It’s one of the more inconvenient truths about U.S. currency: It costs more than a penny to make a penny, and more than a nickel to make a nickel. Now, President Obama is trying to get Congress to grant him permission to lower the cost of minting coins. But making a more inexpensive penny won’t be easy.
We’re assuming you didn’t get around to carefully reading through the White House’s $3.8 trillion, 2,000-page budget that was sent to Congress this week. Frankly, neither did we. But there was one request discovered deep inside the Obama budget: a proposal to make pennies and nickels cheaper to produce.
(MORE: Why Free Birth Control Will Not Hike the Costs of Your Insurance)
If passed, the budget would allow the Treasury Department to “change the composition of coins to more cost-effective materials.” Why? Because it currently costs the federal government 2.4 cents to make a penny and 11.2 cents for every nickel. The special formula for making U.S. coins has stayed the same for the last 30 years. Changing that recipe could save more than $100 million a year.
Since 1982, our copper-looking pennies have been merely coppery. In the 1970s, the price of copper soared, so President Richard Nixon proposed changing the penny’s composition to a cheaper aluminum. The plan didn’t go anywhere until the Reagan administration successfully changed the penny’s make-up. Today, only 2.5% of a penny is copper (which makes up the coin’s coating) while 97.5% is zinc. In fact, our nickels, which are 75% copper and 25% nickel, have more copper in them than pennies do.
But the increase in the price of raw materials like zinc has gradually increased the costs of making coins. The U.S. Mint paid about 1.1 cents for the metal used in a penny last year. And the raw materials for a nickel are about 6 cents per coin.
(MORE: The Most Important Man in Europe)
Some interest groups, such as the Zinc Association, like the current coin status quo, and some even believe that cheaper coins could make them easier to counterfeit. And then, of course, there are those who believe that in an increasingly digital world, maybe we should get rid of our small coins altogether.
But the proposal’s real catch seems to be whether the Mint can even come up with an inexpensive enough metal mixture that could replace what’s currently used. The Treasury has been analyzing new metals for the past couple of years, but considering the administrative costs for making 4.3 billion pennies a year is around 0.5 cents per penny, finding a low-cost alternative may be the most difficult obstacle of all.