U.S. currency apparently costs more to produce than it is actually worth. Now, President Obama is asking Congress to lower the cost of minting coins.
According to his new $3.8 trillion budget, changing the composition of nickels and pennies would save money. If passed, the budget would grant the Treasury Department the ability to change the composition of coins to more cost-effective materials, said the budget, under a section titled Increased Flexibility for the U.S. Mint in Coinage.
Contrary to popular belief, pennies are not solely or even largely made of copper. The current model of the penny is about 97.5 percent zinc and only approximately 2.5 percent copper and hasn't been pure copper since1937.
This contributes to volatile and negative margins on both the penny and nickel, according to the White House budget. Recently, the penny has cost approximately 2.4 cents and the nickel approximately 11.2 cents to produce.
The Treasury Department is currently looking for alternatives metals to use. Industrial porcelain, embedded with identification chip could be a possibility, but most experts say non-metal coins would not work well, reported the Wall Street Journal. Aluminum alloy is considered the likely candidate if a switch is to be made.
The Mint produced 4.3 billion pennies and 914 million nickels last year and the cost added up to over $100 million for each type of coin. However, even if cheaper metals are used, it might not take the cost down, reported CNN, because the administrative cost for minting pennies costs about a half-cent per coin, leaving little room to cut production expenses.
Making coins from more cost-effective materials could save more than $100 million a year, which isn't just pocket change, says Dan Tangherlini, the Treasury Department's chief financial officer, according to the Wall Street Journal.
However, changing the makeup of coins could prove to be controversial.
The nickel's composition has not been changed since 1938 when Thomas Jefferson's face was added, except for a brief period during WWII when silver was added. When Nixon suggested making pennies from cheaper alumina, he received backlash from the public, reported the Wall Street Journal. Business owners want to make sure that the making cheaper coins would not have an impact on profits.
We're all taxpayers, and we're all in favor of being able to mint coins at a more reasonable cost, says Brian Wallace, president of the Coin Laundry Association, reported the Wall Street Journal. But we want to make sure there aren't unintended consequences that could deeply impact the small-business owner during a recession.
Other groups said that changing the composition of coins could lead to more counterfeiting.
People would be more apt to counterfeit casino chips than American coins, said Frank Abagnale, who advises governments and companies on how to avoid fraud and forgery. Abagnale's life was profiled in the Leonardo Dicaprio movie Catch Me if You Can. I'm one of these people who would be in favor of doing away with the penny. I'm always in airports, and people just leave them all over the place.
However, one group actually supports changing the makeup of the nickel. The American Academy of Allergy, Asthma and Immunology said that people allergic to nickel develop an itchy, poison-ivy life rash that can last for about a month.
My husband always has these weird rashes on his leg from the change in his pocket, a treasury official involved in the coinage plans said. Maybe he would benefit from a plastic quarter.