In 2013, the cost of making pennies and nickels exceeded their face value for the eighth year in a row. The cost of minting a penny stood at 1.8 cents, nearly twice its face value. Nickels cost twice as much as dimes — 9.4 cents versus 4.6 cents — despite being worth only half as much.
The U.S. Treasury spends nearly $2 for $1 of nickels or pennies it pumps into the economy. In contrast, a dollar's worth of quarters or dimes costs the government less than 50 cents. A dollar bill is even cheaper, coming in at less than a quarter.
Historically, nickels and pennies have always been more expensive on a per-dollar basis than dimes and quarters — it takes a lot more metal to make 100 pennies than it does to make four quarters. But the government didn't lose money on nickels and pennies until 2006. Manufacturing costs rose gradually from 1984 until roughly 2005, at which point nickel and penny costs began to increase dramatically.
Why the spike? Minting costs are primarily driven by the costs of the metals used to produce the coins — nickel and copper for the nickel, and copper and zinc for the penny. As those costs rose in the first years of the 21st century, the U.S. Mint began losing money on pennies and nickels.
All told, the Mint (and ultimately, U.S. taxpayers) lost $105 million on the production of pennies and nickels in 2013. That might be pocket change compared with last year's budget deficit of $680 billion, but in an era of budgetary austerity, it's enough to make politicians take notice.
Chief among them is President Barack Obama, who included a provision in his 2015 budget to "assess the future of currency" and ultimately develop "alternative options for the penny and nickel."
The least-controversial approach would be to simply change the metal makeup of the coins to make them less expensive. Canadian nickels, for example, are 95 percent steel, which makes them cheaper to produce than their U.S. cousins. As of last year, Canadian nickels cost less than their face value.
The other option would be to discontinue pennies and nickels — Canada ditched its pennies when their production cost approached 1.6 cents.
The penny has plenty of supporters in the public. A 2012 survey by a penny lobbying firm, Americans for Common Cents — funded by the zinc industry — found that two-thirds of Americans favored keeping the penny. Any poll conducted by a lobbying outfit should be treated with skepticism, but it's probably safe to say that the penny and nickel hold special places in many Americans' hearts — there are a remarkable number of penny-centric phrases and idioms in English.
Past attempts to discontinue penny production have been thwarted by the zinc industry (pennies are 97.5 percent zinc) and Coinstar, which operates the change-redeeming kiosks often seen in grocery stores.
But these attempts didn't happen in the context of a global recession and an anemic recovery and an appetite for belt-tightening on Capitol Hill. Moreover, millions of Americans have demonstrated their willingness to pay Coinstar — 10.9 cents on the dollar — to get rid of their unwanted change. Maybe it's time for Congress to step up and do that job for free.