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Steel Cent and Nickel House Bill Passes
By Mike Unser

The House debated on the legislation and finally voted yesterday to change the metallic composition of the penny and 5-cent nickel to a less expensive copper-colored steel.

Although the prices of copper, zinc and nickel metals in coins have declined in recent months, the penny and 5-cent nickel still cost more to make than what they’re worth—resulting in a reported loss of about $100 million every year, or $1 billion over a decade.

It now costs about 1.26 cents to make the penny and about 7.7 cents to make the nickel.

House bill “H.R. 5512, the Coin Modernization and Taxpayer Savings Act of 2008” would seek to change those manufacturing costs by using copper-colored steal, which could cut the cost of making pennies down to about 0.7 cents each. But its recent passage in the House is no guarantee it’ll make its way to the White House for signing.

H.R. 5512 must still go through the Senate and then the President, and not everyone is happy with the current legislation.

One person who would like to see changes is United States Mint Director Ed Moy. In hearings before a House Subcommittee, he commented that the stipulated time in changing the penny to steel was too short. While the newest version of the bill was modified from its initial timeline of 180 days to 270 days, Moy had requested 18-24 months during testimony.

Moy also indicates there may be better, and less costly metals for coins than steel. As a compromise to that, the bill was again modified from its original version to allow alternative metals for the penny—if, and only if, the solution were to "achieve the (bill’s) goals."

However, only 90 days from the date of H.R. 5512 becoming law is allowed in coming up with another solution. The likelihood of that happening seems doubtful.

The legislation also includes the prospect of steel nickels within two years passage. But the language in that area of H.R. 5512 becomes more clouded with variables, and would likely result in several bouts with Congress. Doubt can be cast on the possibility of it ever happening.

Finally, the updated legislation provides the Treasury, and therefore the U.S. Mint under it, the authority to conduct research and testing of potential metals for coins. This was a clarification measure Moy sought. He may not have expected, however, the added legislating guidelines to provide biennial reports to Congress.

In short, new legislation would need to be drafted and passed for different metals in dimes, quarters, half-dollars or dollar coins.

In summary, H.R. 5512 in its current state:

would likely result in a steel penny with the downside that there may be a better metallic alternative, but not enough time to implement it,
will not likely result in a steel or other new metallic nickel any time soon,
would give the U.S. Mint the power to officially research and test other metals for coins
would require new reporting by the Mint to Congress, and
it would still hamstring the Mint in making future metal composition changes to keep coin manufacturing prices down.
Director Moy said this week that the bill was “too prescriptive.” An apt analysis.

H.R. 5512 seems to be a document shrouded in Congressional micro-management, with little hope of altering the dysfunctional system that has resulted in the penny and nickel losing money for nearly two years now. The legislation may "fix" the penny. It probably won’t fix the nickel. And it does little to encourage modifying the composition of other coins to make them less expensive down the road.

Reports indicate that Senator Wayne Allard of Colorado is expected to introduce another version of the legislation in the Senate.

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