WASHINGTON — As Congress considers a plan to use U.S.-made steel in pennies and nickels to save hundreds of millions in taxpayer money, it can look to Canada for some common sense on cents.
The cost of zinc, copper and other metals used in the coins has risen, making it nearly twice as expensive to make the currency than it is actually worth. It currently costs 2.4 cents to make a penny and 11.2 cents to make a nickel.
“The penny had real value until about 1980 when the value of copper became more than the penny itself,” Rep. Ron Paul, Republican of Texas, said at a House Financial Services Committee hearing on Tuesday.
Since Ohio Republican Rep. Steve Stivers introduced a bill that calls for using lower-cost metals in the production of coins, the House committee has begun looking to Canada, which has used mixed alloy coins since 2001 and recently phased out the one-cent denomination altogether.
“The transition went smoothly and almost unnoticed by the general population of Canada,” Dennis Weber, a coin industry consultant and technical advisor to the Royal Canadian Mint, told committee members.
Since the launch of multi-ply plated steel coins in Canada, $200 million in revenue has been recouped in an alloy recovery program and additional millions are saved each year because the government is not making more of the costly coins.
But changing the composition of coins could incur extra costs, warned Rodney Bosco, director at Navigant Consulting, Inc., a firm that specializes in risk management.
Bosco said companies in the vending machine business may have to update their machines or software used in them if the weight or size of coins change, and that owners of parking meters might also be affected.
While it is not clear yet just how high those transition costs could be, one of the nation’s largest providers of coin counters and sorters said its machines can handle a change in the material of the coins, but not the size.
“It is only more costly and difficult when the diameter and thickness of the coins change,” said John Blake, executive vice-president of engineering and product design for Cummins Allison Corporation, based in Mt. Prospect, Ill.
Changing the composition of coins seems to pose little challenge other than the costs to recalibrate systems. “Creating American multi-ply steel and putting copper plating on a steel penny could be used … in existing vending machines,” Stivers said. However, in order to facilitate commerce, low denomination coins are still needed and if the penny were not used, “we’d have to produce more nickels,” Bosco said.
A U.S. Mint study showed concern about the inflationary impact of cutting the penny. Without the one-cent coin, vendors would have to either round up or down to the nearest five-cent increment.
While elimination of the penny is not currently up for debate, simply “diluting the metals doesn’t solve the problem,” Paul said.
The fate of the penny will not be decided just yet, though.
The U.S. Mint is conducting a study on alternative composition of coins and it will be completed by the end of the year. Congress has the authority to set the weights and measures of coins that are produced, but will wait until the report to take specific actions, said New York Democrat Rep. Carolyn B. Maloney.
Meantime, companies with business interests in whether coins change spent close to $1 million lobbying the U.S. Mint in 2011, according to the Center for Responsive Politics, which tracks lobbyists.
Last year, Jarden Zinc spent $140,000 to hire a lobbyist; the firm was awarded $48 million in federal contracts during the same time period, CRP reports.
And the metals industry is not alone in trying to influence the future of money.
The March of Dimes Birth Defects Foundation spent $250,000 last year to ensure coins do not become obsolete, according to lobbying disclosure documents
Editor’s note: An earlier version of this article misstated the lobbying efforts of the March of Dimes Foundation. The foundation did not spend $250,000 last year lobbying to ensure coins do not become obsolete. The amount refers to the foundation’s entire advocacy budget, a small amount of which was spent lobbying for the March of Dimes Commemorative Coin Act, which would honor the 75th anniversary of the March of Dimes.