Penny Wise: Time to Kill the One-Cent Coin?
By Suzanne McGee, The Fiscal Times
President Obama dropped a bombshell in an online "Fireside Chat" Thursday that could reverberate — and shatter piggy banks — across the nation. Our commander-in-chief, it seems, wants to do away with the penny. Each one-cent piece costs 2.4 cents to mint and distribute, so the U.S. government loses money every time it puts one into circulation. The savings from eliminating the copper and zinc coins won't result in huge savings for the government, but it still makes sense, Obama says, as "anytime we're spending more money on something that people don't actually use, that's an example of something we should probably change."
Will it happen? Obama knows it's an uphill battle, in part because politicians in Washington have bigger problems to worry about, and in part because Americans remain sentimentally attached to the coins because they used to squirrel them away, counting every one, as kids. "We all remember, at least those of us of a certain age — some of you are a lot younger than me — but we remember our piggy banks and counting up all our pennies and taking them in, gettin' a dollar bill or couple dollars from them," Obama says. "And maybe that's the reason why people haven't gotten around to it."
The idea has been kicked around for years, but the incentive to do it is growing. In 2009, the U.S. government lost $19.8 million minting pennies, according to the mint's budget. The bill rose to $27.4 million in 2010, and $60.2 million in 2011. In an era when politicians and voters are demanding that Washington put its finances in order, the penny would be an easy thing to cut.
"The penny is a thing of the past," says Phil Gianficaro at the Philadelphia Daily News. In 1909, a penny could buy a postcard, say, or a few eggs, but "today it can't even buy itself."
Why do we need the penny anymore? Other than slipping one beneath a wobbly vase to steady it or dropping a handful of the copper-colored coins into the soil to increase the pH to help hydrangeas, what's the point? Who even bothers to bend down to pick one up off the sidewalk anymore? How many merchants accept handfuls of them as payment without first flashing the jingle-jangle patron a sneer? Penny candy? Today, that's nostalgic rather than realistic. [Daily News]
The penny still has its fans, though. A group called Americans for Common Cents argues in the West Milford, N.J., Messenger that the penny still offers benefits for the economy. Besides, the alternatives come with costs, too. The nickel, for example, costs 11 cents to put into circulation, and that "fixed costs associated with penny production would have to be absorbed by the remaining denominations of circulating coins."
The U.S. isn't the first country to confront the demise of its smallest unit of currency. Canada last year stopped minting its one-cent coins — in circulation since 1858, when Canada established its own currency. In the last few decades, Britain, France, Israel, and Spain, among others, also got rid of their least valuable coins. Other nations, including Australia, Denmark, New Zealand, Norway, and Sweden have phased out several of their smallest coins. "The Canadian penny has been eliminated because it is a waste of both money and time," says The Economist. "Inflation has reduced its purchasing power by 95 percent," and it's no longer good to buy anything, just make change. Once that happens, a coin "becomes more trouble than it is worth."
The same arguments apply to the United States penny, which costs 2.4 cents to make. But eliminating it would result in greater use of the five-cent coin, the nickel, which costs 11.2 cents to produce. So the American penny survives, at least for the time being. In Canada, meanwhile, coin collectors can buy a commemorative roll of 50 pennies from the last million minted for C$9.95, or 20 cents for each coin. Those last pennies, at least, have earned their keep. [The Economist]
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Suzanne McGee
Business journalist Suzanne McGee spent more than 13 years at The Wall Street Journal before turning to freelance writing. Author of the book Chasing Goldman Sachs, she has written for Barron's, The Financial Times, and Institutional Investor.