Should We Make Cents?

Morley Safer On The Bizarre Economics Of Producing Money

(CBS)  This segment was originally broadcast on Feb. 10, 2008. It was updated on July 3, 2008.

Should we make cents? We're talking about those insignificant one cent pieces in your pocket or purse. It may or may not come as a surprise that it now costs the U.S. Mint almost two cents to make a penny and almost a dime to make a nickel. If the economy of that eludes you, join the club.

As correspondent Morley Safer first reported in February, even in Washington, where they literally have the right to print money and where anything under a billion is chump change, there is an ongoing debate over whether it's worth the trouble to keep making cents.

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Every year, the U.S. Mint turns out eight billion shiny new pennies, using hi-tech presses that operate faster than the eye can see, stamping out Abe Lincoln on blank pieces of metal.

And, says U.S. Mint Director Edmund Moy, despite inflation, despite their lowly status, eight billion pennies still add up to $80 million.

Trouble is, to get $80 million in pennies, the government spends $134 million; to produce 1.3 billion nickels, as the Mint did last year, costs $124 million, even though the coins are worth about only half that much.

"It's weird economics, when you really come down to it, isn't it?" Safer asks.

"Well, from our perspective at the United States Mint it's unsustainable. You can't sustain losses on pennies and nickels and expect to be a viable organization that benefits the American people," Moy says.

How did we get in this fix?

"You know, coins are made out of metal. And worldwide demand for copper, nickel and zinc have dramatically increased over the last three years. That's what's primarily driving up the cost of making the penny and nickel," Moy explains.

Nickels are made mainly of copper; pennies are 98 percent zinc. On the frenzied commodity exchange, the price of copper has tripled in the last five years; zinc has doubled. Both are in heavy demand, used in everything from electrical wiring to suntan lotion, so both coins are worth less than the metals they contain. But if you're thinking of putting in a backyard smelter and melting down your spare change to make a profit, forget it. The Treasury Department has declared that illegal.

Asked if there was a fear that people would melt their pennies and sell them by the pound, Moy tells Safer, "Well, you know, other countries that have been in the same situation have ended up having shortages because people melt them. My colleagues in India at the Indian mint have noted that once the rupee became more valuable melted down as razor blades they disappeared overnight. And there was a shortage of rupees that India is still recovering from."

In the five o'clock shadow of the rupee's close shave, Washington is considering ways to reduce the cost of making pennies and nickels. Among them, giving the mint authority to use cheaper metals, like steel. And though efforts in Congress to retire the penny altogether have failed in past years, its detractors say the time has come.

"Inflation has rendered the penny nearly valueless, right? If you can’t buy anything with a penny, if it takes at least a nickel or a dime to buy anything, then that individual unit just doesn't serve much good," argues Stephen Dubner, the co-author of the bestseller "Freakonomics," a zany look at money and American culture. He puts the penny in the same category as your pesky appendix and other useless relics.

"It’s like having a fifth and a half finger on your hand," Dubner says, laughing. "I have to trim the nail, I gotta buy five and a half fingered gloves. But wouldn't it be easier just to have the five? And that really is what the penny is about. It’s just not useful."

Dubner concedes the country suffers from "pennycitis" - a love affair with the penny that's hard to shake. After all, who's on it but that true American Idol honest Abe Lincoln, who, as a young store clerk, walked three miles to return six pennies he'd overcharged a customer. "I think that the two big reasons to keep the penny are inertia, 'cause it takes a lot of work to get rid of something that’s ingrained, and nostalgia. But you need to put a price on even nostalgia," he says.

What about the sentimental attachments people have to the penny?

"But I would argue that, you know, in the old days you might have said 'A penny for your thoughts' as a nice kind of way of saying, you know, whatever you’re daydreaming about, it’s worth something. Now it’s an insult. A penny for my thoughts, what are you, what are you, it’s only worth a penny? Come on," Dubner says.

What does Dubner do with his pennies?

"Well, I have kids. So I try to teach them early on not to get any pennies to get rounded up or rounded down at any opportunity," he explains. "When we play Monopoly at home we get rid of the ones and the fives. It’s like it doesn’t matter. It doesn’t affect the economy."

[wpkelpfroth]

1. How about the fed shrinking the money supply, thereby making the penny and all other coins more valuable?
2. The fact that a coin costs more to make than the face value misses the point. The coin may last over several thousand, perhaps millions of transactions, so the price of a coin per transaction is very small compared to the intrinsic value of the coin.

[cabird1]

In addition to the aforementioned state and local taxes increasing by a nickle instead of pennies, don''t forget that bread, milk, all grocery staples and the gallon of gas will increase by a nickle each time those corporations "need" more money. With few or no pay raises on the horizon for lower and middle class citizens, the economy WILL be in dire straits. If your''re upper class, you''ll have some income to fall back on, but for the majority of citizens, how will they ask for a pay increase of 5 cents an hour everytime bread OR milk goes up?

[schs1966]

Your story on the penny missed the mark. The penny is the most important coin our government mints. The penny is the method local and state governments us to extract millions of dollars from Americans via sales taxes. I am surprised you and your author expert missed this point.

[ellenspencer]

My %u201Ctwo cents%u201D on the Penny:
Before viewing this segment, I too held a rather unappreciative attitude toward the lowly penny. After thinking about it, however, I was amazed to discover just how prevalent pennies are in my life.
The day before viewing this show, my family and I played Tripoley together and pennies were quite necessary. Then, on the morning before the show I stopped by my classroom to add some pennies to our %u201CPennies for Peace%u201D jar. That%u2019s where we save the %u201Cinsignificant%u201D coin in order to help build schools for children in Afghanistan. Finally, just an hour before the show, I stopped at the local office supply store and bought two hand sanitizers that were on sale for a penny each.
Clearly, this shiny little coin is still significant to me and the next time I use one, I%u2019ll be seeing a %u201Cpretty penny%u201D indeed.

[ackthp]

The "Should we make cents" story was a low point for 60 minutes. This story, as was told, was irrelevent. Was there nothing of greater need of air time than this so called story? The producer of this segment forgot one important point in signing off on this story. With the proposition to do away with the penny and round up prices to the nearest nickle, one must take into account state sales tax rates. Let''s take for instance an item rounded up from $4.99, would now be $5.00. No pennies needed. When this item is purchased in Colorado (2.9% sales tax), the purchase price would be, $5.14 (no pennies needed?). In Missouri (4.225% tax), your price would be, $5.21, and in Texas (6.25%), your price? $5.31.
60 Minutes has taken and stuck its head in the sand. With a segment such as this poorly researched one was, this renowned news-magazine has joined the tabloid journalism world of unworthy of air time stories. Please 60 Minutes, stop pandering to the "reality-tv" zombies, and go back to journalism, and relevent news.

[maikeru823]

The US military overseas doesn''t use pennies to save money. This has been going on for at least 5 years. Transactions are rounded either up or down to the nearest nickel. It can be done!

[knraf]

Interesting thought on the penney. Why don''t we just move the number values up a notch and make the penney the nickel, the nickel the dime and the quarter the half- dollar?

Come on CBS. You know d*** well we cling to the penney so the money grubbers can stick .99 on the end of any price. Are they gonna round up from .99 to .00?? Don''t think so.

[ibcjman]

Great commentary on the cost and rational of using the penny. The young mans formula of what it is costing all of us was feasable up to the point that if we were to pay that 10 billion in pennies it would in fact cost us all "20 billion dollars"
Keep up the great work!

[Dliefling]

Maury,
Maybe it is time to copy South Africa where we only have a 2c piece now and so much easier to rather have 2-2c pieces for change than 4 of your 1c pieces! We did away with the penneys long ago!

[msjesse1]

Don''t hate the penny, just pass them on to me.

[karmenu-2009]

Has anyone figured out that pennies could be minted out of recycled plastics at a penny a dozen? and can probably be minted much cheaper in China?
Carmel Gaffiero

[edp2064]

Am I the only one that noticed that nobody brought up the issue of taxation? What are we going to do for local, state and federal taxes when it comes to the purchase of consumer goods? Something tells me that the government is not going to round down to the nearest nickle.

[revdrdark]

The solution is obvious--we should mint them in Mexico!

[hcunn1221]

The US Mint should be prohibited, effective immediately, from manufacturing any coin at a loss.
("Nickels" could be made of steel.) That would solve the penny problem.
For collectors and artists, however, the Mint should make beautiful copper pennies to be sold at a modest profit (2 cents each?).
--Hugo S. Cunningham

[karagmile]

$800 million a year? It''d be cheaper to send free coin rollers (those plastic numbers banks use) to ever address in the country with a note to return pennies in jars & drawers to the bank. It''d cut the minting cost about in half... It''d also require actual sense in DC, which is rarer than a pre-Lincoln penny.

And minting $1 bills is crazier. _Half_ the Bureau''s time is spent minting $1s, which last 18 mo, rather than $1 _coins_, which last 20 yr. Canada (home...) had the sense to switch, & _take the $! note out of cicrulation_, which is why the U.S. attempts at $1 coins have all failed--the _note remains available_... (Don''t suppose that''s from the lobby for the ink & paper companies, do you?)

[karagmile]

$800 million a year? It''d be cheaper to send free coin rollers (those plastic numbers banks use) to ever address in the country with a note to return pennies in jars & drawers to the bank. It''d cut the minting cost about in half... It''d also require actual sense in DC, which is rarer than a pre-Lincoln penny.

And minting $1 bills is crazier. _Half_ the Bureau''s time is spent minting $1s, which last 18 mo, rather than $1 _coins_, which last 20 yr. Canada (home...) had the sense to switch, & _take the $! note out of cicrulation_, which is why the U.S. attempts at $1 coins have all failed--the _note remains available_... (Don''t suppose that''s from the lobby for the ink & paper companies, do you?)

[karagmile]

$800 million a year? It''d be cheaper to send free coin rollers (those plastic numbers banks use) to ever address in the country with a note to return pennies in jars & drawers to the bank. It''d cut the minting cost about in half... It''d also require actual sense in DC, which is rarer than a pre-Lincoln penny.

And minting $1 bills is crazier. _Half_ the Bureau''s time is spent minting $1s, which last 18 mo, rather than $1 _coins_, which last 20 yr. Canada (home...) had the sense to switch, & _take the $! note out of cicrulation_, which is why the U.S. attempts at $1 coins have all failed--the _note remains available_... (Don''t suppose that''s from the lobby for the ink & paper companies, do you?)

[shanesax]

No need to eliminate the penny! BUT smart businesses should round DOWN my final bill.
e.g. at the super market my bill of $121.53 shold be billed at $121.50

Many small businesses already have ''Leave a penny - take a penny'' containers at their check-outs. They KNOW the value of a penny in public relations. Other businesses have a charity container that the let the customer put their small change into. Why not double the customers donation from the rounding DOWN (in the super market example)and get a HUGE corporate public relations bang for a few pennies.

All I care about is NOT having to dig for a penny and NOT having to accept one.

We shouldn''t be worrying about how much the penny and nickle are costing to make. It''s a trival matter compared to the billions spent on the War In Iraq.