The U.S. House of Representatives has finally taken some action in an endeavour to solve the current penny crisis. The question of whether or not to do away with the penny is being put aside for the time being. The current question appears to be “What” should the penny be made from?
House Bill HR-5512 calls for a penny to be made out of copper-coated steel within 270 days or approximately 9 months from the enactment of the date of enactment. The bill also calls for a steel nickel to be issued, but does not set a timetable for this coin.
US. Mint Director Ed Moy is in opposition to this bill, primarily because the bill does not give the Treasury Department sufficient authority to dictate what alloys U.S. coins are to be made from. Plus the Mint Director believes that 270 days is far too short to properly test and implement the issuance of the new penny. Furthermore, he is concerned that the price of steel could go even higher in the near future to coin pennies in a cost-efficient manner.
Even though this bill passed the House by a unanimous voice vote, it is highly likely to face stiff opposition in the Senate. A competing bill there is anticipated to be introduced by Senator Wayne Allard in the upcoming weeks.
It is thought that the Mint Director favors aluminum or some other metal rather than using steel to make the new pennies. The last time the U.S. minted steel pennies, it was a disaster! The 1943 steel cent, which was issued during the height of World War II to conserve copper for war production was especially reviled by the public. The steel penny was partially coated in zinc, and initially had a silver-colored appearance, which made it very easy to confuse with a dime.
The fact that only the faces of the penny were coated, rather than the edges, meant that the low-grade steel used quickly degraded into a corroded and horrifying mess in no time at all.
Although minting technology has advanced greatly since 1943, the U.S. has avoided using steel, principally because the large and politically well-connected vending industry uses magnetic coin validation technologies in its vending machines. Having to replace these machines or upgrading them would no doubt be a real hardship and costly to implement.
Of course the vast majority of vending machines do not accept pennies, therefore making a steel cent shouldn’t affect them. However, once the idea of using steel as an alloy for the other U.S. coins catches on, what implications will this have for the vending industry?
The manner in which the existing beneficiaries of government contracts have a vested interest in influencing future contract policies and legislation makes it very hard to radically change things.
If certain steel suppliers manage to get those lucrative U.S. Mint contracts to supply the metal and/or blanks, they will no doubt fight tooth and nail to further increase the Mint’s use of steel.
So the question comes down to whether the U.S. Mint should have the authority to decide what metals to use to mint coins rather than leaving the choice up to Congress as expressed in the U.S. Constitution.