When it comes to making coins, the Mint isn't getting its two cents worth. In some cases, it doesn't even get half of that.
A penny costs more than two cents and a nickel costs more than 11 cents to make and distribute.
The excessive cost has left the U.S. Mint looking for new metal mixes that would be cheaper to make.
But Oklahoma City businesswoman Terry Neese said it might be time to consider scrapping at least some coins altogether.
“We need to decide whether we are going to keep the penny or not,” said Neese, who in 2005 turned down a presidential appointment to lead the Mint. “Are we going to continue to pay double or over double what it takes to make the penny? It is not wise economic policy to do that. If we can't find the right material that would close the cost to print the penny and nickel, it's time to walk away from those two coins.”
Dick Peterson, the Mint's acting director, has reached a different conclusion
Pennies may not be cost-efficient, but they won't be getting pinched as long as they're in demand, he said.
“We produce 6 billion pennies a year,” Peterson said. “Our customers want them.”
The Mint last month presented to Congress a 400-page report outlining nearly two years of trials, where a variety of metal recipes were tested.
Evaluations of 29 different alloys concluded that none met the ideal list of attributes.
The Treasury Department concluded that additional study was needed before it could endorse any changes.
“We want to let the data take us where it takes us,” Peterson said.
More test runs with different alloys are likely in the coming year, he said.
For Neese, however, the evidence is already clear.
“At some point, you need to look at this like a business,” she said. “When it costs twice as much to produce an item than what you are selling it for, you can't sell it for very long.”
Neese has been an advocate of a U.S. Mint program called “History in My Pocket,” which celebrates the historical significance of the country's metal money.
“That's what coins are. They're history,” Neese said. “It's perhaps time to walk away from that history and look at how money is being spent today. Most people have debit cards. People waiting in line for others to pay for what they've just purchased get irritated when people are trying to pull out their coins and pay for what they're buying.”
The government has been looking for ways to shave the millions it spends every year to make bills and coins. Congressional auditors recently suggested doing away with dollar bills entirely and replacing them with dollar coins, which they concluded could save taxpayers some $4.4 billion over three decades.
Neese, however, said the American public has repeatedly rejected dollar coins.
“The dollar coins have never been effective in the system because they look too much like the quarter.”
One challenge for the Mint is the rising cost of copper (used in all U.S. coins) and nickel (used in all except pennies).
Only four of the 80 metals on the periodic table — aluminum, iron (used to make steel), zinc and lead — cost less than copper and nickel, the Mint report stated. Lead isn't an option because of its potential health hazards.
“Pricing of steel, aluminum and zinc are pretty close to each other. … There are promising alternatives for the nickel, dime and quarter,” Peterson said.
To test possible new metal combinations, the Mint struck penny-, nickel- and quarter-sized coins with “nonsense dies” — images that don't exist on legal tender (a bonneted Martha Washington is a favorite subject) but are similar in depth and design to real currency.
Test stampings were examined for color, finish, resistance to wear and corrosion, hardness and magnetic properties. That last item might be the trickiest, as coin-operated equipment such as vending machines and parking meters detect counterfeits not just by size and weight but by each coin's specific magnetic signature.
Except for pennies, all current U.S. circulating coins have the electromagnetic properties of copper, the report said.
A slight reduction in the nickel content of quarters, dimes and nickels would bring some cost savings while keeping the magnetic characteristics the same. Making more substantial changes, like switching to steel or other alloys with different magnetic properties, could mean big savings to the government but at a big cost to coin-op businesses, Peterson said.
The vending industry estimates it would cost between $700 million and $3.5 billion to recalibrate machines to recognize coins with an additional magnetic signature. The Mint's researchers reached a lower but still pricey estimate of $380 million to $630 million.
Because of the cost to coin machines and the rising metal costs, Neese questioned whether it is time to consider doing away with all metal coins, not just the pennies and nickels.
“I think new metal options are worth looking at for the dime and the quarter, but it is getting so expensive using the current metals that in a few short years, we are going to be looking at a dime costing 15 to 20 cents and be back at where we are today for the penny and nickel,” she said. “We have to look at the future and what the future holds.”
Neese said it makes no sense to require coin machine operators to upgrade or replace their mechanisms today just to have to do it again in a few years.
“I think we just have to move on,” she said.
The Associated Press
“I think new metal options are worth looking at for the dime and the quarter, but it is getting so expensive using the current metals that in a few short years, we are going to be looking at a dime costing 15 to 20 cents and be back at where we are today for the penny and nickel.”
Oklahoma City businesswoman