Should the Penny be Retired?
Tuesday May 13, 2008
Ever since the lower house of Congress passed a bill last week mandating a change in the composition of the U.S. penny coin, the debate around coin collecting circles has been about which substances the Mint is likely to use. Note that I didn't say metal... The debate about coining material includes the obvious candidates like steel and aluminum, but it also includes space-age composites like ceramic and high-density plastics. But really, are we even asking the right question here? Shouldn't the debate be more about whether we need the penny at all anymore, rather than about what substance to make it out of?The issues for and against continuing to produce the penny are emotional, thorny ones. After all, if the solution was simple, we would already have acted decisively, either passing a bill that mandates the penny's manufacture for another quarter century or so, or passing the bill that ends the circulating penny entirely. And don't be so sure that if the penny comes to end, that the U.S. Mint will continue striking them for mint sets and collectors. It's one thing to mark up a roll of 25 Presidential Dollars by 44% (and make an $11.00 profit,) but what is the Mint going to do with a roll of 50 pennies? Sell it for 22 cents over face value? ;)
Anyway, I did some research into the pros and cons of the penny debate, and have come up with a summary of the arguments involved on both sides. Take a look at both sides of the penny issue, and then share your thoughts via the "comments" link below.
Photo courtesy of CoinPage.com
Comments
I strongly believe that the penny should be retired, along with the paper dollar, although that is a separate item of debate.
I would disagree with two of your arguments: first, there is no reason to believe that the elimination of pennies would cause a substantial increase in the need for nickels. For example, if someone wants to give you 17 cents change, they now must give you a dime, a nickel, and two pennies. If that is rounded up to 20 cents, they give you two dimes. If they round down to 15 cents, they give you a dime and a nickel. So in one case they require less nickels, and in the other there is no difference in the number of nickels.
My other critique is the assumption that prices will be rounded up. Retailers don’t like round numbers. Someone who currently prices an item at $19.99 is more likely to change the price to $19.95 than to $20.00.
As you pointed out, when the half cent was retired as unnecessary it had the purchasing power of 11 cents today, and people did just fine. We should be debating whether to retire the nickel and the dime as well, not whether the penny serves any useful purpose. Eliminating the penny is a no brainer.
Then again, switching to the metric system would also be a no brainer, as every other country in the world except for Burma (Myanmar), Liberia, and the US has realized, and I don’t see that happening very fast either…
First nickels should be re-evaluated on size, material make-up, expected longevity and then issued. Then pennies should be retired. They are worthless in the marketplace.
The penny is the biggest single indicator as to how out of control our government is. It is a wonderful indicator as to how much inflation is affecting us all. Government loves inflation because it creates a great source of hidden taxation. We need to continue having the penny so we can all feel how much uncontrolled government is affecting US.
It goes back to the question of how do you boil a live frog? Obviously the pot (inflation) is getting too hot for us frogs to remain in the pot, so let US just discontinue the penny to make to make the pot not seem so hot.
get rid of the penny, nickel, dime, and dollar bill.
Get rid of free speech, voting, the Constitution and all the other stuff dead white guys faught for a little over 200 years ago.
beautiful penny, one of my favorites. it is considered to be masterpiece of mintage industry (it’s kind). i definitely sugest to keep it.. thanks for posting this article..
i saw another article on the same subject on dig4coins.com about pennies, nickles, eagle coins.. there are also many interesting facts..
if someone would like to read it - welcome..
dbtuner, I do not follow your “argument”. You seem to equate the elimination of a coin that is worth one tenth as much as the half cent that was eliminated a century ago with some attack on our fundamental freedoms. How does this follow? Shall we bring back spitoons, slavery, and powdered wigs as well?
Bill, how does eliminating the penny make the pot seem not so hot? Gas costs $3.60 a gallon whether you pay for it in pennies or not. In fact, many things can’t be paid in pennies. Parking meters won’t take them, toll booths won’t take them, soda machines won’t take them. Simply a waste of metal that steals a few hours of time each year from consumers, adds a bit more to the deficit, and drives up copper and zinc prices.
The argument is similar to the frog in pot of water where the heat is turned up slowly.
Ron Paul said we can’t even stay on the Zinc standard because our currency is being debased. When the first US coins came out in 1792 until 1913 there was no inflation. Something that cost 10c in 1792, by and large, cost 10c in 1913.
Sure there were some times of price fluctuations like wars and depressions, but prices reverted back to their norms.
Imagine being able to save for your future knowing that $10k would be worth $10 50 years from now.
A penny isn’t worth anything because we accept that lies coming out of the government re inflation statistics. “I have had enough and I’m not going to take it any more.”
Lets get rid of the 500+ corrupt boneheads in Congress and Senate and keep the penny instead.
Don’t start the revolution without me!! Good book, BTW
Once again, you argue with a non-sequiter. You can argue that the boneheads in congress should be replaced because they have allowed the currency to be debased, but that does not change that fact that the currency has been debased to the point where a penny is worthless.
One can keep congress and eliminate the penny, replace congress and keep the penny, replace both, or keep both. I don’t need to carry around worthless pieces of scrap metal (or precious examples of the pinnacle of the minter’s art) to know that things cost more than they did.
I don’t see how anyone is “forcing” you to carry around pennies. Use a credit card or leave the pennies. It’s your choice.
The key word being “choice”. That’s what democracy is about.
dbtuner, I “choose” to suggest that congress stop wasting money minting pennies. That is called “democracy” and “free speech.” I do not see how this impinges on anyones “freedom”. Generally, libertarians applaud measures that decrease wasteful federal spending. It would also obviate the need for laws “banning” the melting of coins whose intrinsic metal value is greater than their face value, laws I assume you would also oppose.
Great. We have a $3T budget, almost $1T in unfunded liabilities per year, and yet we grasp at $100M from a gov’t agency that actually makes a profit.
Way to keep your eye on the ball.
I propose a legalization of melting copper pennies to support the shortages of copper materials. Copper is on the rise meaning there must be a need for such metals. Legally (keyword) melt all those copper pennies stored in jars, old socks, and pillow cases will bring copper back into production of other things, and will profit those who had the vision to save them. Looks like a win-win situation to me.
Another non-sequiter, dbtuner. If spending $100 million or so here helped reduce deficits elsewhere, fine. It does not. The fact that the mint makes a profit is also irrelevant. If they eliminate the penny and make a larger profit, the deficit will be less.
So I suggest it is not me that refuses to keep my eye on the ball. The “ball” in this case is whether minting the penny is worth the trouble. I state that it is not, and you try to change the subject to the overall failings of our government.
Oh, and if you do wish to convert our coinage to gold and silver, which would you prefer, a 0.6g silver penny or a 0.03g gold penny?
As far as i remember, it’s already been amended as to how our coinage system would work. In tenths. Congress worked it out a couple hundred years ago. If that’s the way it is, they can work the numbers down. No way they can work in the opposit direction without amending the constitution. Remember what happened when the godless dollars were discoverd?
What a fire storm that errupted, and it was a simple mint error. A mistake not caught in time. People are living with over blown fears about too much government as it is. Regardless of the cost of minting pennys, that couldn’t compaire to what might happen if congress were to do away with the penny. Not just in this country. Other nations would view us as weakening and trust our currency even less which comes back on us again. Alot of foriegn money invested here in our country, buying our debt, scare them away, it will be us picking up the pieces. With no one here willing to invest in an already shakey economy, with falling currency. It can’t work now, it won’t work in the near future.
Another thought — opinion.
coiny
coiny, are you seriously arguing that others will lose confidence in our currency if we stop minting pennies? I would think that the exchange rate between dollars and euros or dollars and yen would give them ample evidence to what it is worth.
I don’t think that foreign investors deal too much with minor US coinage. And as Susan has pointed out, other countries such as New Zealand have eliminated pennies without catastrophe.
It could be argued that if americans as a whole lose confidence in our currency, becuase we cannot balance our budget. And since our coinage has been debased to almost worthless, like paper printed dollars, which are basicly worthless paper. We start doing away with our heritage. It might look like we are folding up camp. And heading for the hills. I can’t say for sure what the out come would be. No crystle balls here. And besides, how many other countries have done away with their pennys lately? Don’t look like to many. As of now. Why should we follow what other countries do. We do what’s best for us. If congrees decides the penny has to go, then it will go. But so will a couple hundred years of american hertitage. Regardless of exchange rates, there is more to it than numbers. In all honesty, that would be another hidden tax on american tax payers. And add to inflation. I don’t think that foriegners are that stupid that they couldn’t see that we are in trouble, when we have to lock step with the rest of the world. We’ll have to find a way to keep pennys in circulation. With out screwing up our monetary system the way it is now and has been since it’s inception.
Just one more opinion.
coiny
gdnp: In case you would like to know what is behind my reasoning for being in favore of keeping the penny in circulation. Here is why. Do away with the penny and the nickel. By the following day, you just lost a 1,000% of your purchasing power. Pennys add up. They may not have much purchasing power as a stand alone coin. Put a billion pennys together, i’d glady put them in my savings account. Not to mention the inflation rate would jump a 1,000% over night. I don’t know how Newzeland did it. I know it would be a castastrophy here in the U.S.A.
That’s my reasoning for my arguement in this debate.
coiny
coiny: I am having a bit of trouble following your reasoing. Inflation last year was in the 3% range. This year I am sure it is higher. This is in large part due to the devaluation of the dollar, brought on by a combination of chronic US trade deficits and low US interest rates. Let’s say current inflation is 5%. Are you arguing that elimination of the penny would make the inflation rate go to 50% (a 1000% increase?) In other words, a car that costs $20,000 this year will cost $30,000 next year if we eliminate the penny? Why should the presence or absence of a penny have any effect on the price of a car at all?
Elimination of the penny should have little or no effect on inflation. For example, gas is priced, for historical reasons, in 10ths of a cent per gallon. Does the lack of mils in circulation affect the amount you pay for a gallon of gas? Not at all. It is simply an advertising ploy.
When i said we florished as a nation after the mill disapeared. That is because of inflation. That we florish. Yes, i’m saying you cut out the penny and nickel, you effectivly up set the balance in our economy. Ok … you might not see car prices go up any more next year, after the demize of the penny, AND nickel, to round it off to the nearest 10-th. You’ll see the things you pay for get more expensive. For every penny or nickel you lose in purchasing power, adds up over time. Think about it. On the surface it dosen’t look like it would affect anything. When there is no more 9.95, or any 99 or 95-s anywhere, you must make up the difference out of your pocket. So you didn’t save a penny on your purchase right? No big deal! You didn’t save a nickel on that other purchase? No big deal! And over time, you have lost purchasing power because? you have lost the ability to save. Instead of pocketing the savings you got saving a penny here or a nickel there does add up over time. It eats away at what you could have pocketed, versus now having to shell out more for any items you buy. You don’t see that? As the same thing happens to you, so does it happen to everybody, including manufacturers, who then have to pass on the extra cost to consumers. And there is where inflation rizes. But now it goes up faster … we have taken away any buffer for savings we had by removing it. Over time that car will get more expensive after the costs for producing it have been passed along. It works the same way with the rising costs of energy. You have less to spend because you have less left over after paying for the higher gasoline costs, as every body else is paying, as those higher costs get passed along. That is an anaolgie in the sense of push inflation. That’s is what is happening now with energy costs. Remove any buffer to savings, you add more fuel to push inflation, to maybe runaway inflation. Then instead of paying 30,000 for that car, it may cost you a 120,000 in a few years as it tickles down through the economy. That’s the way i see it. You see it another way. I for one, don’t want to see that happen. Times are tough enough for most, as it is.
coiny
BTW gdnp. When i said that was just another hidden tax. Most every state has a sales tax now. The sales ploy that works, also saves you money. When you lose that extra penny and 5 cent piece. You have to pay more sales tax now. Out of pocket for every purchase you make. Some will get the chance to write it off their taxes. Most won’t. I know! it isn’t much now. Through the years it will catch up to your savings, and errode to nothing. It’s about that way already as we speak. So 30 years from now, you could end up in the hole. I’m not trying to convince you of what can happen. I’m telling you what i see happening, taking away the lowly penny AND nickel.
coiny
Coiny, What you say might have some validity if we commonly bought things that cost a few pennies. We don’t. Last I checked the gumball machines now require at least dimes, maybe quarters.
If a loaf of bread that costs $3.89 goes to $3.90 because they do away with the penny, how much have I lost? About 1/4th of 1%. At a historically modest 2% rate of inflation, the same loaf of bread will cost 8 cents more next year regardless of whether we eliminate the penny or not, and another 8 cents the year after, and so on. So any increase in inflation caused by eliminating the penny would be both trivial and a one-shot deal, whereas inflation is likely to continue indefinitely.
(A high rate of inflation is bad, but there are economic reasons that a low positive rate of inflation is actually preferable to deflation, or falling prices. When prices are falling no one buys because they know the longer they wait the lower the prices will be. Look at the current housing market. Economic activity tanks, production ceases, people are laid off, demand falls further, and depression ensues. Prior to the 20th century deflation was actually a larger problem for the economy than inflation.)
The sales tax rates are a non-issue. Some states charge 6 1/2% even though we don’t have half pennies. Everything just gets rounded off. When the NJ sales tax was 5% anything up to 10 cents had no tax, 11-30 cents was charged a penny, 31-50 cents 2 cents, and so on. If the penny were eliminated, then anything up to 50 cents could have no tax, 51 cents through $1.50 5 cents, $1.51 through $2.50 10 cents, and so forth. Neither tax rates nor total sales tax revenues would have to change at all. So the net effect to the economy of eliminating the penny would be nil, and compenstated for by the time saved by people not having to deal with pennies.
db, First guy shot that started the whole revolution … was a black guy.
gdnp, It’s very hard to say what could happen untill it happens. I stand by my thoughts on the subject, but open to possibilitys on all sides, can’t say it’s an absolute, when one dosen’t know the full out come till after the fact. I find it scary, especially now. The ONLY way that could work, is to try it on for size first. If it don’t, you must remitt.
And New Zealand! What’s their GDP? About what RI. makes in a year? If RI. has a deficit, we don’t bat an eyelash, that’s because the whole country has one!
coiny
I’m not sure this discussion is going anywhere. I present arguments of why I think your reasoning is faulty, and you say you still believe it. So be it. You have the right to believe what you want.
Eventually, the price of the penny will become low enough that people can melt them profitably, and the US will be forced to either eliminate the penny or switch to a cheaper metal like aluminum. Eventually, even with inflation in the single digits, the value of the aluminum will exceed the value of the penny, and they will be forced to eliminate the penny or switch to paper or plastic. Or I suppose we could continue to make pennies whose melt value is higher than their face value and then waste even more money hiring T-men to hunt down the people who decide to make a living melting pennies for a profit.
gdnp: You don’t have to convince me! If my reasoning is faulty, that has yet to be proven. I lived through the era of push inflation because of price restraints put on businesses to stop inflation by controling prices. Instead of stoping inflation. Inflation took off like a rocket once the controls were lifted. I’m looking at this in the same way. The feds have lost control again. Who woulda thunk the lowest of metals, steel would become an issue. That by minting steel pennys, that will drive up the price of steel, because of it. This is not something that can be crunched with numbers. Theres a psycological reason also. I’ve never liked the phoney new pennys since they came out with them in 83. This is the way of the world. The way things are. I had to accept it as it is. Not the way i wanted it to be. I still don’t like these cheap phoney pennys. But there part of our coinage. If we remove them i still see runaway inflation ahead. Ok … that’s my assumption. It hasen’t been proven either. Since no one in government can control the costs of metals, that leaves them in a bind. I think their afraid of mass hysteria, if all of a sudden pennys go. Why would we need the nickel then? That’s not a tenth. There would be no need. It’s there basicly to lighten the carrying load from 10 pennys. And quicker change, instead of counting out 5 more pennys as you pointed out in the time savings debate. You say our inflation rate is 3% You believe that? i don’t. I believe very little that comes out of Washington as far as numbers go.
I couldn’t be happeir than to be in agreement with you. It’s just that i can’t be cuz i see things different. It does seem like a waste of time to disagree about this, but … i have too respectfully of course
coiny
It is interesting that the director of the mint just said that pennies could not be made out of paper or plastic because we have to keep the weight of the penny the same. I guess that would also rule out aluminum, which is a very light metal (and I believe cheaper, more corrosion resistent, and softer than steel, thus more appropriate for coinage). It is not clear to me why the weight of the penny has to remain constant. The weight changed in 1982 from 3.1 to 2.5 grams and we survived. (The penny has lost 57% of its value since then). And as far as I know there the only machines that currently take pennies are the coin counting machines at the supermarket. Parking meters, toll booths, soda machines all require higher denominations. Can you imagine waiting for the toll collector at the GWB to count 800 loose pennies?
Ever try to break a 50 dollar, or hundred dollah bill at a toll both? I think the toll booth guys would take my pennys faster. But seriously. No pennys allowed on the Garden State Parkway in the exact change toll booths.
And after mentioning a black carbon fiber penny, the more i think about that, the more it intrieges me. We could use them for playing checkers. Useing the old copper pennys for the red checkers.
coiny
Well if u take the penny away from circulation thats like slaping Lincoln in the face.If you think about it the population needs the 1cent coin. If you take it away then the price of everything would probably go up atleast 4cents, But i say keep the penny. Its been in circulation for years and it needs to be for years to come.