Citing copper and zinc costs, House votes for return of steel penny

By Brian Faler
Bloomberg News Service
Thursday, May 8, 2008

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aawSYGeCapwM

WASHINGTON -- The U.S. House has voted to bring back the steel penny, saying it would be cheaper than the current practice in which the government loses money on every penny it makes because of rising metal prices.

The chamber approved legislation directing the U.S. Mint to begin producing, within the next nine months, pennies made of copper-plated steel -- not the zinc-copper alloy currently used. The measure, passed on a voice vote, also recommends phasing in steel nickels over the next two years.

Democrats, who noted that the government produced steel pennies during World War II when copper demand was high, said the plan would save $1 billion over the next decade. Unlike the gray steel pennies produced during World War II, the new steel pennies would have to retain their copper color.

"This legislation represents a fiscally responsible solution to a situation that grows worse with every penny minted," said Rep. Zack Space, an Ohio Democrat who sponsored the bill. "It is an insult to American taxpayers that we are manufacturing coins at a rate more than their face value represents."

The Senate hasn't taken up the matter. The Bush administration opposes the plan. Mint Director Edmund Moy said today that while he supports changing the metal content of the coins to save money, he doesn't believe steel would be the best option.

... Senate Debate

"Mandating a primarily steel penny eliminates any consideration of other alternatives that may prove more cost-effective," Moy said in a statement. "The United States mint looks forward to the debate in the Senate on the issue of producing the penny and nickel more cost effectively using a less restrictive process than outlined in the House bill."

The mint, which produces almost 8 billion pennies each year, says it now costs 1.3 cents to make a single one. That's up from the 97 cent-per-penny cost three years ago, according to agency statistics. Pennies are about 97.5 percent zinc and 2.5 percent copper. The agency says it loses even more on nickels -- which are one-quarter nickel, three-quarters copper -- because they each cost 7.7 cents to make.

Mint spokesman Greg Hernandez said the mint continues to make money on other coins, estimating it costs 4 cents to produce a dime, 10 cents to create a quarter and 16 cents to manufacture the $1 coin. The mint hasn't tinkered with the metal content of the one-cent coin since 1982 when rising copper prices prompted it to replace pennies that were almost entirely copper with the mostly zinc ones now being produced.

The bill is H.R. 5512.

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