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The debate over whether or not the United States should stop using pennies has raged on for years. Defenders of the penny argue that as long as sales taxes and retail prices continue to be rendered in cents, consumers should not stop using pennies during transactions. Some opponents of the penny suggest that retail prices and taxes should be rounded up or down to the nearest nickel, thus eliminating the need for pennies as currency. This is only the opening salvo in the Great Penny Debate, however.
Some say the United States should stop using pennies because the cost of producing the coin is now higher than the value of the coin. Even the US Mint admits that the cost of producing a penny in 2007 could be as high as 1.4 cents. Pennies are no longer made from pure copper, which would make the minting of them prohibitively expensive, but rather from zinc and a thin coating of copper. Supporters of the penny often suggest that the US government should continue to produce the coin, only with cheaper metallic alloys than zinc or copper.
The US Mint has been producing a one-cent coin since 1793, and will continue to produce pennies until an official law orders a stoppage. Several bills have been introduced to stop production of the penny, but so far none have succeeded in becoming law. Opponents of the penny suggest that lawmakers from zinc or copper-rich states have economic interests in perpetuating the minting of a coin that has long since outlived its usefulness. Even switching to the five-cent nickel, which ironically is made primarily from copper with a zinc coating, would still not be cost-effective, since production costs of a nickel may reach 7 cents.
Other arguments against the penny include the added cost of processing rolled pennies, the additional time required to make change with pennies and the lack of vending machines which accept the coin. Those who say consumers should not stop using pennies suggest that rounding up taxes or prices would in itself be a form of tax hike. Pennies do have some nostalgic value for many people, and eliminating the coin altogether might prove more disruptive to the economy than anticipated.
Other countries have voted to eliminate their lowest-valued coins with little to no ill effects on their economies. Considering the raw cost of materials, processing and storage of the United States penny, it may actually be time to consider retiring the coin over time and encourage consumer to stop using pennies whenever possible. Perhaps a one-cent coin could be minted using cheaper metal alloys, but the current zinc and copper-clad Lincoln penny may have outlived its usefulness as currency.
Frequently Asked Questions
What are the main arguments for eliminating the penny in the United States?
The primary arguments for discontinuing the penny include its diminished purchasing power and the cost of production. According to the U.S. Mint's 2019 Annual Report, it costs 1.99 cents to make and distribute a penny, which is more than its face value. Additionally, pennies are often not used in transactions and can cause inefficiencies at cash registers, leading to lost economic productivity.
How might removing pennies affect the economy and consumers?
Eliminating pennies could streamline transactions and reduce the need for producing and circulating a coin that is used less frequently. Consumers might experience "rounding" at the cash register, where totals are rounded to the nearest nickel. Studies, such as one by economist Robert Whaples, suggest that rounding would have a negligible impact on consumers, as the rounding would average out over multiple transactions.
What do other countries' experiences with removing low-denomination coins tell us?
Several countries, including Canada, Australia, and New Zealand, have successfully eliminated their lowest denomination coins. For instance, Canada phased out the penny in 2013 and implemented a rounding system for cash transactions. The transition was smooth, and according to the Canadian government, it saved taxpayers about 11 million Canadian dollars per year. These international examples suggest that the U.S. could also retire the penny without significant disruption.
Are there any sentimental or historical reasons to keep the penny?
Yes, some people argue that the penny holds sentimental value as it features President Abraham Lincoln, an iconic figure in American history. Additionally, the penny has been in circulation since 1793, making it a piece of the nation's heritage. However, these emotional and historical attachments must be weighed against practical considerations of the coin's current utility and cost.
What would need to happen for the United States to stop using pennies?
To eliminate the penny, Congress would need to pass legislation authorizing the cessation of its production. This would involve a detailed plan for phasing out the coin, including how to handle existing pennies in circulation and guidelines for businesses on rounding transactions. Public education campaigns would likely be necessary to ensure a smooth transition and address any concerns from citizens and stakeholders.