U.S. Penny Could be the Next Economic Casualty

Posted by in Retail


After the recent announcement that Canada is pulling its penny from circulation, the debate about whether or not to keep the U.S. penny in production is buzzing once again. It’s a discussion that seemingly rolls around every few years that continuously yields the same result. For various reasons, the American people have voiced over and over again that they are reluctant to let go of their copper coins.

 

The argument to ditch the lowest common denomination of U.S. currency stems from the simple fact that a penny costs more money to make and ship than one cent. Penny production is priced at 2.4 cents per coin. In 2001, the U.S. footed a bill to the tune of $120 million to put less than $50 million of pennies into people’s pockets. Chairman of the President's Council of Economic Advisers under President George W. Bush, Greg Mankiw, explained, "When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful."

 

The concept seemed clear to Canadians, who determined it would be better in the long run to nix the penny and round up to the nickel. In a press release, the Canadian Mint wrote, “The decision to phase out the penny was due to its excessive and rising cost of production relative to face value, the increased accumulation of pennies by Canadians in their households, environmental considerations, and the significant handling costs the penny imposes on retailers, financial institutions and the economy in general.”

 

While rounding may sound like a dream to retailers, penny pinchers across the country are a little more skeptical. Penn State economics professor Raymond Lombra presented a study estimating consumers would eventually pay a "rounding tax" of $2 billion to $4 billion over the course of two years if the penny were eliminated. However, Robert Whaples of Wake Forest University says consumers would break even when stores start to round their prices. Other professors see the resistance to change the change in U.S. as more of notion of nostalgia. "The vast majority want to keep a penny, regardless of all the good arguments against it," Whaples said. "It's a sentimental attachment."

 

Killing the penny isn’t a new idea, but one that has arisen in many forms. In 1990, it was the Price Rounding Act. In 2001, it was the Legal Tender Modernization Act. Then in 2006, it was the Currency Overhaul for an Industrious Nation (COIN) Act. All were introduced and promptly defeated in Congress. "Yes it would speed up transactions, and yes that is good," Jeff Lenard, spokesman for the National Association of Convenience Stores, told CNN. “But if it's a convenience that the customer doesn't want, we're not going to question the consumers' decision.”

 

Maybe the answer isn’t to eliminate the penny but simply put a stop production on the coin for the time being. Coin-collecting enthusiasts know their two cents can be worth millions under the right circumstances.

 

Photo courtesy of Arvind Balaraman at FreeDigitalPhotos

Comment

Become a member to take advantage of more features, like commenting and voting.

  • Melissa Kennedy
    Melissa Kennedy
    Thanks for taking a moment to leave a comment. There has been a debate about the future of the penny for a long time. Even now, there are penny fans and people who just keep them in great big jars. I'm with Heather, I'm going to get a pair of penny loafers just in case!!
  • James B
    James B
    They the government want to stop making pennies so they can start getting us for more a nickle give em an inch they want a mile there never satisfied.
  • Prentice B
    Prentice B
    Considering production cost of the coin, it should be eliminated.  The government has enough excessive waste, why not eliminate this one?
  • Heather Fairchild
    Heather Fairchild
    I'm going to go buy a pair of penny loafers, just in case.
  • Rick S
    Rick S
    Just leave the PENNY alone.Next time the plan will be,to change the NICKLE.Our country has more important  things to worry about than not using  the penny anymore.  
  • Bobby S
    Bobby S
    I do not think they should drop the pennies. They have been a part of our system for many years.
  • Christopher C
    Christopher C
    They do the roun up round down in Sweden and it works great.  The paper Dollar is also a thing of the past.  We need a $2 coin also.  Lets be green and make it happen
  • Paul R
    Paul R
    Good riddance to the penny. Let free enterprise work however with the rounding issue. I doubt the penny elimination will happen. We are too hidebound and resistant to change in the USA. That, along with our broken political system is why logical solutions never have a chance!
  • Shawn R
    Shawn R
    Get rid of the smelly things! :)
  • Raymond r
    Raymond r
    It's time to kill the penny andbegin minting $1 and$2 coins. By default, our Canadian neighbors have already decoded the size and shape.
  • anthony b
    anthony b
    Well, lets see....The Socialist democrats are ruining the economy, the politicians are stealing from the treasury ( read the book "throw them all out"....The Obamanation is seizing guns like Hitler and Communist dictators did....we are now being illegally searched and detained by Homeland Security.....the dollar is being considered worthless by world powers....Iran and China are considering going to war with the US....the USA is BANKRUPT...borrowing $50,000 EACH SEcond...does it matter if we drop the penny?...
  • Rick C
    Rick C
    The penny is no longer worth producing for all of the reason stated above.Time to let it go !

Jobs to Watch