Buried deep in the proposed Fiscal Year 2011 Budget released by President Obama is one page that could have far-reaching consequences into American circulating coinage, and reads like it came straight from U.S. Mint Director Ed Moy's Congressional testimony nearly two years ago.
Titled "Other Savings: Coinage Material – Department of the Treasury," the proposed section seeks to grant the Department of the Treasury authority to change the composition and weights of the most common circulating coins: the penny (cent), the nickel, the dime, the quarter and the half dollar.
Stating that the primary cost driver for the United States Mint is something that it has no control over, namely the price of metal, the Budget goes on to cite the fluctuating prices of the two main metals used in circulating coin composition, copper and zinc. Both have seen 100% plus increases over the last several months, which is tame compared to the swings nickel has experienced in the last few years of over 500%.
According to the 2009 Annual Report recently released by the U.S. Mint, the total cost of producing a cent was actually 1.62 cents, for a net loss of .62 cents on each one. The nickel, worth only five cents, actually took 6.03 cents to strike during the last fiscal year, losing the Mint 1.03 cents apiece. With these figures firmly in mind, it is easy to understand why some parties are concerned with the costs associated in making the coins.
The Budget goes on to justify the broader discretionary powers it wants to empower the Treasury Department by stating that using alternative materials could ultimately save $150 million/yr. . .coinage is actually profitable for the government even with high production costs. According to last year's figures, the total seigniorage on the $777.6 million worth of circulating coinage shipped to Federal Reserve Banks was $427.8 million. This equates to a 55% net profit margin.
Coin Composition Changes Now in Obama's Budget
Source: CoinNews (2/4/10)
". . .coinage is actually profitable for the government even with high production costs"