Why Does The White House Want Cheaper Pennies And Nickels?

President Barack Obama has submitted a proposal to Congress asking for permission to produce cheaper pennies and nickels. Why?

As part of the United States 2013 fiscal budget, Obama included a proposal to “change the composition of coins to make more cost-effective materials”.

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President Barack Obama has submitted a proposal to Congress asking for permission to produce cheaper pennies and nickels. Why?

As part of the United States 2013 fiscal budget, Obama included a proposal to “change the composition of coins to make more cost-effective materials”.

Related News: Obama To Unveil Budget Plans: $901B Deficit and Tax Hike in Store

Accordingly, it costs the federal government eleven cents to mint a single nickel, and more than two cents to make a penny. Obama is appealing to Congress to change the “special formula” for making coins, a formula that has remained unchanged for the last 30 years.

Dan Tangherlini, the Treasury Department’s chief financial officer said:

[quote] Making coins from more cost effective materials could save more than $100 million a year, which isn’t just pocket change. [/quote]

But CNNMoney reports that even though the “Treasury has been studying new metals since 2010, it has yet to come up with a workable mix that would definitely be cheaper, and it has no details yet as to what metals should be used or how much it would save to do so.”

The spike in production costs of coins can be traced to the sharp increase in the price of raw materials like zinc, copper and nickel.

According to the website Coinflation, these materials are getting more expensive:

[quote] Copper/Nickel/Zinc prices move in either direction primarily based on short-term physical demand and speculation on economic manufacturing forecasts. On the supply side, mining isn’t keeping up with demand and the market has responded with higher prices. [/quote]

At the same time, the Wall Street Journal points out that history has shown that Obama’s proposal “would rekindle an emotional debate among Americans who fear changing the composition of their currency will hurt its value.”

While the value of the U.S. dollar certainly isn’t pegged to the value of the raw metals, opponents of the proposal say they fear cheaper coins could lead to wave of counterfeiting. For others, the penny represents a transactionary cost saving in itself.

Mark Weller, director of Americans for Common Cents, argues that “the penny is a hedge to inflation” without which merchants would end up rounding up to the nearest nickel. 

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