Friday, May 09, 2008

Modern Day Coin Clipping

Commodity prices have risen to such a level that it costs the government more to mint pennies and nickels than their face value. That means that minting more coins actually adds to the deficit, so Congress is considering doing something about it:

WASHINGTON (AP) -- Further evidence that times are tough: It now costs more than a penny to make a penny. And the cost of a nickel is more than 7 1/2 cents.

Surging prices for copper, zinc and nickel have some in Congress trying to bring back the steel-made pennies of World War II, and maybe using steel for nickels, as well.

Copper and nickel prices have tripled since 2003 and the price of zinc has quadrupled, said Rep. Luis Gutierrez, D-Ill., whose subcommittee oversees the U.S. Mint.

Keeping the coin content means "contributing to our national debt by almost as much as the coin is worth," Gutierrez said.

A penny, which consists of 97.5% zinc and 2.5% copper, cost 1.26 cents to make as of Tuesday. And a nickel -- 75% copper and the rest nickel -- cost 7.7 cents, based on current commodity prices, according to the Mint.

That's down from the end of the 2007, when even higher metal prices drove the penny's cost to 1.67 cents, according to the Mint. The cost of making a nickel then was nearly a dime.

Penny, nickel cost taxpayers $100 million last year. Gutierrez estimated that striking the two coins at costs well above their face value set the Treasury and taxpayers back about $100 million last year alone.

A lousy deal, lawmakers have concluded. On Tuesday, the House debated a bill that directs the Treasury secretary to "prescribe" -- suggest -- a new, more economical composition of the nickel and the penny. A vote was delayed because of Republican procedural moves and is expected later in the week.

I wonder what they will do when the price of steel rises?

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