Uncle Sam loses money making money: producing pennies, nickels cost more than their face value

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Inflation may make a penny worth less — but it also makes that penny cost more.

The rising price of raw materials has sent the cost of manufacturing coins soaring over the last two years, adding nearly a full cent to the cost of producing each penny. It now costs more than two and a half cents to mint and distribute each penny coin, the federal government said in a new report to Congress.

Making a nickel now costs more than 10 cents.

The price to make dimes and quarters also rose, though at least in those cases the government still comes out ahead because their face value is higher and, in the case of the dime, it’s so tiny that it just doesn’t use as much material.

“The average price of copper, nickel, and zinc, which are the primary metals in each coin, have increased each year, resulting in an overall increase in the cost of metal for each denomination,” the U.S. Mint said in a new report to Congress detailing the situation.

Some members of Congress said it’s time for the government to cut its losses and figure out savings.

“It’s absolute non-cents that American taxpayers spend ten cents to make just one nickel,” said Senator Joni Ernst, Iowa Republican. “Only Washington could lose money making money.”

She and Sen. Maggie Hassan, New Hampshire Democrat, announced legislation Thursday that would allow the mint to switch up its production methods, saving money on raw material costs.

“This commonsense, bipartisan effort will modify the composition of certain coins to reduce costs while allowing for a seamless transition into circulation,” she said. “A penny saved is a penny not borrowed.”

Losing money on some coins has been standard for nearly two decades, but it had seemed manageable when the loss was less than a cent per penny, or two cents on the nickel.

But the last two years have made the situation acute.

It now costs 2.4 cents to obtain the materials to make a penny, and roughly three-tenths of a cent for administrative and distribution costs, for a final tally of 2.72 cents per penny produced in fiscal year 2022.

Just two years earlier, in 2020, before the Biden administration and the current round of severe inflation, a penny cost 1.76 cents to produce.

Making a nickel rose from 7.42 cents in 2020 to 10.41 cents in 2022.

The mint produced 1.4 billion nickels in 2022, with a total face value of about $72 million. It cost about $150 million to make them, resulting in a net loss of about $78 million.

Making 5.5 billion pennies lost Uncle Sam another $92.7 million.

Luckily, the dime and quarter are still money-makers, offsetting the penny and nickel losses.

One bright spot in this week’s Mint report is that the Mint is coining fewer coins, which keeps the penny and nickel losses down.

Nearly 8.2 billion pennies were minted in 2020, while just 5.4 billion were coined last year. If production had remained the same, the government would have lost $140.6 million on producing the penny.

Attempts to change the composition of coins aren’t new, and indeed the Mint has been studying options for years.

It’s looked at nine different modifications, such as using copper-plated steel for the penny or an alloy known as C99750T-M, which contains less copper and nickel and uses zinc and manganese, for minting new nickels.

Using C99750T-M could have shaved $26.2 million off the loss from minting nickels last year.

The Mint says it did large-scale testing on the new penny last year and is now doing small-scale refinements.

The nickel alloy, meanwhile, still needs large-scale testing to make sure a transition would be seamless.

Other options could save even more money, but their transition wouldn’t be seamless since automated machines could struggle with them.

The legislation from Ms. Ernst and Ms. Hassan would require the Mint to consider the seamlessness of the transition and how well the new versions would work in automatic coin machines before moving forward.

“When it comes to fiscal responsibility, it’s just common-cents to use every tool at our disposal,” said Ms. Hassan.

Their legislation is named the Coin Metal Modification Authorization and Cost Savings Act.

Chances for change are iffy.

For decades, the penny has faced — and successfully fended off — calls for its extirpation.

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