OhMyGov! - "U.S. Mint still losing a mint making coins" .
Aug 20 2009, 09:32 AM
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.
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