Despite high production costs and a shift toward electronic payments, a House of Representatives hearing has confirmed that for the foreseeable future, the humble penny isn’t going anywhere.
The House Subcommittee on Monetary Policy and Trade discussed the future of the penny and the rest of the American coin purse in a hearing Wednesday. The problem for the U.S. Mint is that a penny actually costs 1.8 cents to produce, but there remains a strong popular constituency for the coin.
“Despite the rumblings, the penny is here to stay,” Rep. William Lacy Clay, Missouri Democrat, said.
The lawmakers were told that despite increasing debit card and electronic payments, low denomination currency like pennies and $1 bills are still in wide circulation and are used for the majority of small transactions.
“There will still be a portion of society that will always use coins,” Lorelei St. James, director of physical infrastructure issues for the Government Accountability Office, the watchdog agency for Congress.
The hearing explored the possibilities for reducing the costs of producing the penny, but U.S. Mint Deputy Director Richard A. Peterson said the penny’s production was unlikely to be modified.
“No alternative metal composition will lower the cost of making the penny,” he said.
The hearing also addressed methods that might reduce the cost of producing other coins, like the nickel, dime and quarter.
The nickel is the only other commonly-used coin that costs more to produce than it is worth. Making one nickel cost the American taxpayer 9.5 cents in fiscal year 2013, according to Mr. Clay.
Andrew Mills, director of circulating coin at Britain’s Royal Mint, discussed his agency’s method for reducing costs — making the core of coins steel and then plating the outside with other metals.
Mr. Mills said the switch has been seamless for British shoppers.
“They really tell very little difference,” he said.
One of the biggest concerns for any major change to the design of coins would be the costs incurred by vending machine companies, parking meter operators and other businesses that heavily rely on coin payments.
Mr. Mills said that the transition to plated, steel-core coins at the Royal Mint allowed two years for private companies to adjust to the changes.
Rep. Steve Stivers, Ohio Republican, expressed concern that American businesses get the same transitional period if the production of any major coin is modified in the future.
“Those folks deserve to have that phased in,” Mr. Stivers said.