(CNSNews.com) - The federal government spends almost twice as much to make a penny as a penny is worth, according to a new report from the Government Accountability Office.
However, says GAO, the government still makes a net profit—“seigniorage,” it is called—from printing paper money and minting coins because the overall cost of producing the new U.S. money put into circulation each year remains less than its face value.
“Since fiscal year 2006, both the penny and the nickel have cost more to produce than their face value, according to our analysis of Mint data,” said the GAO.
“For example, in 2017, the Mint spent approximately 1.8 cents to produce each penny and approximately 6.6 cents to produce each nickle,” said GAO. “Because the Mint sells coins to the Federal Reserve at face value, both coins cost more to produce than the Mint receives for them.
“As a result,” said GAO, “in 2017, the Mint incurred net losses of about $69 million to produce the penny and about $21 million to produce the nickel.”
But the production of dimes, quarters and paper money more than make up for the deficits caused by the penny and the nickel.
“The dime and quarter, however, cost less to produce than their face value,” said GAO. “The combined cost to produce all widely circulated coins (the penny, the nickel, the dime, and the quarter) is less than their combined face value, so the government continues to realize positive seignorage overall from producing circulating coins.”
“The federal government spent about $1.3 billion to produce, process, and circulate notes and coins in 2017,” said the GAO report. “These costs are offset by the financial benefit the government realizes when it issues notes or coins because currency usually costs less to produce than its face value. This benefit, which is known as seigniorage, is the difference between the face value of currency and its cost of production; this difference provides a financial benefit to the government when the government issues currency.”
The net result is that the Federal Reserve and the Mint end up paying money to the Treasury.
“In calendar year 2017, the Federal Reserve reported transferring about $81 billion to the Treasury, and the Mint reported transferring about $269 million in fiscal year 2017,” said GAO.
Of the $269 million that the Mint paid to the Treasury, GAO said, “about $250 million was from seigniorage; the remaining $19 million was net income from numismatic and bullion products.”
This income created by the government making money, GAO concluded, helps reduce the federal debt.
“The seigniorage the Federal Reserve and the Mint pay into the Treasury reduces the need for the government to borrow money, and as a result, the government pays less interest over time,” GAO said.
The GAO report said that the Mint had determined that it could save money by getting rid of the penny altogether and making other coins with cheaper metal.
“The U.S. Mint estimates that it could save approximately $250 million over 10 years by suspending penny production and between $2 million and $9 million per year by changing the metal composition of the nickel,” said GAO.
“It also estimates that it could save about $74 million over 10 years by changing the metal composition of the dime and quarter,” it said.
The federal government spent $4,107,741,000,000 in fiscal 2018, according to the Treasury. That equals about $7,815,337 in federal spending per minute.
The $250 million the Mint estimates the government could save over the next 10 years by getting rid of the penny would keep the government funded for approximately 32 minutes at last year’s rate of spending.