EDITORIAL: The cost of coinage

New Castle News

May 08, 2008 11:26 am

— “Seigniorage” isn’t a term most people use in casual conversation.
But when official Washington discusses the making of money, it’s the word on everyone’s lips.
Seigniorage refers to the profit government enjoys from the process of producing money. For instance, it costs about 10 cents to make a quarter. That means the seigniorage on each quarter produced for general circulation at the U.S. Mint is 15 cents.
The Mint is one of the few departments of government that actually generates a profit. But recently, the cost of certain metals has eaten away much of that additional revenue.
With rising prices for copper and nickel, The Associated Press reported, it now costs about 1.25 cents to make a cent, while the cost of a nickel is around 7.5 cents. Dimes — because of their small size — remain a relative bargain at about four cents each.
And we’re not dealing with precious metals here. The U.S. government did away with virtually all silver in circulating coins back in 1965. Silver-toned U.S. coins are now composed of copper and nickel. The cent is a copper-coated disc of zinc.
At issue is rising world prices for many commodities. It’s visible every day at the gas pumps, and police reports frequently cite the theft of copper from assorted sources. The metal can be sold to a recycler for a high price.
Because of what it costs to produce coins, Washington is looking at alternatives. One piece of legislation in Congress would direct the Treasury Department to suggest alternatives — which Congress would then have to approve.
The Bush administration doesn’t like this idea, arguing that lawmakers should give the executive branch the authority to decide such things. But when the matter is as personal as the change jingling around in constituents’ pockets, Congress isn’t likely to surrender its power.
For instance, one solution to the high cost of coin production is the complete elimination of the cent. This might be a good fiscal decision for the government, but many Americans would object.
And perhaps more significantly, special interests — in the form of metal suppliers — would fight this move.
We suppose the United States can shift to cheaper metals to produce its coins. In 1943, the government made cents out of steel because copper was needed to make shell casings. Other countries frequently use aluminum for their coins.
But for the lowly cent in particular, the basic expense of production threatens to ensure their cost will outweigh their value regardless of metal content. We think the coin has reached the reasonable end of its life. However, as is often the case, what’s reasonable doesn’t always count for much in Washington.