[dropcap style=”simple” size=”5″]L[/dropcap]et me be clear, I do not hate pennies. I consider myself a lover of American currency. Who doesn’t love money? I even have a limited edition ‘First State Quarters Of The United States Collectors Map’ with every state filled in by shining decade old quarters. That being said, I also consider myself a realist and a strong advocate for smart spending and proper finance.
The national debt in this country is at about $21 trillion, and that number is ever increasing by the millisecond. For this reason, I care to look at what I perceive to be one of America’s most unnecessary and money wasting expenses: the penny.
The penny contributes a bigger impact on American expenditures than we Americans care to admit – not in a good way. There’s not a lot that can be said in defense of the penny. It’s one of the most unused coins in America, according to the Chicago Tribune, only second to the half dollar.
Half of all American adults use pennies daily, 40 percent say they collect or store their pennies in a bank while three percent throw them away. A second study by the Government Accountability Office reports that, in 2012, the U.S. Mint estimates that there are from 355 to 377 billion [pullquote]While coins, quarters and dimes produced a profit of 416 million, pennies and nickels produced a loss of 91 million with most of that 91 million coming from pennies.[/pullquote]coins in circulation, with two-thirds being pennies.
Many pennies are not active in circulation because people store them almost everywhere, from car floors to pant pockets, due to their small size.
Further analysis reveals that since 2006 both the nickel and the penny have cost more to manufacture than the value they hold. The sudden change comes from rising metal costs, particularly zinc, that makes up 97.5 percent of a penny. The remaining 2.5 percent is made up of copper. Copper, the penny’s secondary ingredient, went from a price of 2.24 per pound to 4.58 from 2011 to 2015.
With most currency and coins, production results in a higher value than the manufacturing of the actual currency/coin which is called a “seigniorage.” In 2014, the U.S. Mint received a seigniorage of 315 million from the circulating new coins. While coins, quarters and dimes produced a profit of 416 million, pennies and nickels produced a loss of 91 million with most of that 91 million coming from pennies.
The U.S. Mint did note that about eight million to 39 million dollars can be saved by restructuring the production of nickels, dimes and quarters if the coins were changed to one of four possible alternative coin compositions instead of their current state. So why single out the penny?
Simply because new and better versions for nickels, dimes and quarters are available for the U.S. Mint to consider and discuss while the penny is a totally different and, frankly, hopeless story. The U.S. Mint has yet to discover a cheaper metal composition to replace zinc as the penny’s main ingredient.
However, neither the U.S. Mint nor the Federal Reserve has the power to phase out the circulation of currency. Since they are extensions of the Executive Branch, they cannot determine the legal tender. They can only calculate how much is circulated annually by combating and allocating resources and inflation rates. Only Congress has such privilege and power to phase American currency.
What many may not know is that the United States has stopped the circulation of currency before. No longer do Americans perform monetary transactions with the two-cent coin, the three cent coin, the half-dime coin (later replaced by the nickel), the 20 cent coin and several variations of gold coins.
Phasing out the penny from American circulation would not make it inactive per se, but it does mean that the U.S. Mint would stop production of the penny after a time period determined through Congress. A monetary transaction would have to be rounded to the nearest nickel with the exemption of non-cash payments; however, pennies would still be legal tender until the U.S. Mint could figure a way to eventually collect and melt down all the billions of pennies that are currently in circulation.
Such efforts to rid America of this treacherous metal disk by lawmakers are, as recent as last year by Senators John McCain (R-AZ) and Mike Enzi (R-WY) who reintroduced the Currency Optimization, Innovation and National Savings Act of 2017 or COINS Act for short. Not only would passing this act end the minting of the penny, but it would also replace the U.S. dollar with an equal value coin and reduce the cost of nickel production.
Now, these extra features included in the COINS Act are worthy of discussion individually itself but such introduction of this bill shows the traction and political foothold this issue currently has in Congress.
Through the decades, even the American public has grown tired of this copper faced menace. Gallup reported in 2006 after the U.S. Mint reported that costs for the penny were more than they were worth and that 55 percent of Americans found the penny to be a useful coin and for the government to keep them. Another 43 percent of Americans said they supported the government getting rid of the penny with another five percent of Americans having no opinion at all.
While 55 percent is a majority, it should be noted that an ABC poll 13 years earlier found that 64 percent of Americans said the penny was a useful coin in contrast to 33 percent of Americans advocating for its removal.
Though there are no other recent polls regarding Americans opinion of phasing out the penny, it is fair to point out that Americans support for the value of the penny is dwindling. No longer does it hold its sentimental value when spotted on the ground. Better yet, I only pick up pennies for the superstition of good luck, not that I ever use it. Pennies may, in fact, be legal tender, but they are not real money. Think about the last time you asked to borrow a penny from somebody…it’s been a while, right?
People ask to borrow a dollar because the monetary difference a penny covers is substituted by all the other currency and coins.
The healthy option for Americans is to let go of the penny. The penny is holding America back from a vital change in federal expenditures. Saving 91 million dollars is not much of a dent when the national debt is more than 21 trillion dollars.
Phasing out the penny is only one of many movements America can take to smartly budget its money, and we as citizens have to permiss the government to take such an action. If Americans make phasing out the penny a voter issue, then Congress will make it a policy issue.