According to Kim

Interesting read

with 5 comments

Cost of pennies spurs calls for change

Bills would give U.S. Mint freedom to use cheaper metals to make coins

WASHINGTON — The U.S. penny is not what it appears to be, and some in Congress would like to see it change further, if not disappear entirely.

Because of a surge in the price of copper, the U.S. Mint decided 25 years ago to manufacture the coins almost entirely with zinc, save for the coating on which Abraham Lincoln’s profile is engraved.

Now, the fate of the penny is up in the air once again. With the price of zinc soaring amid a worldwide commodities boom, it costs the government almost 2 cents to make each 1 cent coin — a pretty penny considering roughly 8 billion new ones are placed into circulation annually.

While it is unlikely the penny will be pulled from circulation, there are some lawmakers who want to ditch zinc as a raw material and instead use steel or some other less expensive metal.

The nation’s sole supplier of zinc “penny blanks,” Jarden Zinc Products, is lobbying the federal government to protect its interests.

The subsidiary of Jarden Corp., based in Rye, Westchester paid Baker & Daniels LLP $180,000 in 2006 to fight legislation that would have allowed retailers to round off cash transactions to the nearest nickel, effectively creating a penniless society. Fortunately for Jarden, the House legislation did not gain traction, and its author, Rep. Jim Kolbe, R-Ariz., has since retired.

In the past two weeks, however, bills in the House and Senate were proposed that would give the Treasury Department the power to decide — without congressional approval — the type of metals used for all coins. The bills’ authors said using cheaper metals to make pennies and nickels, which incidentally cost an estimated 10 cents each to produce, could save taxpayers $100 million annually.

Jarden’s lobbyist in Washington, Mark Weller of the law firm Sonnenschein Nath & Rosenthal LLP, said House staffers recently assured him the latest bills won’t open the door to another effort to get rid the penny. “We’re satisfied, but we need to stay on top of that,” Weller said.

Francois Velde, a senior economist with the Federal Reserve Bank of Chicago, said the federal government should rid the U.S. currency of pennies, or at the very least find a cheaper way to make them. Velde noted that equivalent coins in Canada, the United Kingdom and Europe are made from steel, which is roughly five times less expensive than zinc.

The Mint spent nearly $100 million manufacturing pennies in 2006, based on a 1.2 cent per-penny cost at the time. The cost has risen to 1.7 cents per coin in 2007, according to the Mint.

Since March 2003, global demand for core metals has driven up the price of zinc 450 percent, lawmakers said.

Weller, who has long lobbied for the penny with a group called Americans for Common Cents, argues the penny is good for the economy. Its absence, he said, would lead retailers to raise prices, influencing inflation. Weller also said past polls have shown a majority of Americans favor the coin, which was first produced in the United States in the 1790s.

Velde said he isn’t aware of any widespread movement in Congress, or elsewhere, calling for its demise.

“We are talking about small change,” he said. “It’s not something people get extremely excited over.”

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Written by Kim

August 16, 2007 at 9:47 am

Posted in News

5 Responses

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  1. Why don’t they just make it all electronic, already?! I couldn’t even tell you the last time I used real money. It’s rare.

    diamondfistwerny

    August 16, 2007 at 10:13 am

  2. We don’t have pennies in Australia, Shops just round off. We don’t have a paper dollar either, so between the $1 and $2 coins, it’s nice to not have the extra weight of pennies dragging the pockets down. I think the US should get rid of the penny and look for cheaper materials for other coins.

    Robguy

    August 16, 2007 at 7:46 pm

  3. I don’t really think it matters what materials are used to make it. We never see it for very long, before it goes back into the coffers! *winks*

    Shaney

    August 17, 2007 at 8:04 am

  4. If it costs 2 cents to make, and there are 8 billion new each year, why doesn’t the government do a “buy back” from the public. 1.5 cents apiece. The public wins by getting 50% on their money, the government wins by saving 25% on costs, and mother earth wins with a reduction in mining of zinc and copper. Have to find a way to make it fraud-proof.

    I’m for ditching the penny and the paper dollar.

    I’m like Steve…I prefer to charge everything and pay a single bill at the end of the month. Helps when I’m doing taxes at the end of the year too.

    Gavin

    August 18, 2007 at 3:55 pm

  5. Well, how about an aluminum penny? Many countries use aluminum for their small coins. Rob — When did they stop mamking pennies in Australia? I stsill see them in the mint sets!!!!

    Northsdad

    Northsdad2000

    August 19, 2007 at 7:24 pm


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