Strange but true: it costs more to make pennies and nickels than the respective coins are worth. This week, in the proposed 2013 Budget, the Obama Administration petitioned Congress to allow a change to the formula for pennies and nickels that has been in place for more than three decades.
As part of President Obama's proposed 2013 budget, his administration's proposed budget "Makes Necessary Cuts in a Constrained Fiscal Environment," a component of which is to "modernize U.S. currency." Steps have already been taken to do so with the $1 coin; now the administration has set its sights on the smaller denomination coins. As per the Department of the Treasury's budget overview:
"In December 2011, the Treasury Secretary suspended production of circulating Presidential $1 Coins in light of the Federal Reserve Banks' inventories of 1.4 billion in $1
coins. This measure will reduce the U.S. Mint's expenses by $50 million annually. In addition, 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."
However, much of the expense of the penny and the nickel are in the labor and production costs, not just the increasing cost of natural resources. According to Time, it costs about half a cent per penny just in administrative costs.
