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.
