U.S. Budget Analysis — a Penny Costs 2.4 Cents to Make

The Budget proposes legislation to provide the Secretary flexibility to change the composition of coins to more cost-effective materials, given that the current cost of making the penny is 2.4 cents and the nickel is 11.2 cents.

The purpose of the budget is mostly to look forward at the nation’s financial plans for the next several years. But the Treasury request about the penny is a sign, albeit a small one, of what has been wrong with federal government financial planning in the past, as well as the absurdity of many of the suggestions about how to fix earlier mistakes.

How did the Treasury allow the cost of penny to reach 2.4 cents? The Treasury Secretary probably does not look at his operations in enough detail to know about the problem. Tim Geithner has been to busy with concerns of a still-troubled financial world. Geithner does have Richard A. Peterson as the chief of the U.S. Mint. The penny problem may be so small that he overlooked it as well. But, since there are only five coins made by the mint, the fact that Peterson missed the penny issue is appalling. And the number of coins will drop to four now that the dollar coin is being phased out. As with all other businesses, the devil is in the details. The penny detail has escaped everyone — at least as fair as the taxpayer is concerned.

The more extraordinary part of the budget request is the manner in which it is presented. The Treasury Secretary needs congressional approval to “change the composition of coins to more cost-effective materials.” Geithner cannot make that decision on his own. It has to be worked through the massive bureaucracy of budget approval, and may be sidelined in that process.

Some of the smallest details of how the federal government can be improved financially are caught in a web of budget negotiation. They should have been fixed in the past as part of the normal course of operating the government. In the case of the penny, that did not happen. The fact that it is a request  in the current budget may mean it will go “unremedied” again.

Douglas A. McIntyre