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Obama's plan to downgrade nickel faces protest from laundromat owners. Should U.S. Mint drop the penny?

Nickels, pennies from U.S. Mint by Ryan McVay:Getty Images
For four years, given the rising price of metals, it has cost the U.S. Mint more to produce and distribute the penny and the nickel than they are worth. As the Wall Street Journal noted, "like many things produced in Washington, U.S. coins aren't what they seem." A penny, which in 2009 cost 1.62 cents to make, is mostly zinc. The nickel, which cost 5.79 cents, has more copper than nickel. Silver? No U.S. coin has any.

"Making coins from more cost-effective materials could save more than $100 million a year, which isn't just pocket change," said Dan Tangherlini, the Treasury Department's chief financial officer.

So President Obama is proposing to save money by making the coins from cheaper material than their namesakes. Mindful of the likely uproar from the zinc industry, laundromat owners and coin collectors, the government is not disclosing its option. Speculation centers on aluminum alloy, which other countries use,  or perhaps industrial porcelain, embedded with an ID chip.

Vending machine owners and laundromat businesses are poised for a fight -- worried that any change in size, weight and metal content would require costly retooling or even replacement of their machines.

"We're all taxpayers, and we're all in favor of being able to mint coins at a more reasonable cost," said Brian Wallace, president of the Coin Laundry Assn. "But we want to make sure there aren't unintended consequences that could deeply impact the small business owner during a recession."

For their part, coin collectors seem more tepid in their response. "I am not necessarily opposed as long the new coins are not awful," said one writer on the Coin Community Info Blog. "I am glad to see there is no plan to get rid of the penny."

And the penny, as they say, is where the rub is. Periodically a member of Congress, usually Ohio Democrat Zack Space, introduces a bill to change U.S. coin content or even banish the penny, on grounds that it is a costly expense for business owners.

But advocacy groups like Americans for Common Cents, backed by the zinc industry, usually manage to defeat the idea. "The penny is a hedge to inflation," argues Mark Weller, the group's executive director. Without it, he adds, businesses would merely round up to a nickel.

In its 2010 budget asking Treasury to research alternative coin content, the Obama administration made no mention of the 1-cent coin, which now costs 2 cents to make. As the president keeps saying, with a full plate, you have to pick your political battles carefully.

-- Johanna Neuman

Photo Credit: Ryan McVay/Getty Images

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Producing new kind of coins in the US will affect almost all sectors. It is said in the article that vending machine owners will have to reconfigure their machine's coin recognition to suit the new US coins. Plus the telephone booth will probably be needed to be reconfigured as well.

To compensate for retailers rounding up and creating price inflation, just make all list prices end in a 5 or 0 - no more $2.99!. That will make all after-sales-tax prices also end in 5 cents or 0 cents and thus eliminating the need for pennies. As for laundromats, well, tough luck. You'll have to upgrade your equipment just like everyone else has to on occasion. You should take credit cards/debit cards anyway.

Can't we just kill the penny all together? Its superfluous these days. I'm sure there is some lobby out there that will block it but aside from the lore what exactly is the reason for keeping the penny?

Worked in a bank way too long. Long, long ago.
Walk away from banking scratching my head about Pennies.
Boxes of Pennies from Fed are $25. That's 2,500 of the little zinc buggers.
That box weighs, in the mist of memory, about 10 pounds.
Then, people brought in rolls of the things. Businesses took away boxes of them; lots of boxes on a three day weekend!
Later, the people brought in the Pennies they'd gotten from the businesses, the businesses brought in the Pennies they hadn't used, and we bundled them up and sent them back to Fed.
Pennies are better anchors than currency.

Many countries have faced this. The United Kingdom in the early 60's demonetized their farthing and later their 1/2 penny. Also, both Australia and New Zealand banished their pennies a few years ago. Even Canada is looking into demonetizing their penny. Inflation is the culprit here and keeping a penny is really just providing subsidies to the Zinc industry. How many times have you seen people just throw them away or not even bother to pick them up when they fall. I say demonetize and just create some small runs for collectors only.

I think all cents /pennies should be withdrawn for they have no value at all. It costs more to produce them. We should only have the lowest denomination coin being 5 cents . It is a shame that the lobbyists and the corrupt in Congress do not go along with what seems to be practical and good for the Country than debating it till the cows come home. Who cares for Coin operated machine owners and the like. Our Country is being pulled down by Red-necks and vast majority of idiots who create problems for everyone. These mostly consist of blue collar or rural folks who think they have to make their pitch for whatever it is worth. Because they put our Government in a corner to continue to waste millions of taxpayer funded money for sure they are not the majority nor have the common sense to make a rational decision and defend it.

Oh no, we can't get rid of the penny. I remember when Nana would give us kid some pennies so we could go down to the "Five and Dime Store" and buy an some candy and soda and we still had change to go to the picture show.

Just kidding, let's get rid of it. The only people who really care that much seem to be the elderly and the zinc industry. Why would the laundry association care? Has anyone seen a washing machine that takes pennies?

I have always thought that the biggest obstacle to the dollar coin is cash register drawers not having a slot for it. The only practical way to do it would be to eliminate the penny. But I don't see it happening anytime soon.

I always thought the biggest obstacle to the dollar coin was cash drawers not having a slot for it (same goes for the 2-dollar bill). One solution would be to eliminate the penny. But I don't see it happening anytime soon.

Drop ALL currency and issue government debit cards. You'd be amazed at how much more money Uncle Sam would get from all the tax cheats that get money under the table. Billion$!!!!!!!

Coins and paper money are relics of inefficiency. Let's move on to the 21st century.

You ay $100 mill a year isnt small change. But, yes it is. This is a needless distraction when we're spending $100 billion a year in Iraq and more in Afghanistan, and handing taxpayer money to the banks in $700 billion chunks. Frankly, I think it's a complete waste of space in the paper to even discuss this. The immediate costs of the oil spill down south is already over 25 times what you're talking about and is going up every minute. So yes, it is small change.

What about if businesses were allowed/encouraged to opt out of using pennies? Businesses could have signs that said that the total bill will be rounded to the nearest 5 cents. Eventually, the penny could be dropped with little disruption.

If the Deficit Democrats and Obama would quit spending money we don't have, we would not be in such a mess to begin with.

Obama has already spent more in 16 months than Bush spent in 8 years.

I would be worried that a lot of machinery would be wasted if it had to be replaced. The government should have to set up a recycling program as well.

You know, we could abolish the Federal Reserve (which is a bank and NOT a government agency), make Congress coin money (which is part of THEIR JOB), and then put us back on the Gold Standard. Then that worthless penny would be worth around $2.00 by today's standards.

To be honest, I really do not understand why this is even an issue.

The existing coins are too expensive to make - period. We're losing over $100 annually because of them. Apart from the special interest group lobby and a few affected industries, the only ones that will be against this are speculators and hoarders.

I'm sure it would be easy enough for the affected industries to shift their attention in getting the government to bear the cost of any mechanical alterations that needs to be done. It's not exactly rocket science here, folks...

I keep hearing the 'hedge against inflation' argument, but for the life of me, I do not understand how that would amount to anything much, considering the general state of the economy. Any so called rounding up effect could be easily matched by the fluctuating crude oil prices. By many, many magnitudes at that...

A question for any economist reading this. Do we still need the cents denomination in the first place? Forget about the inflation angle, or the banking/stock market/forex industry, and consider it from a real world perspective.

Apart from a marketing/psychological angle, I fail to see how $3.99 or $3.95 would have any tangible effect if it were rounded up to $4.

And no inflation argument - the effect is short term, and practically negligible...


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About the Columnist
A veteran foreign and national correspondent, Andrew Malcolm has served on the L.A. Times Editorial Board and was a Pulitzer finalist in 2004. He is the author of 10 nonfiction books and father of four. Read more.
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