But it's not so easy as having
the Mint just stop making coins.
"We [the Mint] don't have
the authority to eliminate coins and change their composition," says
White. "That power lies with Congress. For the penny to
change, Congress would have to take action."
And Congress doesn't seem
to be acting so quickly. The last time the topic of changing the penny
and the nickel came up was May 2008, with Rep. Zachary Space's (D-OH)
"Coin Modernization and Taxpayer Savings Act of 2008."
The bill would have given the Treasury
Department authority to
set the weight and composition of any coin whose production costs
exceed its face value for five consecutive years. With the exception of Lincoln Bicentennial Numismatic
(collectible) Pennies, the one-cent coins would be made from steel and
treated with less expensive materials to impart a "copper color to
its appearance similar to one-cent coins produced of a copper-zinc alloy." Nickel would undergo similar changes as well.
According to the Act, "Given
the current cost to make a penny and volume of pennies minted, simply
reducing penny production costs to face value, the United States will
save more than $500,000,000 in the next 10 years alone."
The Coin Modernization and
Taxpayer Savings Act of 2008 sparked a national debate about the value
of the penny. CNN and countless other news sources and bloggers
covered the story. Lobbying groups working on behalf of the cooper industry,
such as the organization Americans for Common Cents, worked overtime
to save the original formula of the penny and nickel.
And on May 12, 2008, the Coin
Modernization and Taxpayer Savings Act of 2008 died in the Senate without
even being voted upon. Since then, the only bills concerning coinage
that have gone through Congress really haven't involved more than
the request to make more Sacagawea golden dollars.
If the government is working
so hard to save taxpayers money and to change our economic system for
the better, why not make this one simple change? It may originally
cost a lot, but in the end would save American citizens from wasting hundreds of millions.
Perhaps instead of hurling out new spending programs and stimulus plans, President Obama can usher in the "line-by-line" cuts to the federal budget he promised, starting with a big chunky line for the U.S. Mint. After all, this is not a problem to have recently crept up. The Mint has been losing money on its operations since 2003, and will continue to do so until the President, Congress, and Americans demand action.