The U.S. Mint has some good news and bad news in its latest biennial report to Congress. The good news is that we're wasting less money on pennies and nickels. The bad news is we're still wasting money on pennies and nickels.
Production costs for all four major coin types fell in fiscal year 2014 due to the falling price of copper, one of the primary metals used to make coins. The Mint estimates it saved $29 million this year compared to last year on account of lower copper prices.
But it continues to lose money on pennies and nickels. It now costs $1.62 to make a dollar's worth of nickels, and $1.66 to make a dollar's worth of pennies. By contrast it costs only 36 cents to make a dollar's worth of quarters, and 40 cents for a buck of dimes. Paper dollar bills are even more cost-effective.
As recently as the early 2000s, the Mint was still turning a small profit on the nickels and pennies it produced. But the costs of those coins spiked in 2006, and haven't broken even since then.
As of 2013 taxpayers were losing $105 million annually on penny and nickel production. This report doesn't include total production numbers, so we can't calculate costs at the moment. But it's safe to assume that losses on pennies and nickels decreased this year, in line with their falling cost.
The Mint could decrease production costs even further, especially on dimes and quarters, by using different metal compositions in the production of those coins. But that would change their weight and their "electromagnetic signature," which would drive vending machines haywire. It would require a multi-billion dollar upgrade of coin-operated machines nationally, which dwarfs the few million that might be saved from adjusting the coins' metal composition.
But ditching the penny and nickel would cost literally nothing -- imagine, a $100 million annual savings with a flourish of the executive pen. But such a move remains fiercely opposed by metal alloy industries and Coinstar, which makes millions each year by helping people get rid of their unwanted change.
In essence, we're paying $100 million a year to make coins that nobody wants, so that people can take them to a Coinstar kiosk and pay again to get rid of them. Capitalism!