The House debated on the legislation and finally voted yesterday to change the metallic composition of the penny and 5-cent nickel to a less expensive copper-colored steel.
Although the prices of copper, zinc and nickel metals in coins have declined in recent months, the penny and 5-cent nickel still cost more to make than what they’re worth—resulting in a reported loss of about $100 million every year, or $1 billion over a decade.
It now costs about 1.26 cents to make the penny and about 7.7 cents to make the nickel.
House bill “H.R. 5512, the Coin Modernization and Taxpayer Savings Act of 2008” would seek to change those manufacturing costs by using copper-colored steal, which could cut the cost of making pennies down to about 0.7 cents each. But its recent passage in the House is no guarantee it’ll make its way to the White House for signing.
H.R. 5512 must still go through the Senate and then the President, and not everyone is happy with the current legislation.
One person who would like to see changes is United States Mint Director Ed Moy. In hearings before a House Subcommittee, he commented that the stipulated time in changing the penny to steel was too short. While the newest version of the bill was modified from its initial timeline of 180 days to 270 days, Moy had requested 18-24 months during testimony.
Moy also indicates there may be better, and less costly metals for coins than steel. As a compromise to that, the bill was again modified from its original version to allow alternative metals for the penny—if, and only if, the solution were to "achieve the (bill’s) goals."
However, only 90 days from the date of H.R. 5512 becoming law is allowed in coming up with another solution. The likelihood of that happening seems doubtful.
The legislation also includes the prospect of steel nickels within two years passage. But the language in that area of H.R. 5512 becomes more clouded with variables, and would likely result in several bouts with Congress. Doubt can be cast on the possibility of it ever happening.
Finally, the updated legislation provides the Treasury, and therefore the U.S. Mint under it, the authority to conduct research and testing of potential metals for coins. This was a clarification measure Moy sought. He may not have expected, however, the added legislating guidelines to provide biennial reports to Congress.
In short, new legislation would need to be drafted and passed for different metals in dimes, quarters, half-dollars or dollar coins.
In summary, H.R. 5512 in its current state:
- would likely result in a steel penny with the downside that there may be a better metallic alternative, but not enough time to implement it,
- will not likely result in a steel or other new metallic nickel any time soon,
- would give the U.S. Mint the power to officially research and test other metals for coins
- would require new reporting by the Mint to Congress, and
- it would still hamstring the Mint in making future metal composition changes to keep coin manufacturing prices down.
Director Moy said this week that the bill was “too prescriptive.” An apt analysis.
H.R. 5512 seems to be a document shrouded in Congressional micro-management, with little hope of altering the dysfunctional system that has resulted in the penny and nickel losing money for nearly two years now. The legislation may "fix" the penny. It probably won’t fix the nickel. And it does little to encourage modifying the composition of other coins to make them less expensive down the road.
Reports indicate that Senator Wayne Allard of Colorado is expected to introduce another version of the legislation in the Senate.
Reference: Text of H.R. 5512 EH, Coin Modernization and Taxpayer Savings Act of 2008
For reference, here is the text of the final version of H.R. 5512:
110th Congress
2d Session
H . R . 5512
AN ACT
To reduce the costs of producing 1-cent and 5-cent coins, provide authority to the Secretary of the Treasury to perform research and development on new metallic content for circulating coins, and to require biennial reports to Congress on circulating coin production costs and possible alternative metallic content.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Coin Modernization and Taxpayer Savings Act of 2008′.
SEC. 2. FINDINGS.
The Congress finds as follows:
(1) International demand along with market speculation for commodity metals has, over the past several years, increased the cost of producing circulating coins in the United States.
(2) In a July 30, 2007, letter to the Congress, the Secretary of the Treasury, with support of the Administration’s Office of Management and Budget, requested that legislation be put forward to authorize the Secretary of the Treasury to make changes to the composition of circulating coins.
(3) The United States Mint has studied alternative metals for use in circulating coins, as noticed in its 2004 annual report.
(4) In 1943, the United States Mint produced zinc-coated steel pennies in response to war-time demands for copper.
(5) The United States Mint gained further experience changing the metal content of pennies in 1982, when it began producing copper-coated zinc pennies as a result of rising copper prices.
(6) The Royal Canadian Mint has produced for several years a copper-coated steel 1-cent coin that is similar to the United States penny at a significantly lower cost than the cost to produce the United States penny.
(7) Given the current cost to make a penny and volume of pennies minted, by simply reducing penny production costs to face value, the United States will save more than $500,000,000 in the next 10 years alone.
(8) Reducing the cost to produce a nickel to face value will save the United States an additional $60,000,000 per year.
(9) Commodity metal prices are often cyclical in nature, and can be inflated by speculation, so it is important that a solid trend in the rising price of a commodity metal be established before any change in the metal content of a coin is made.
SEC. 3. IMMEDIATE REDUCTION IN THE COST OF PRODUCING 1-CENT COINS THROUGH THE USE OF STEEL PENNIES.
Subsection (c) of section 5112 of title 31, United States Code, is amended to read as follows:
`(c) Composition of 1-Cent and 5-Cent Coins-
`(1) 1-cent COIN-
`(A) IN GENERAL- Subject to paragraph (2), beginning 270 days after the date of the enactment of the Coin Modernization and Taxpayer Savings Act of 2008, the 1-cent coin shall–
`(i) be produced primarily of steel; and
`(ii) meet such other specifications as the Secretary may determine to be appropriate, including any change in the weight from that specified in subsection (a)(6).
`(B) TREATMENT- The 1-cent coin shall be treated to impart a copper color to the appearance of the coins so that the appearance is similar to 1-cent coins produced of a copper-zinc alloy.
`(C) EXCEPTION FOR LINCOLN BICENTENNIAL NUMISMATIC PENNIES- No provision of this paragraph shall apply with respect to 1-cent coins described in section 304 of the Presidential $1 Coin Act of 2005 that are issued for numismatic purposes.
`(2) ALTERNATIVE 1-CENT COIN COMPOSITION-
`(A) IN GENERAL- If, before the end of the 90-day period beginning on the date of the enactment of the Coin Modernization and Taxpayer Savings Act of 2008, the Secretary determines that, with the addition of any other element to any alloy of zinc and copper of which 1-cent coins could have been composed as of the day before such date of enactment, there is a way–
`(i) to produce 1-cent coins of the same diameter, general composition, and general weight as 1-cent coins produced in accordance with this subsection as of the day before such date of enactment; and
`(ii) to achieve the goals of paragraph (1) by reducing the unit cost to produce the 1-cent coin to less than 1 cent while retaining such coin’s ease of use and ensuring ease of co-circulation with 1-cent coins of the diameter and weight already circulating as of such date of enactment for ordinary commerce,
the Secretary may add any such element and continue production of 1-cent coins of the same diameter, general composition, and general weight as 1-cent coins produced in accordance with this subsection as of the day before such date of enactment instead of complying with paragraph (1).
`(B) EFFECTIVE PERIOD- This paragraph shall only apply if the change to the new composition and the subsequent drop in the production cost of the 1-cent coin referred to in subparagraph (A) can be achieved before the end of the 270-day period referred to in paragraph (1).
`(C) REPORT TO THE Congress- Any determination and action by the Secretary under subparagraph (A) shall be promptly reported to the Congress.’.
SEC. 4. AUTHORITY TO CHANGE METALLIC CONTENT OF 5-CENT COINS TO LESS COSTLY ALTERNATIVE.
(a) In General- Subsection (c) of section 5112 of title 31, United States Code, (as amended by section 3) is amended by adding at the end the following new paragraph:
`(3) 5-cent COIN-
`(A) IN GENERAL- After the end of the 2-year period beginning on the date of the enactment of the Coin Modernization and Taxpayer Savings Act of 2008, the Secretary shall produce no 5-cent coin that is not primarily made of steel with a coating of nickel, that can co-circulate with the existing supply of 5-cent coins and work interchangeably in coin handling machines, except that–
`(i) the Secretary shall make no change to the content of the existing 5-cent coin if at that point the unit cost of production of such coins is lower than the face value of the coin; and
`(ii) if the report issued by the Secretary pursuant to section 6 indicates that a different metallic content of circulating 5-cent coins is both functional and interchangeable, and more economical to produce in both the short and long term, the Secretary shall propose such content to the Congress in the form of a legislative recommendation.
`(B) FACTORS TO BE CONSIDERED- In prescribing the weight and the composition of the 5-cent coin, the Secretary shall consider–
`(i) factors relevant to the potential impact of any revisions to the weight and composition of the material on the current coin suppliers;
`(ii) factors relevant to the acceptability of new coinage materials, including the effect on vending machines and commercial coin processing equipment and making certain, to the greatest extent practicable, that any new coins work without interruption in existing coin acceptance equipment without modification; and
`(iii) such other factors that the Secretary, in consultation with merchants who would be affected by any change in the weight and composition of the 5-cent coin, vending machine and other coin acceptor manufacturers, vending machine owners and operators, transit officials, municipal parking officials, depository institutions, coin and currency handlers, armored-car operators, car wash operators, and American-owned manufacturers of commercial coin processing equipment, considers to be appropriate and in the public interest, after notice and opportunity for comment.
`(C) COMMENT AND SELECTION PROCESS- In making any determination with respect to any change in the weight and composition of the 5-cent coin, the Secretary shall enter into a formal rule making process that includes a hearing on a record in addition to the publication of notice and opportunity for comment.’.
(b) Technical and Conforming Amendment- Section 5112(a)(5) of title 31, United States Code, is amended by striking `and weighs 5 grams’.
SEC. 5. AUTHORITY TO CONDUCT RESEARCH AND DEVELOPMENT ON ALL CIRCULATING COINS.
To accomplish the goals of this Act, the Secretary may conduct any appropriate testing within or without the Department of the Treasury, and may solicit input from or otherwise work in conjunction with entities within or without the Federal government including independent research facilities or current or potential suppliers of the material used in volume production of circulating coins, to complete the report referred to in this Act and to develop, evaluate or begin the use of new metallic material for such production.
SEC. 6. BIENNIAL REPORT TO Congress ON CURRENT STATUS OF COIN PRODUCTION COSTS AND ANALYSIS OF ALTERNATIVE CONTENT REQUIRED.
(a) Biennial Report Required- Before the end of the 270-day period beginning on enactment of this Act, and at 2-year intervals following the initial report, the Secretary of the Treasury shall submit a report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate analyzing production costs for each circulating coin, cost trends, and possible new metallic materials or technologies for the production of circulating coins.
(b) Detailed Recommendations- The reports required under this section shall contain detailed recommendations for any appropriate changes to the metallic content of circulating coins in such a form that the recommendations could be enacted into law as appropriate.
(c) Improved Production Efficiency- The reports required under this section shall include recommendations for changes in the methods of producing coins at the United States Mint that would further reduce the costs to produce circulating coins, and include notes on any legislative changes that might be necessary to achieve such goals.
(d) Minimizing Conversion Costs- The reports required under this section shall–
(1) include no recommendation for new specifications for producing a circulating coin that would require significant change to coin-accepting and coin-handling equipment to accommodate changes to all circulating coins simultaneously, except for any potential change to the 5-cent coin as authorized under section 4; and
(2) to the greatest extent possible, recommend specifications that, while consistent with other portions of this section and the amendments made by this Act, require no changes to coin-accepting or coin-handling equipment whatsoever to accommodate both coins produced with the new specifications and coins produced as of July 31, 2007.
(e) Fraud Prevention- The reports required under this section shall make no recommendation for a specification change that would facilitate or allow the use of a coin with a lesser value produced by another country, or the use of any token or other easily or regularly produced metal device of minimal value, in the place of a circulating coin produced by the Secretary.
Passed the House of Representatives May 8, 2008.
They debase the coinage and they call it “saving taxpayers act.”
I agree with Mr. Jensen, this bill would debase the coinage and cost the taxpayers more in the long run because the more valuable pennies and especially nickels would be exported and melted down
for a profit. It would be much better to simply revalue the coins to a higher value
and keep them in circulation as called for in the US Constitution “Congress shall coin
money and regulate the value thereof”. Nickels could be revalued to 20 cent pieces and
pennies to 5 cent pieces.
I am all for saving taxpayer $$$. The mint should be willing to change the metal content of any coin that costs more to make than it is worth. According to Coinworld Magazine, the Canadians not only changed the metal content of coins that cost more than face value to make, but they also recycle the coins that are worth more than face value at a profit. The U.S. Mint should learn from the Canadians. What is really irritating is the additional 9/10ths of a cent gas stations add to the price of gas when gas is well over $4… Read more »
Dear people of the United states, this is not good for our economics, it is debasing are currency. Did you know it is a fact that the dime, quarter, half and the coin dollars are already not worth their weight in basic base metal? That is correct just go to coinflation.com and use the base metal calculator and you will see a 25.00 dollar roll of coin dollars is worth $1.62 worth of base metal
[…] Rep. Paul’s position on the matter has been such for several years, going back to at least 2008 when he voiced similar statements during testimony over the Coin Modernization and Taxpayer Savings Act of 2008. […]