Should the penny be retired? It's been our smallest-denomination coin for 150 years. But if people are leaving pennies at the cash register, is it time to get rid of them?
Inflation has so eaten away at the value of the penny that it is no longer useful: It is simply a nuisance.
The penny has been our lowest-denomination coin since 1857, when the halfpenny was retired. (At the time it was retired, the halfpenny was worth more than the equivalent of a dime today.)
Pennies are now worth so little that people often don't pick them up off the street, despite the lucky-penny adage. As Harvard professor of economics Gregory Mankiw points out, "When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful."
But what harm is caused by continuing to mint the penny? First, it's a waste of time. Most cash transactions involve the exchange of pennies, and this increases the time it takes to complete them.
Second, minting pennies is a waste of money. The U.S. Mint produces about 7 billion pennies a year at a cost of $100 million. Pennies are made of copper and zinc, two metals that have recently soared in price. Because of the high value of those metals, a penny is worth more melted down than as U.S. currency. (In fact, the Mint recently announced that it's illegal to melt down the penny.)
A simple way to retire the penny would be to round each cash transaction to the nearest nickel. Similar reforms have been successful in other countries, including Australia and the Netherlands. The U.S. might have already made similar changes if not for lobbying by the zinc industry to keep the penny in circulation.
The penny has outlived its usefulness. Let's retire it.
--Jeff Gore Citizens for Retiring the Penny
Abolishing the penny would hurt both consumers and the economy.
The alternative to the penny is rounding transactions to the nearest nickel. But that will make goods and services more expensive.
Since the objective of any business is to maximize profits, most prices would be rounded up--and research suggests that consumers would spend an additional $600 million a year as a result.
Inflation from rounding up would in turn have a significant impact on government spending: A report by an economics professor at Penn State estimates that abolishing the penny would result in an extra $1 billion in government spending over five years, since payments from many government programs are tied to inflation.
Opponents of the penny argue that no one will miss the penny since few people use cash anyway. But the majority of purchases of $10 or less are still made with cash. Many low-income Americans don't have bank accounts or credit cards. Rounding would hurt all Americans, but the poor and other disadvantaged people would be disproportionately affected.
Abolishing the penny would not save the government money. Without the penny, the U.S. Mint would produce more nickels. Due to soaring metal prices, the nickel costs almost 10 cents to produce. Spending more money to produce more nickels is no way to save money.
According to a recent poll, more than 70 percent of Americans support keeping the penny in use. There is no need to abolish the penny, especially when the change would hurt consumers and the economy.
--Matthew J. Eggers Americans for Common Cents
Earl Henderson (Member): Penny or No? 6/24/2008 12:07 PM
I believe the penny should stay, and Jeff Gore has proven it. Even though he's opposed to keeping the penny, he quoted the Harvard professor of economics, Gregory Mankiw. The quote states that, "When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful." The key word is "useful". If I leave something for someone else, and that someone else uses it, does that make it useful? I believe so. I have yet to see a "Leave a Penny, Take a Penny" overflowing with penny's? I haven't, so obviously people are using them. How often do you eat out and leave all the change you receive after you pay as a tip? Does that mean all the coins are not useful as you are essentially leaving them for the next person (waiter or waitress) to use.
Secondly, how much does it cost to mint the dime, quarter, half dollar, and dollar coins in comparison to their value? Even if the penny and nickel cost more to produce, they all come out of the same company's budget. That company also produces all the other coins as well, and they cost a lot less to make than what they are worth. You should read up on the principals of "loss leaders".
Thirdly, Mr. Gore also states that "Most cash transactions involve the ex
Cory J (Member): Retire it! 12/2/2008 4:32 PM
The "keep the penny" side seems to be laboring very hard to conjure up reasons to keep it. A quick bit of thought is all it takes to smash their arguments to pieces.
"Prices Going Up": First, what research? Your own calculations? Let's see some real citations here, man. Second, prices won't be rounded up. They will be rounded to the NEAREST 5 cents. The proposed legislation specifies the rules of rounding. Third, following your line of reasoning, companies could simply raise prices, without the need for rounding, in order to maximize profits. In actual fact, the laws of supply and demand aren't being repealed, so prices are pretty much going to stay constant.
"Government spending": One report from an unnamed "professor" does not lend well to an argument. Let's have a name, and a source, shall we?
"More Nickels!": Do some math, will you? Show me a study where it says it will take more nickels. As it happens, a simple 10000-row spreadsheet, where each row sets a random amount for the cent portion, and which figures out the coins needed, both WITH the penny, and WITHOUT the penny, clearly demonstrates that there will be NO MORE nickels, NO MORE dimes, and NO MORE quarters. The only thing to change will be a slight increase in dollar bills. That's it. Re-randomize, same result, again and again.
"Penny still useful": It is only "useful" because current law makes it required. That's circular reasoning. Take away the requirement, and suddenly it's no longer useful. The fact that you don't see them overflowing is not evidence of its value, it's evidence of a desire for many customers to remove the penny from the transaction altogether.
"Loss Leaders": LOL. Do you even know what you are talking about, Earl? The "company" you speak of is actually the U.S. Treasury. But please, do tell us about the concept of loss leaders in this context.