Rising penny costs may lead to battle in Congress

WASHINGTON -- The U.S. penny is not what it appears to be, and some in Congress would like to see it change further, if not disappear entirely.

Because of a surge in the price of copper, the U.S. Mint decided 25 years ago to manufacture the coins almost entirely with zinc, save for the coating on which Abraham Lincoln's profile is engraved.

Now, the fate of the penny is up in the air once again. With the price of zinc soaring amid a worldwide commodities boom, it costs the government almost 2 cents to make each 1-cent coin -- a pretty penny considering roughly 8 billion new ones are placed into circulation annually.

While it is unlikely the penny will be pulled from circulation, there are some lawmakers who would like to ditch zinc as a raw material and instead use steel or some other less expensive metal.

The nation's sole supplier of zinc "penny blanks," Jarden Zinc Products, is lobbying the federal government to protect its interests.

In the past two weeks, bills in the House and Senate were proposed that would give the Treasury Department the power to decide -- without congressional approval -- the type of metals used for all coins. The bills' authors said using cheaper metals to make pennies and nickels, which incidentally cost an estimated 10 cents each to produce, could save taxpayers $100 million annually.

It's just common sense to give the government that power "so we no longer have to spend so much money making our money," Sen. Wayne Allard, a Republican from Colorado, a bill co-sponsor, said in a statement.

However, Jarden's lobbyist in Washington, Mark Weller of the law firm Sonnenschein Nath & Rosenthal LLP, said House staffers recently assured him the latest bills won't open the door to another effort to rid the penny. "We're satisfied, but we need to stay on top of that," Weller said.

A federal disclosure form filed Tuesday shows that Jarden, which is based in Greenville, Tenn., spent up to $10,000 in the first half of 2007 on lobbying expenses.

Francois Velde, a senior economist with the Federal Reserve Bank of Chicago, said the federal government should rid the U.S. currency of pennies, or at the very least find a cheaper way to make them.

Velde noted that equivalent coins in Canada, the United Kingdom and Europe are made from steel, which is roughly five times less expensive than zinc.

Weller said Jarden, which produces coin blanks for more than two dozen countries, is "agnostic" about the penny's metal content.

"Should Congress or the Mint suggest a different metal composition, like copper-plated steel or copper-plated aluminum, I'm sure Jarden would be interested in talking to the Mint about their capabilities," he said.