Let’s start with a trivia question:
What is the only coin (not pattern) struck by the U.S. Mint that contained no copper?
(cue “Jeopardy!” music)
If you said the 1943 Lincoln Steel Cents, you are correct. Every other coin struck by the U.S. Mint has contained some amount of copper in the alloy. Even the 1942-1945 war-time alloy used for the Jefferson Nickel was changed from a copper-nickel alloy to one made of copper-silver-manganese.
After the bombing of Pearl Harbor by the Japanese on December 7, 1941, the next day congress passed a formal Declaration of War on Japan. Three days later, a Declaration of War was passed against Germany. Mobilization took a while and the United States did not formally enter the European theater until landing on Normandy Beach on June 6, 1944, better known as D-Day. Between those declaration and full-scale fighting in both Europe and the Pacific, copper was a critical element necessary to manufacture bullets for training.
Rather than using the copper for coins, the government had bullets manufactured. In order to ensure there was a supply of circulating currency, the U.S. Mint changed the composition of the cent to zinc coated steel. Similarly, to save the nickel needed to make other armaments, the Jefferson 5-Cent coin was changed to 56-percent copper, 35-percent silver, and 9-percent manganese.
To say that 1943 Steel Cent was a disaster would be an understatement. Because of its silver color, it was not accepted by the public. Also, since the steel was not treated, it oxidized quickly and became a dark, dirty color. After a while, the coins would begin to rust. In 1944, Lincoln cents were made using the spent shell casing picked up from the training fields. This continued through 1946, the end of World War II giving the coins the nickname of “Shotgun Cents.”
One other coin that was not made using copper was a 1974 Lincoln Cent pattern that was made of aluminum. The U.S. Mint struck over 1.5 million examples in 1973 in order to convince congress to allow them to circulate them. A few was given out to members of congress as part of the U.S. Mint’s lobbying effort. After the measure was defeated, the members of congress was supposed to return the coins. However, one coin was allegedly “dropped” by a senator and retrieved by U.S. Capitol Police Officer Albert Toven. The Toven Specimen was graded MS62 by PCGS in 2005. It is estimated that 18-44 more still exist but have yet to be discovered.
Today there is another issue. Since 2006, the cost of the metals to manufacture the current Lincoln Cent (99.2-percent zinc covered with .8-percent copper) and Jefferson Nickel (75-percent copper and 25-percent nickel) has raised its base cost to at least 150-percent of face value before considering manufacturing costs. The cost has caused several “discussions” about the fate of these coins—there are some who want to eliminate the cents; others want to change its composition; and there is a small group who understands the concept of the loss-leader and is willing to let it go as long as seignorage for other coins cover the costs.
First term Rep. Steve Stivers (R-OH) wants to settle the discussion by introducing two bills that if passed will change the composition of the one-cent and five-cent coins. Stivers introduced H.R. 3693, Cents and Sensibility Act, and H.R. 3694, Saving Taxpayer Expenditures by Employing Less (STEEL) Imported Nickel Act on December 15, 2011. Both bills are being co-sponsored by Reps. Tim Ryan (D-OH) and Pat Tiberi (R-OH).
H.R. 3693 is very straight forward. It says that the “1-cent coin shall be produced primarily of steel” and “shall be treated to impart a copper color to the appearance of the coins.” If the law is enacted, the coins will use only steel produced in the United States. If it is not possible to use U.S. manufactured steel, the reason has to be published in the Federal Register. The size of the coin will not change but the weight is allowed to be altered as necessary.
H.R. 3694 is similar to H.R. 3693 in that it strives to keep the 5-cent coin to look the same using U.S. manufactured steel. Where the bill differs is how the coins are to be designed for use in circulation. The three provisions required for the conversion is that whatever composition is used, the new alloy is not supposed “require more than 1 change to coin-accepting and coin-handling equipment to accommodate coins,” use the same alloy or specifications that is used by another country, and “require changes to coin-accepting or coin-handling equipment whatsoever to accommodate both coins produced with the new specifications.”
Every time there is a proposed change in the composition of U.S. coins, the one group that has the biggest say is the vending machine industry. When silver was removed from U.S. coins in the 1960s, the decision was made to use the current copper-nickel clad coins so that it produces the same electro-mechanical signature its silver counterparts. The electro-mechanical signature is the combination of the coin’s size, weight, and how electricity is conducted by the coin. If the coin can match the specifications, it is determined to be real (as opposed to a slug) and is accepted by the machine. Considering that steel has a different density from the copper-nickel alloy, the coin will have a different weight and be a stronger conductor of electricity. Steel coins may require two changes to vending machines making it nearly impossible to comply with the law. The vending machine lobby will not like the results of this bill and will lobby for its defeat.
Before considering other options, by saying that the coins cannot use the same alloy or specifications that is used by another country, the U.S. Mint could not consider using aluminum, especially since it is being used in Canada.
The professional organizations that cover the vending machine industry has not comment on these bills.
The bill was referred to the House Committee on Financial Services. Coin bills are referred to the Domestic Monetary Policy and Technology subcommittee, chaired by Rep. Ron Paul (R-TX). Aside from Rep. Paul’s current status as a candidate for the Republican nomination for president, he is known for not being a fan of using base-metals for coins and “wasting time” on coinage changes. Remember, it took a the members of this subcommittee to bring the measure to the Financial Services Committee as a whole to have the Baseball Hall of Fame Commemorative referred to the floor for a vote.
While H.R. 3693 and H.R. 3694 may make for an interesting discussion, politics suggests that these bills may never make it out of committee.