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just carl
Penny Hoarding Member
USA
601 Posts |
 Posted - 01/03/2007 : 11:34:21
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Numerous individuals constantly note the cost of a cent to produce bu the US Mint. Lately many have also stated the cost of a nickel, dime, quarter, etc. In all instances this is based on the cost of the metal itself and with the cost of metal going up and down, then obviously so does the cost of producing coins.
However, think about this. If YOU say wanted to produce an object for sales or distribution, YOU would have to do the following:
Purchase or rent a building, pay taxes on the building, pay for gas, water, electricity, phones, faxes, wiring, maintenance. Now you would have to have funiture, paper, filing cabinets, computers, printers, chairs and on and on and on. Even once you have them they wear out and have to be replaced. Now you have to get machines to make your product, people to run the machines and then pay thier wages, insurances, retirement funds, etc. Now you have to pay for the material, delivery of the material, sending the finished product out to whoever. And there is a lot more such as maintenance on the outside of the building and lots and lots more.
All of the above must come from the profits of the sales of your product. Not so with our Mint. Almost all of the above is paid for with our taxes. Try that with your own buisness. If the Mint had to pay for all of the above, a cent would cost probably a hundred dollars each.
Carl
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Cerulean
Penny Hoarding Member
USA
993 Posts |
Posted - 01/03/2007 : 14:43:05
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Okay, let's disect this claim.
First of all, the Mint has other sources of income besides tax dollars. Seignorage and sales of nurismatic items helps defray the costs of operation and supplements the Mint's income. Like the Postal Service, the Mint is encouraged to run itself profitably, and receives in Congressional spending only what it needs to cover what it can't. When you buy a proof set, Eagle, or even just a state quarter, you're helping to pay the Mint's costs directly.
Secondly, your arguement above does not address amortization. If I were to make coins like the Mint does, I'd have decades of time to pay off my machinery and facility costs. And once I purchase the equipment to manufacture coins, I can keep doing it at negligible additional cost of durable goods. It's a one-time cost that I can spread out over the life of the equipment. So if I keep using it for, say, 40 years, the $/coin gets lower and lower.
One could crunch a whole bunch of numbers trying to reverse engineer the Mint's fiscal records. I will instead try to determine a reasonable maximum cost to produce a penny.
So, what we want to know is the cost per penny.
First, let's find the cost. The only cost to the taxpayer of Mint operations, which is the number we're really concerned about here, can come only from the Treasury's budget allocation from Congress. We'll assume that the Mint's total expense to us the taxpayers is represented by that figure, omitting all the other financial details that might help contribute to that number.
The cost is represented by how much money the Mint gets from Congress each year. We start out with $11.60 billion, which is the whole US Treasury Dept.'s budget allocation for 2007, same as it was in 2006. Subtract out the $10.591 billion going to the IRS, and that leaves $1.009 billion for other Treasury departments. Let's assume that's all going to the Mint. In reality, it's shared further by other agencies reporting to the Treasury, but let's assume the Mint's hogging it all. (These numbes are courtesy of the 2007 Presidential budget proposal found at You must be logged in to see this link. and I'm assuming 2007 is comparable to 2005's proposed bidget.)
So, COST = $1.009 billion
Now the easy part, the number of pennies. In 2005, the Mint produced approx. 15,700,000,000 coins. (Number courtesy You must be logged in to see this link.)
Let's start with the cost per coin:
$1.009 billion / 15.7 billion coins = $0.064
But that's too easy on the Mint. We wanted to know the cost per penny. Let's assume they slacked off and made nothing but pennies that year. That way, they can only divide the operating costs among the pennies they made, forcing the cost per penny up. In 2005, the Mint made approx. 7.700,000,000 pennies (You must be logged in to see this link.).
So we get the cost per penny:
$1.009 billion / 7.7 billion = $0.131
That's the reasonable limit to how much a penny can cost to produce. Thirteen cents is a far cry from the "hundreds of dollars each" that you assert.
The assumptions I've made above have been conservative, in the direction most damaging to the Mint's cost per penny. One could also attack the government data, either the budget data or coin production, as being suspicious. But such an exercise won't tell us anything useful. If you don't even know how many pennies there are, why bother calculating the cost per penny? Isn't the lack of honesty in government reporting troubling enough? |
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just carl
Penny Hoarding Member
USA
601 Posts |
Posted - 01/04/2007 : 20:36:15
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Great statistics. However, I am still a pessimist when it comes to our government releasing of information. As noted however, much of the items have been paid for in the past and I'm sure none have been updated in the last 100 years. I'm not worried about the cost of any of our denominations, it was just a thought as to how things are done in different circles.
Carl |
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Metalophile
Penny Collector Member
USA
320 Posts |
Posted - 01/05/2007 : 00:26:42
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If you take the US Mint's word at face value, the 2004 US Mint Annual report says that they returned $665 Million to the General Treasury. (before protection costs). After perusing the report it seems they do not receive any General Treasury funds. Seingorage and Numismatic sales are sufficient to give them an overall operating "profit" See the link at: You must be logged in to see this link.
On page 19 it says that protection costs were $38 million.
In the report they say that in FY 2004 the cost of producing and distributing a penny was $0.0093. They say this does include both raw metal costs and other fixed costs, administration, transportation, and labor.
I wonder why they haven't released an annual report from 2005 or 2006 yet? At the very least the rising costs of copper, zinc, and nickel have trimmed their "profit" by about $75 million per year.
Metalophile |
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just carl
Penny Hoarding Member
USA
601 Posts |
Posted - 01/15/2007 : 19:01:21
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Not to be to much of a pessimist, but I jsut do not believe most of what our government releases as docomeentation for general usage. I'm just to much of a reader in books like 1984. They will always let you believe what they want you to believe.
Carl |
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The possible real cost of a cent
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