As you may have read in my previous columns, I dislike the poor state of the railways in this country and I dislike the endless mischaracterizations of Europe by politicians on this side of the Atlantic. I think the laws on alcohol over here are out-dated and that the USPS shouldn’t be left to die.
The emotion I may reserve for those topics—while great—is nothing compared to my unbridled hatred for something that many of you might not even consider deserving of attention: the penny.
Now, I should make it clear that there isn’t anything intrinsic to pennies as objects that make them worthy of anyone’s ire—after all, they are little more than discs made out of an alloy that is a trifling 2.5 percent copper (the rest is zinc). But the relatively low price of zinc cannot compensate for the fact that it costs 2.4 cents to make a single penny.
As recently as 2007, the worth of the metals that make up the coin was so much greater than the face value of the one-cent coin itself that the U.S. Mint had to issue orders making it illegal to melt them down.
Meanwhile, the production of pennies continued unabated: in 2011 alone, the mint produced over five billion pennies, at a cost of nearly $120 million, to produce less than $50 million of currency.
The increased costs of copper and zinc have prompted the Treasury (of which the U.S. Mint is a part) to consider alternative metals and alloys that would make the penny less expensive to produce. It is certainly heartening to see a government agency taking such a logical approach to cost cutting, although this fails to recognize that the penny’s continued existence makes little economic sense.
Currency serves to facilitate the exchange of goods and services and, according to Harvard Professor of Economics Greg Mankiw, “the penny no longer serves that purpose.” You can’t buy anything with a penny alone and you can’t use them at most tollbooths, vending machines or the majority of parking meters.
This leaves you with the option to take them to a CoinStar kiosk, which are machines that exist for the sole purpose of helping people rid themselves of coins, especially pennies, that they just don’t need.
For the supposed convenience of getting what is your money and converting it into what is the same amount, CoinStar (and similar companies) usually take a cut of around 9.8 percent.
That said, pennies are still legal tender, so nothing is stopping you from taking hundreds, if not thousands of the fiendish orange-colored coins with you when you next go to the supermarket.
However, I have my doubts as to whether Hannaford would be willing to accept the 314 pennies that you would need to cover the cost of a bag of Jolly Ranchers, including tax.
Instead, you’ll probably hand over a five-dollar bill and dread that moment when the cashier hands you (if not a nickel plus one cent) a nice collection of six pennies, which will likely end up at the bottom of your pockets or in a jar.
If the purpose of currency is to help the economy “move,” then the penny is doing a pretty poor job of it.
Eliminating the smallest unit of currency is by no means a novel idea: Australia, New Zealand, the Netherlands, Finland, Switzerland and even the U.S. have, at some period in their history done away with coinage that had drifted into irrelevance.
The last time the U.S. got rid of a coin was in 1857, when production of the half-cent was stopped, even though the value of the coin in 2012 dollars was equivalent to 12 cents.
Canada stopped minting its penny just a few weeks ago. Our northern neighbor is expected to save $11 million per year as a result of this change.
Even the U.S. Armed Forces agree that the penny isn’t viable and has phased out its use on bases around the world, preferring instead to round prices to the nearest nickel.
No country that eliminated its equivalent of the penny saw big changes in consumer prices—the same can be assumed of the United States. Most importantly of all, were the U.S. to do away with the one-cent coin, it would save $100 million over the course of 10 years. This may not seem like much, but in times of economic hardship like these, every little bit helps.
President Obama recently said that he was open to the idea of eliminating the penny. He admitted that emotional attachment to the cent—a recent survey found that two-thirds of Americans were opposed to getting rid of the coin—would likely hamper its removal from circulation.
For now, sadly, the penny will likely endure. And for the time that it remains, it will stand in my mind for the failure of people to let common sense prevail.
Correction March 1, 5:41 p.m.: pennies are 2.5% copper and 97.5% zinc, not 95% copper and 5% nickel.