WASHINGTON (MCT) These days, your thoughts are worth 1.7 cents.
That's what it costs the government to forge a penny, thanks to the rising price of metal. A nickel costs 10 cents. Congress, in its infinite wisdom, has concluded that's a pretty bad deal.
A House subcommittee chaired by Rep. Luis Gutierrez, D-Ill., convened a hearing Tuesday on a proposal to change the composition of both coins. Republicans and Democrats like the concept, particularly its promise to save taxpayers $100 million a year by using cheaper metals at the U.S. Mint. If the legislation clears the House and Senate and President Bush signs it, you could be plucking steel pennies off the street before year's end.
In Washington, of course, nothing is that simple.
There are bureaucracies to navigate and interest groups to appease. There are lobbyists and powerful home-state imperatives. There are questions of constitutionality and whether the penny should exist at all. There is Ron Paul, the Texas congressman who recently ended his long-shot Republican presidential bid.
But despite Gutierrez's plea that "we need to act immediately," it appears there will be months more debate before Congress votes on fixing the Treasury's penny problem.
The Mint has coined American money since 1792. Congress has given it the power to tweak coin composition several times. Rationing begat a steel penny and a no-nickel five-cent piece during World War II. Rising prices pushed silver out of coins in the 1960s. Copper inflation gave us the current penny, which is copper-plated zinc, in the early '80s.
Until recently, Mint officials say, no American coin had ever cost more to produce than it was worth.
Global metal prices began shooting upward in late 2003, driven by increased demand for raw materials, particularly in India and China, according to Mint statistics. The price of copper quadrupled in the last five years. Nickel more than tripled, and zinc nearly did the same. The Mint lost $33 million on penny and nickel production in the 2006 fiscal year. In 2007, it lost $99 million.
"There is no indication," Mint Director Edmund Moy warned the House Subcommittee on Domestic and International Monetary Policy, Trade and Technology, "that copper, nickel and zinc prices will decrease over the short term."
Enter the "Coin Modernization and Taxpayer Savings Act of 2008," the subject of Tuesday's hearing. It would give the Treasury authority to set the weight and composition of any coin whose production costs exceed its face value for five consecutive years. It also requires the Mint to start producing a primarily steel penny within 180 days of the bill becoming law, so taxpayers would save money almost right away.
The bill requires any new coin to work in existing vending machines. That's a concession to the National Automatic Merchandising Association, which opposed an earlier version for fear that it could force hundreds of dollars in upgrades to each of the nation's more than 6 million dispensers of soda, snacks and other convenience items. An association lobbyist testified in favor of the revised bill on Tuesday.
Other concerns persist. Moy told the subcommittee that six months isn't nearly enough time to produce a steel penny and that the five-years-of-losses requirement would prevent the Treasury from stepping in early if the dime or quarter which currently run 7 and 10 cents to produce, respectively suddenly grow more expensive.
Several Republicans worried about Congress giving up coinage control to the executive branch. "It seems to me that the Mint has been the leader in slowing down changes to coin composition," said Rep. Peter Roskam, R-Ill., who introduced a bill last year that would have mandated a cheaper make-up for the penny.
Paul called the current proposal an unconstitutional delegation of power and a symbol of "how far we have fallen" in monetary policy. America, he said, has failed to maintain a gold standard or silver standard for its currency. "Now," he said, "we cannot even maintain a zinc standard."
Rep. Mike Castle, R-Del., raised the long-simmering question of whether America should scrap the penny entirely. The pennies he collects go into "an old beer mug I have from college," Castle noted. Moy, the Mint director, said he keeps his loose change in tubes one for pennies, others for nickels and dimes.
Gutierrez said after the hearing he hopes to get the bill out of committee by summer, after perhaps some tweaks to address the Mint's objections. Other subcommittee members also seemed eager to get their hands on it. "This is going to be a good bill to work with," said Rep. Frank Lucas, R-Okla.. "I can see some good amendments coming for this."