April 16, 2014

Obama’s 2014 Budget Proposal Addresses Coin Composition Changes

centPresident Obama's recently submitted 2014 Budget proposes legislation which would provide the Secretary of the Treasury with the authority to change the composition of coins to more cost effective materials. Similar proposals have also been made in previous budgets.

According to the latest figures, it currently costs the United States Mint 2.00 cents to produce and distribute each cent and 10.09 cents to produce and distribute each nickel. Since 2006, the two lowest denominations have cost more than their respective face values to produce, generating cumulative losses of $469 million. However, overall circulating coinage production has continued to generate positive seigniorage since the losses on the cent and nickel are more than offset by the higher denominations.

The authority to alter compositions for circulating coins currently rests with Congress. In 2010, a law was enacted which provided the Treasury of the Secretary with the authority to perform research and development activities related to coin composition with the requirement for a biannual report with findings and recommendations. After two years of research, a report was delivered to Congress which stated that additional work was necessary before any specific recommendations could be made.

While the United States has continued to study the issue, the Canadian government acted swiftly to eliminate the cent in their country. The Canadian cent, which reportedly cost 1.5 cents to produce, ended production in April 2012 and ceased distribution on February 4, 2013.

The 2014 Budget also proposes legislation which would grant the United States Mint and Bureau of Engraving and Printing increased flexibility to share services and engage in cooperation actions. This would have the intended impact of gaining efficiency savings by eliminating unnecessary duplication.

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Comments

  1. Greg says:

    We should stop minting pennies, nickels and dimes altogether. In 1913, a penny could buy you a candy bar. Today, it costs more than a $1 and the candy bar is 1/2 the size. The US dollar has declined so much that our coins are worthless. What can you actually buy with a dime? Even a quarter? The only reason we still have them is because of tradition. The penny today is like what 1/100 of a penny was in 1913. They got by just fine without that, and I’m sure we can too.

  2. Greg, I agree the penny and probably the nickel ought to go.

    In the case of the other denominations, they still get used in vending machines and the remaining arcades and to buy newspapers and such. But I do think the day is coming soon where even the dime and quarter will be as useless and valueless as the penny.

  3. Mickey says:

    End the FED 1 st & then return to the Constitution & start all over, we will have no other choice soon as the dollar & all fiat crashes! A copper penny & a nickel will be in need soon!

  4. Bilbo says:

    I don’t understand why they though the presidential dollars would succeed. Who’s going to carry around a pocket full of these coins? What do you carry them in? If would make more sense to mint $10 or $25 coins.

  5. Ryan says:

    I agree with dropping the penny for sure and changing the composition of nickles. While we’re at it, let’s dump the $1 bill- by executive order if need be. That’ll force people to use all those surplus Presidential/Sacajawea/SusanB Dollars stored in vaults around the world.

  6. Jason says:

    How about screening comments and eliminating the ones from goofs? Candy bars, pocketfulls of coins and end the FED. Sheesh! No wonder they can’t get anything done. Somebody brings up a legitimate topic of discussion and some crank starts talking about 1913.

  7. ben shlomoburg says:

    How c ome there isn’t any mention that Canada still lost money cancelling the pennies cuz it cost them money to take the coins out of circulation?

  8. Trey says:

    It’s so ironic to see this, my dad predicted the copper penny would be a “free” way to grow my money in 1982 (when the new plated penny created another piece of FED engineered junk) and today I started my nickel hoard (because they will soon be junk when they change the composition, and they will eventually). Our nickel’s are currently the only “real” money minted for regular circulation and they can’t allow constitutionally sound money to continue, heck, that would be constitutional and we can’t have that! The pre-1982 95% copper penny is now worth 2.2 cents or $100 face value = $226.00, I thank God for logical and sane people that see beyond the smoke & mirror’s. The nickel is next, grab some while you can!

  9. Coin Update says:

    ben shlomoburg – Most of that is the cost to redeem the face value of the coins. Over a longer period, there is still savings. http://www.660news.com/2012/12/19/demise-of-canadas-one-cent-coin-to-cost-taxpayers-a-pretty-penny-2/

  10. Michael G. Koerner says:

    It is not ‘crackpotish’ to discuss why the USA is in such a mess with its coinage – as in fact we have had about an 80:1 overall inflation since the end of the gold standard in 1933. Today, all coins below 25¢ are only useful for fine-parsing of state and local sales taxes and quarters are only barely useful for any legitimate commerce anymore – I can buy a whole 20 minutes with one from a downtown Appleton parking meter. Yes, this inflation has now rendered it impossible for the USMint to strike and distribute ‘pennies’ and ‘nickels’ at a profit, even if the metal was *free*.

    With that 80:1 overall inflation (yepper, we’ve added nearly two full ‘zeroes’ to the dollar since then), one dollar today had only slightly more buying power than one cent did in 1930 and yet back then we had the same overall slate of circulating coins and banknotes – except back then we also had regular circulation coins for $2.50, $5, $10 and $20, with the $20 having an equivalent buying power of just over $1,600 in 2013 money. Also, 50¢ coins, with a buying power of just over $40 in 2013 money, were more common in circulation than were quarters – and nearly ALL ‘everyday’ commerce was done using coins only.

    Amazing when one thinks about it.

    Mike
    Appleton, WI

  11. Daniel says:

    This topic always comes up and every time nothing ever happens. These people just keep minting these coins at losses. I can understand for the first two years (2006 and 2007) minting pennies and nickels at a loss, but we’re still minting these coins at a loss into 2013! Our neighbors in Canada are much smarter than us, because they change the metal content of their coins much more often than America does, and they even got rid of the penny, which we need to do.

  12. Boz says:

    The government assumes that if you are still carrying coins and bills around, you must be a drug pusher, funding a terror cell, or worse. I agree that citizens need to discuss issues such as these in open forums. Thankfully there are still avenues such as this to do so.

  13. Koichi Ito says:

    Stop minting penny and make aluminum 5 cent coins?

  14. Bob says:

    Why does the argument against the dollar coin always seem to be that “I don’t want to carry around a pocket full of dollar coins”? Do you regularly carry around more than a couple dollar bills? Certainly not a pocket full. The value of the dollar has been so reduced that it really is just “pocket change” any more. What’s the big deal? No one ever complains about carrying around a pocket full of quarters, etc…

  15. PHIL says:

    what difference does it make if a penny costs 2 cents to produce?
    once a coin is in circulation ,..it becomes a token of commerce ,.,
    its initial ‘cost ‘ has noting to do with its function and purpose

    just think of all the money the government wastes on other things ….
    at least the penny and nickel have a tangible and real purpose ,

    maybe if the U.S. mint got rid of the labor unions and cut the benefits to the over paid government employees,, the cost of production would drop
    nobody talks about doing that ,….

  16. Tim says:

    Actually, our current coins such as the quarter STILL have value given their nickel & copper constitution. In Argentina, during their hyper-inflation the paper money became worthless, but the COINS were horded. The Govt banned the unofficial sale of coins, but the people bypassed this. They baked coins into small cakes. So when you needed money for the bus you traded foreign currency (usually us dollars) for a cake. You break it open and take the coins out to pay for the bus… or what ever you needed.
    Never underestimate the value of coins…they may be worth less than face value now, but in a fiat crash they will be the only real “money” accepted. Paper primarily use to start fires, etc.

  17. Ben Shlomobergensteinburg says:

    Tim, I wholeheartedly agree with you. There are similar stories of how important coinage was in zimbabwe, and that’s why I think it’s ridiculous to get rid of our coinage, especially the lower denomination coins that actually represent some value for the people when government wastes so much money to maintain itself.

  18. Tim says:

    OK. So we know that a handful of coins are preferable to a pile of worthless paper when it comes down to it. So… what do we do about it. Well…
    You know how all those “official” disaster sites recommend keeping anywhere from a few (3) days to a few weeks, or months (Katrina,etc.)of supplies? So assuming the standard advice is to keep (based on your own budget) a similar amount of “cash” in case the credit systems fail (from memory, they did) then it would follow that you could serve an additional purpose by reserving some of that cash in the form of coins. Why? because if it really gets bad, coins will tend to maintain their rightful purpose as a medium of exchange far more than paper currency precisely because those coins have actual value that would tend to increase, where paper would tend to decrease.
    Besides… did you ever try to defend yourself with a rolled handful of paper pieces. Better to hold a roll of coin, or several rolls in a few strong socks. Support AND defense in one.
    Not too bad at all.

  19. Ed says:

    The past is very pertient to the discussion. With nothing to “relate” to (i.e. gold), our money has become worth-less to the point that our smallest denominations (penny and nickle) now are worth more in metal than face value. We further debased our currency in 1964 by removing silver (because it cost too much). In Roman times, such debasement was rampant to the point where trust in the Roman currency faltered. In fact, each time a government practiced currency debasement, trust in that currency, collapsed.

    Subsituting different metals for our coins is nothing but further debasement. What is needed is a reset in value which can’t happen without major upheaval or the introduction of a new currency based on a finite store of value (a new reserve currency predicated on actual store of goods).

    Pennies and nickles are still units of value, just ask any local govenment that depends on sales tax, most stores that price in psychologically acceptable units (.69 rather than .70) and of course, gasoline sales (seriously, 9/10ths of a cent?)

    In the meantime, make the Dime the new penny, the halfdollar the new nickle and the dollar the new dime. Do away with the dollar bill, the Five becomes the new half and could be a coin and the ten dollar bill becomes the new dollar bill. You also completely eliminate the quarter coin! Savings galore! Of course the general population will be confused beyound belief, so you’ll have to change all the coins over (say over a 1 year period, after that, sorry, old coins are worthless).

    There is no good way to admit to a currency debasement, but to junk the old currency and start over.

  20. Lembeck13 says:

    Very much enjoy the PHIL-Tim-Ben banter… a roll of bills in a fist indeed! I’ve collected coins since I was eight and now I’m twelve (at least in dog years.) Coinage, to me, has always been the perfect fusion and perpetuation of history, art, and a people’s identity. Surely, given unprecedented levels of hollow government spending, Americans can absorb a small financial loss for this simple and enduring canvas.

  21. Well, now that we’re on that, the goverment should switch from using 100 cents to a dollar to using 10 decims to a dollar. Much less awkward than having to ask “why are cents only in multiples of ten?”

  22. Robert Forsythe says:

    What is the real point. Look if anyone was running a business and that is really what this country or any country is all about, is it wise to keep pennies or nickels. Today what can anyone buy with a penny, nickel or dime ? answer nothing. But could a dime change the cost of something ? answer yes. It cost more to make a penny or a nickel therefore it would save all of us money in the long run to get rid of them. Not to mention all that weight and problem every time you go to the store. Get rid of pennies and nickels and get on with things

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