Efforts to eliminate the penny in the United States

A debate exists within the United States government, and American society at large, over whether the one-cent coin, commonly known as the penny, should be eliminated as a unit of currency in the United States. Two bills introduced in the U.S. Congress would have ceased production of pennies, but neither bill was approved. Such a bill would leave the nickel, at 5¢, as the lowest-value coin.

Legislation

In 2002, United States Representative Jim Kolbe (R-AZ) introduced the Legal Tender Modernization Act, and in 2006 he introduced the Currency Overhaul for an Industrious Nation (COIN) Act. [cite news | author = Christian Zappone | title= Kill-the-penny bill introduced | url= http://money.cnn.com/2006/07/18/news/penny/index.htm | publisher= CNN Money | date=2006-07-18 | accessdate=2007-03-21 ] Both bills failed to advance in either house, and died when Congress adjourned.cite news |url=http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2006-07-20T120021Z_01_N17321144_RTRIDST_0_LIFE-PENNY-GENERAL-FEATURE.XML
title=Nickel for your thoughts? US bill seeks penny's end| publisher=Reuters |date=2006-07-20|accessdate=2006-07-20]

Arguments for elimination

* Production at a loss — As of March 2008, it costs almost 1.7 cents to mint a penny. [ [http://abcnews.go.com/Business/story?id=4460935 Penny Problem: Not Worth Metal It's Made Of - March 16, 2008] ] Now that the price of the raw materials exceeds the face value, there is a risk that coins will be illegally melted down for raw materials. [cite web|url=http://news.bbc.co.uk/2/hi/south_asia/6766563.stm|title=Sharp practice of melting coins|date=2007-06-26|publisher=BBC] [cite web|url=http://www.usmint.gov/pressroom/index.cfm?action=press_release&ID=724|title=United States Mint Moves to Limit Exportation & Melting of Coins|date=2006-12-14]

* Distribution costs — The Federal Reserve incurs the costs of distributing pennies, which cuts into the vast seigniorage profits it makes from creating larger denominations of currency.fact|date=July 2008

* Lost productivity and opportunity cost of use — With the average wage in the U.S. being about $17 per hour in 2006, it takes about two seconds to earn one cent. Thus, it is not worthwhile for most people to deal with a penny. If it takes only two seconds extra for each transaction that uses a penny, the cost of time wasted in the U.S. per person is about $3.65 annually, [cite news |first=Sebastian |last= Mallaby |authorlink= |coauthors= |title=The Penny Stops Here |url=http://www.washingtonpost.com/wp-dyn/content/article/2006/09/24/AR2006092400946.html |work= |publisher=The Washington Post |page= A21|date=2006-09-25 |accessdate=2007-08-09 |quote=The median worker earns just over $36,000 a year, or about 0.5 cents per second, so futzing with pennies costs him $3.65 annually.] about $1 billion for all America. [cite web | last = Mankiw | first = Greg | authorlink =N. Gregory Mankiw | coauthors = | title = How to Make $1 Billion | work = Greg Mankiw's Blog | publisher = | date =2006-09-25 | url=http://gregmankiw.blogspot.com/2006/09/how-to-make-1-billion.html| accessdate = 2007-08-09|quote=Multiply that last figure by the number of Americans, and you find that getting rid of the penny would free up economic resources valued at about $1 billion a year.] Using a different calculation economist Robert Whaples estimates a $300 million annual loss. [cite web | title =The Penny's End Is Near | work =| publisher =Consumer Affairs | date =2006-07-19 | url=http://www.consumeraffairs.com/news04/2006/07/penny_sense.html| accessdate = 2007-08-09|quote=Whaples said that based on the average American wage, $17 an hour, every two seconds of an average American's day is worth one cent. "That's going to add up to about $300 million per year for the U.S. economy," Whaples said.]

* Limited utility — Pennies are not accepted by all vending machines or toll machines, and pennies are generally not accepted in bulk. Officemax demonstrated this with a series of ads where a man tries to pay for things in New York City, almost always being rejected. Then the ad flashes to a screen where Officemax said that they are selling school supplies for only a penny. In addition, people often do not use pennies to pay at all; they may simply use larger denominations and get pennies in return.fact|date=July 2008

* No higher prices — Research by Robert Whaples, an economics professor at Wake Forest University, using data on nearly 200,000 transactions from a multi-state convenience store chain shows that rounding would have virtually no impact. Consumers would gain a tiny amount -- about one-fortieth of a cent per transaction.cite news | first= | last= | title= Topic Two: It's time to pitch the penny | url= http://www.newsobserver.com/164/story/438851.html | publisher= The News & Observer | date=2006-05-14 | accessdate=2007-03-21 ]

* Historical precedents — There has never been a coin in circulation in the US worth as little as the penny is worth today. Due to inflation, as of 2007, a nickel is worth approximately what a penny was worth in 1972.http://data.bls.gov/cgi-bin/cpicalc.pl CPI Inflation Calculator] When the United States discontinued the half-cent coin in 1857, it had a 2008-equivalent buying power of 13¢. [http://www.westegg.com/inflation/ The Inflation Calculator] After 1857, the new smallest coin was the cent, which had a 2008-equivalent buying power of 26¢. The nickel fell below that value in 1974; the dime fell below that value in 1980; the quarter fell below that value in 2007. [http://www.westegg.com/inflation/ The Inflation Calculator]

* Hazards — The reduced-cost clad zinc penny, which has been produced since mid-1982, holds additional dangers when swallowed by children and others, unlike all previous U.S. coins. If the copper plating is breached, the penny quickly corrodes into a sharp-edged object, which is more likely to lodge in the digestive tract. Injury is more likely, and zinc and copper digested from the lodged pennies may be toxic. A dog was fatally poisoned by swallowing two pennies, although this was likely due to dogs' higher sensitivity to zinc toxicity and lower body weight. [ [http://radiology.rsnajnls.org/cgi/content/full/213/1/113 Gastric Retention of Zinc-based Pennies: Radiographic Appearance and Hazards - O'Hara et al. 213 (1): 113 - Radiology ] ]

Arguments for preservation

* May affect some charitable causes — Some organizations rely on donations from the collection of pennies.

* Historical sentiment — The cent was one of the first coins authorized to be minted by the American government, and the first to be put into production.

* Regional sentiment — Because the Penny depicts former President Abraham Lincoln, representatives of the State of Illinois (official nickname is "Land of Lincoln") have been vocal in their opposition to the elimination of the penny.

* The zinc suppliers profits — The penny is 97.5% zinc and the removal of the penny would decrease profits of zinc suppliers.

Other options

The economist François R. Velde has suggested an alternative plan in which the government would make the penny worth 5 cents. This change would cause minor monetary inflation of $5.6 billion. [Goolsbee, Austan. New York Times, 1 February 2007. [http://www.nytimes.com/2007/02/01/business/01scenes.html?_r=1&oref=slogin "Now That a Penny Isn’t Worth Much, It’s Time to Make It Worth 5 Cents"] . Accessed 30 November 2007.]

On May 8, 2008, the House of Representatives passed H.R. 5512, the Coin Modernization and Taxpayer Savings Act of 2008. [ [http://www.thomas.gov "Thomas Library of Congress. Search by Bill Number - Coin Modernization and Taxpayer Savings Act of 2008"] . Accessed 08 May 2008.] [ [http://www.govtrack.us/congress/bill.xpd?bill=h110-5512 H.R. 5512--110th Congress (2008): Coin Modernization and Taxpayer Savings Act of 2008] , GovTrack.us. Accessed 2008-05-14.] If enacted to law, the act would result in the penny being made primarily of steel and treated to have a copper color within 270 days of enactment unless the Secretary of the Treasury can come up with a new element for coin composition that, when added to zinc and copper will lower the price to manufacter to under one cent. According to the act, "Given the current cost to make a penny and volume of pennies minted, simply reducing penny production costs to face value, the United States will save more than $500,000,000 in the next 10 years alone".

Precedents in other countries

Sweden removed the 1 and 2 öre coins from circulation in 1972 and by 1991 had also eliminated the 5, 10 and 25 öre coins, the same as with the Norwegian krone, which only has 50 øre and the Danish krone, which only has 25 and 50 øre (the 25 øre to be removed from circulation on October 1, 2008). The decimal British half penny (£0.005) was first issued in 1971. Being worth 1.2 pre-decimal pence, it enabled the prices of some low-value items to be more accurately translated to the new decimal currency. Inflation over the ensuing 13 years led to the coin being withdrawn from circulation in December 1984. New Zealand eliminated the 1 and 2 cent coins of the New Zealand dollar in 1990 and the 5 cent coin in 2006. [ [http://www.rbnz.govt.nz/currency/money/0094086.html History of New Zealand Coinage] , Reserve Bank of New Zealand. Accessed 2 January 2008.] Israel eliminated the 1 agora coin in April 1991, and the 5 agorot coin in January 2008. Australia eliminated the 1 and 2 cent coins of the Australian dollar in 1992. [ [http://www.ramint.gov.au/about_ram/default.cfm?Defaultpage=faq.cfm Royal Australian Mint FAQ] . Accessed 2 January 2008.] The Dutch eliminated the 1 cent of the Guilder in 1980 and ceased issuing the 1 and 2 cents of Dutch euro coins in 2006. In Finland, 1 and 2 cent of Finnish euro coins are only being minted for collectors, and are not in general usage. On March 1, 2008, Hungary eliminated 1 and 2 Hungarian forint coins and rounded everything to the nearest 5 forint. [ [http://english.forint.hu/Engine.aspx National Bank of Hungary - Forint.hu] ] After removal of the low denominated coins, all countries adopted a method of rounding known as Swedish rounding, though some not officially.

However, many nations still use coins of similar or even less value. Russia still issues 1, 5, 10, and 50 kopek coins, despite their value being approximately equivalent to $0.0004, $0.002, $0.004, and $0.02, respectively, in U.S. dollars. The East Caribbean Dollar Board, the Bahamas, Barbados, Bermuda, Cayman Islands, Belize, and Fiji all issue one-cent coins, and the Solomon Islands and Namibia both issue five-cent coins valued approximately at or below US$0.01. Most of the Eurozone uses 1 cent and 2 cent euro coins, with a euro cent valued between US$0.01-$0.02. Even other industrialized nations still have low value coins. Japan continues to mint a one yen.

Current status

On April 17, 2007 a Department of the Treasury regulation went into effect which prohibited the treatment, melting, or mass export of cents and nickels. Exceptions were allowed for numismatists, jewelry makers, and normal tourism demands. [cite web | url=http://www.usmint.gov/pressroom/index.cfm?flash=yes&action=press_release&ID=771| title=United States Mint Limits Exportation & Melting of Coins | accessdate=2007-08-28 |date=2007-04-17|publisher=United States Mint|work=Press Release and Public Statements] The reason given was that the price of copper was rising to the point where these coins could be melted for their metal content. [ [http://www.usmint.gov/pressroom/index.cfm?action=press_release&ID=724 The United States Mint Pressroom ] ] In the 1960s, similar attempts had been made with silver coinage and failed. [ [http://www.hartfordadvocate.com/article.cfm?aid=5401 Hartford Advocate: News - Penny Ante Profits ] ]

See also

* Coin Coalition

References

External links

* [http://www.forbes.com/2002/07/05/0705penny.html Ban The Penny] ("Forbes Magazine")
* [http://money.cnn.com/2002/04/11/pf/q_pennies/ Should the penny go?] ("CNN")
* [http://www.pennies.org/ Americans for Common Cents, a pro-penny organization]
* [http://www.usatoday.com/news/offbeat/2004-07-01-pennies-sold_x.htm Man tries to get rid of million pennies, USATODAY/AP, 7/1/2004]
* [http://www.findarticles.com/p/articles/mi_m1571/is_30_15/ai_55481523 Not So Common Cents - shortage of pennies, FindArticles, August 16, 1999]
* [http://www.retirethepenny.org/index.html Citizens for Retiring the Penny]