The short answer is no—or at least, not yet. The U.S. Mint has no plans to discontinue the penny, and such a move would require congressional approval. However, the “Penny Debate” continues in the United States, with pro- and anti-penny advocates both making some pretty solid points in their arguments.
We thought that you, like us, might be wondering: why do people want to eliminate the penny? What would happen if the penny was withdrawn from circulation? What would we pick up for good luck? Continue reading to find out!
Why do people want to discontinue the penny?
The penny has what we money geeks call “negative seigniorage,” meaning that its value is less than what it costs to produce it. In fact, it costs about two cents to produce a single penny. Inflation can cause negative seigniorage over time, with costs increasing for raw materials, labor, and distribution, to name a few. Estimates from numbers in the U.S. Mint’s annual report extrapolate that taxpayers lost about $85.4 million from penny production in 2018. In short, a penny just isn’t worth what it used to be.
The U.S. isn’t the first country to encounter this, and in fact, the U.S. has already withdrawn a low-value denomination coin from circulation. In 1857, the U.S. discontinued the unpopular half-cent coin due to the rising cost of copper. Canada withdrew its penny in 2012, Australia stopped minting its one- and two-cent coins in 1991, and Switzerland withdrew its single Rappen in 2007.
What would happen if the penny were discontinued?
We can only speculate what the effects might be if the penny goes away, but it would definitely be a big deal. Here are a few of our thoughts on what might happen:
- They likely would continue to be accepted as legal tender. Countries that have eliminated lower-value coins such as Canada and Australia still accept pennies as legal tender for transactions. Pennies can also be exchanged for their face value at financial institutions. And yep, you guessed it—consumers can still exchange Canadian pennies in our Coinstar machines in Canada.
- Prices would need to be rounded up or down. Penny advocates argue that eliminating it would impose an additional sales tax on consumers and drive up inflation. In 2012, Chipotle tried this at a few of its locations in New York and New Jersey—using a computer algorithm to round receipts up or down to the nearest $0.05 until customers complained. However, they didn’t stop the practice, they simply decided to round all receipts down, which brings us to our next point…
- Eliminating the penny might save time in the checkout line. A study conducted by Walgreens and the National Association of Convenience stores found that having to handle pennies adds as much as 2.5 seconds to each cash transaction. And just like the penny, that might not be much, but when you put them all together, it starts to add up. The anti-penny advocate group Citizens to Retire the Penny claims that handling pennies wastes 120 million hours of time per year in cash transactions with customers and retailers.
- Charities will have to rethink penny drives. Penny drives are a common fundraising activity for charities like Ronald McDonald House. Most people are happy to give pennies away since they are perceived as valueless or hard to spend. While taking pennies out of circulation may seem like a losing proposition for these organizations, it may wind up being a great opportunity. In Canada, the Salvation Army launched a campaign in conjunction with the Canadian penny’s retirement, providing people a place to unload their pennies in bulk.
There are two sides to every coin
Only time will tell whether the penny will stick around long into the future. While it’s the least logical of any arguments in favor of keeping it, people like pennies because of a sense of nostalgia (or admiration for Abraham Lincoln). In a 2014 Google Hangouts chat, President Barack Obama recalled warm feelings surrounding childhood memories of saving pennies in our piggy banks and buying penny candy at the general store.
In conclusion, the penny is here to stay. And as coin geeks, we’re grateful for that.
As a numismatic enthusiast with a deep understanding of the intricacies of currency and coinage, I can provide valuable insights into the concepts discussed in the article. My expertise extends to the historical context, economic principles, and global trends related to the production and circulation of coins, including the ongoing debate about the discontinuation of the penny.
The concept of "negative seigniorage" is a key element in the article. Seigniorage refers to the profit that a government makes by producing currency. Negative seigniorage occurs when the cost of producing a coin exceeds its face value. In the case of the penny, the production cost of approximately two cents is greater than its one-cent face value. This phenomenon is a result of factors such as inflation and rising costs of raw materials, labor, and distribution.
The article also touches upon historical precedents set by other countries in discontinuing low-value denomination coins. For instance, in 1857, the U.S. discontinued the half-cent coin due to rising copper costs. Similarly, Canada withdrew its penny in 2012, Australia ceased minting its one- and two-cent coins in 1991, and Switzerland withdrew its single Rappen in 2007. These examples illustrate that the challenges associated with low-denomination coins are not unique to the United States.
The potential consequences of discontinuing the penny are discussed in the article, and it speculates on various outcomes. Notably, the article suggests that pennies might continue to be accepted as legal tender even if they are no longer minted. Countries like Canada and Australia, which have eliminated their lower-value coins, still accept them for transactions, and financial institutions exchange them at their face value.
The article also delves into the economic implications of rounding prices if the penny were eliminated. Advocates for keeping the penny argue that rounding prices could lead to additional sales taxes on consumers and drive up inflation. Additionally, the time-saving aspect of eliminating the penny at checkout lines is explored, citing a study that found handling pennies adds time to cash transactions.
Furthermore, the article discusses the impact on charitable activities, particularly penny drives, which are common fundraising initiatives. While penny drives may seem less viable without the circulation of pennies, the article suggests that it could present an opportunity for innovative campaigns, drawing parallels with the Salvation Army's initiative in Canada during the retirement of the Canadian penny.
In conclusion, the article highlights the multifaceted nature of the penny debate, incorporating economic, historical, and practical perspectives. It acknowledges that sentiments of nostalgia or admiration for historical figures, such as Abraham Lincoln, contribute to the enduring popularity of the penny despite its practical challenges. The intricate details provided in the article reflect a comprehensive understanding of the complexities surrounding the fate of the penny in the United States.
