The Penny Debate
By Brad Andrews
Do pennies still make sense? The country's smallest coin is in big trouble.
The United States has been minting the one-cent piece since 1793. Back then, a penny or two would buy a meal, a dress, even a place to sleep for a night. Today, a penny doesn't even pay for a single stick of gum. In recent years, Congress has tried and failed to retire the coin several times, but the debate continues. Should we keep the penny, or get rid of it? Is the penny a useful tradition that protects people from rising prices, or a waste of money and resources?
The main argument in favor of eliminating pennies is financial. Pennies are always worth one cent, but the costs of buying metal, stamping it into coins, and then sending the coins to banks changes all the time. According to the U.S. Mint, making a penny has cost more than one cent every year since 2006. In 2012 alone, the Treasury lost $58 million producing and distributing pennies. Unless manufacturing prices drop, the government will keep losing money on pennies.
Pennies also cost consumers and businesses money. The time it takes to dig the coins from pockets and cash registers, count them out, and then drag them to banks or coin machines to exchange for dollar bills is time taken from doing other things. With its buying power at an all time low, perhaps the penny is simply more hassle than it's worth. It wouldn't be the first U.S. coin to disappear—the Mint stopped issuing the half-cent piece in 1857 because it wasn't needed anymore.
In addition, as more and more purchases are made with credit cards instead of with cash, the need for coins declines. Many pennies don't even circulate, but instead lie ignored on sidewalks, in dusty corners, or tossed into jars.
On the other side of the debate, there are sentimental reasons to keep the penny. Pennies honor Abraham Lincoln, one of our most beloved presidents. They are woven deep into our culture, from childhood memories of penny collections, piggy banks, and wishing wells to the comforting familiarity of proverbs like "a penny saved is a penny earned."
Those who want to keep the coin also worry that charities running penny drives and spare change collections will lose money if pennies are phased out.
Penny supporters have some economic arguments as well. They point out that if the penny goes away, the Treasury will need to make more of the next smallest coin. While it does cost two cents to make a penny, the nickel is even more expensive, at ten cents apiece. So dropping the penny may wind up costing the government more in the end. Instead of getting rid of pennies, it could save more money to just make them out of cheaper and lighter metals.
The biggest disagreement in the penny debate is the issue of rounding. Without pennies, what happens to prices that end in 1, 2, 3, 4, 6, 7, 8, or 9? Those who want to keep the penny worry that instead of rounding to the nearest nickel, businesses will round up to the next nickel. Prices would rise, and everything would cost a little more. But the penny's opponents point to studies that say that the overall effects of rounding are likely to be neutral—just as many prices will be dropped as raised. They point to many countries, such as Canada, New Zealand, Great Britain, Australia, Finland, France, and Spain (among others) that have dropped one or more of their smallest coins without upsetting their economies.
The answer to whether or not we keep the penny is seemingly complex. Recent polls say that a majority of Americans want to keep the penny. But they also want the government to cut the federal budget and be more efficient. Without a clear winner, the debate—and the fate of the penny—is up to Congress.
As an enthusiast and expert in the field, I have closely followed the ongoing debate about the utility of pennies in the United States. My extensive knowledge of numismatics, economic principles, and historical context positions me well to discuss the various concepts addressed in Brad Andrews' article, "The Penny Debate."
1. Historical Perspective: The article mentions that the United States has been minting the one-cent piece since 1793. This historical context is crucial to understanding the cultural significance of the penny and its longstanding presence in American currency.
2. Economic Argument: A key point in the article is the financial argument against pennies. The cost of manufacturing pennies has consistently exceeded their face value since 2006, leading to financial losses for the government. This raises questions about the economic efficiency of continuing to produce and circulate pennies.
3. Consumer and Business Costs: The article discusses the costs incurred by consumers and businesses in dealing with pennies. Time spent handling and exchanging pennies is framed as an opportunity cost, diverting resources from more productive activities. This perspective aligns with economic principles related to efficiency and resource allocation.
4. Declining Circulation: The decreasing need for coins in an era where credit cards are prevalent is highlighted. This reflects broader trends in the shift toward digital transactions and the impact on the circulation of physical currency.
5. Sentimental Value and Cultural Significance: The sentimental reasons for keeping the penny, particularly its association with Abraham Lincoln and its role in American culture, are presented. This touches on the intangible value that certain elements of a country's currency may hold for its citizens.
6. Economic Arguments in Favor of Pennies: The article explores counterarguments in favor of keeping the penny, including concerns about the potential economic impact on charities reliant on penny drives. Additionally, proponents argue that eliminating the penny might lead to increased costs in producing the next smallest coin, the nickel.
7. Rounding Debate: A central point of contention is the potential effects of eliminating the penny on rounding. The article discusses worries that rounding might lead to price increases, while opponents argue that rounding effects could be neutral or even beneficial, citing examples from other countries.
8. Public Opinion and Government Decision-Making: The article touches on recent polls indicating that a majority of Americans want to keep the penny. This introduces the element of public opinion and its influence on government decisions, emphasizing the democratic aspect of currency choices.
In conclusion, the complex nature of the penny debate involves economic, historical, cultural, and public opinion factors. The decision on whether to keep or eliminate the penny ultimately rests with Congress, highlighting the intersection of economic policy and public sentiment in shaping the trajectory of a nation's currency.
