THE PLANK DECEMBER 16, 2009
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President Obama has taken his fair share of flak for not following through on campaign promises--from renegotiating NAFTA to reforming immigration to ending Don’t Ask Don’t Tell. But there’s a slightly more obscure pledge--one he made at a March 2008 town hall meeting in Greensburg, Pennsylvania--that he may want to revisit.
“I will seriously consider eliminating the penny,” then-candidate Obama said, in response to a voter who questioned the wisdom of producing coins so worthless that vending machines (and some stores) no longer accept them. At the time, a growing media mob of economists and their public allies were pointing their pitchforks at the penny. And their case was ironclad--or, rather, zinc-clad: The soaring price of the penny’s primary ingredient had pushed the mine-to-mint production cost of each cent from .97 cents in FY 2005 to 1.67 cents in FY 2007 (at an annual loss of $54 million--or “negative seignorage,” in coin-speak).
But the penny’s prospects soon brightened, as the economic meltdown drove zinc prices down and led the U.S. Mint to produce fewer coins of all stripes (one-third as many pennies this year as in 2007). The coin was still a net loser for the American taxpayer, but a few million dollars in waste couldn’t spark the populist outrage that $700 billion in bank bailouts could. And so, the kill-the-penny zeitgeist died down.
It’s time to revive it.
While all eyes have been on gold prices in 2009 (up nearly 50%), zinc prices have more than doubled, bringing the unit cost of penny production up from 1.42 cents in FY 2008 to 1.62 cents in FY 2009 (and, at current prices, that cost will approach 2 cents in FY 2010). The twin specters of a weakened dollar and accelerated inflation also threaten to further sap the cent's, er, buying power.
Meanwhile, the other (arguably stronger) case for abolishing the penny--saving time lost to fumbling cashiers--remains as solid as ever. Considering that pennies add 2 to 2.5 seconds to each cash transaction, economist Robert Whaples has calculated this country's penny-induced productivity loss at $300 million annually. Former Bush economic adviser Gregory Mankiw puts the figure at $1 billion, while anti-penny activist Jeff Gore argues that it’s actually in the neighborhood of $10 billion.
That said, it will likely be some time before the penny goes the way of the half-cent (abolished in 1857). Fresh congressional kill-the-penny measures will, like previous stabs, meet the concerted opposition of K Street’s penny lobby--a coalition of zinc producers, coin collectors, and charities. And the few (outdated) polls on the question suggest that the vast majority of Americans would circle the wagons. Alas, the only recent changes to the penny have been aesthetic: The 2009 pennies featured four nifty illustrations commemorating the life of Lincoln, and, starting next year, a striped shield will permanently replace the image of the Lincoln memorial.
It's fair to assume that coinage ranks fairly low on the list of presidential priorities, but taking on the penny might help Obama as he tries to sell his pricey agenda to a deficit-wary public by signaling that he literally takes every cent of taxpayer money seriously. And, because he pledged only to consider eliminating the penny, Obama could mull less radical measures, should he decide that he just can’t bear to see the penny go. There was, for example, the 2008 push by Congressman Zack Space (D-OH) to start making the coins out of steel, as was done temporarily during World War II. Or Obama could hand off the matter to economic adviser (penny czar?) Austan Goolsbee, who endorsed another idea in a 2007 New York Times op-ed: Just make each penny worth five cents!
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5 comments
A comedian I heard many years back had a great solution: make the penny edible, perhaps chocolate. This way, prices are not forced upwards because of the inability to handle increments smaller than a nickel, but the pennies would not be building up anywhere but on our waistlines. It seems like about the only positive aspect of retaining the penny is the meager generosity it engenders as people so thoughtfully direct their pennies into the quasi communal penny bowls by most cash registers. The expense of pennies to society is even greater than the added time spent during transactions, and the production expense. Just think of how much time you waste if you ever get around to rolling your surplus coinage. They probably would not even have to manufacture more of them if the ones in jars across America were in circulation instead. People dump them from their pockets and purses because they are heavier than is worth carrying around.
- kerFuFFler
December 16, 2009 at 10:33am
And once again, the bleatings of the utilitarians must be heard! Well, my friends, allow me to defend the humble $0.01. It occupies a far more important niche than its prosaic brethren the dime, the dollar, the mighty Jackson. It is, in fact, an artful artifact of philosophy, right there on the sidewalk next to the blackened gum and the pigeon poop where no one in their right mind will stoop to pick it up. In our frenzied search for efficiency we kill serendipity in the public square: we leave no (wrong) turn unstoned. Forget meandering, traipsing, or taking the long way home: either lead, follow, or get out of the way. All hail GPS! Nowhere does our fetish for boiling life down to every possible digital datum hold more sway than in finance. We must run those numbers, again and again. Why, I bet some math Ph.D. will figure out how to bundle debt obligations and make a market out of them. Won't that be a great idea? Forget the penny: derivatives are where it's at! Standing against history's tawdry tsunami is our little copper friend. He is more trouble than he is worth--like an elderly relative in a nursing home, or a homeless vet living under a bridge. He can't survive without society's help, like a single mom raising her kids alone. He's worth more dead than alive--like millions of Americans with a life insurance policy and an underwater mortgage. You want to see what a penny looks like? Look in the mirror. No, my friends. The penny should not be eliminated because it is worthless; the penny should be RETAINED because it is worthless.
- williamyard
December 16, 2009 at 1:46pm
All my adult life I've never picked up dropped pennies because I figure the time it takes to do so is less than what I earn, even right after I graduated college.
- Juniper
December 16, 2009 at 1:53pm
Not factored into this discussion: the billions of dollars invested in, among other things, POS transaction systems that are all built on the assumption that sales and tax amounts should be calculated and rounded to the penny. If the penny is abolished, all of these systems will have to be modified to round to the nearest nickel instead. Has anyone estimated the cost of doing this?
- zaiquiri
December 16, 2009 at 1:56pm
Get rid of the penny and the nickel and issue a 2 1/2 cent "new penny." At the same time, get rid of the dollar bill, also a nuisance, and shift exclusively to dollar coins. We then have only three coins in the ratios of 4:1, 10:1. Simple. Everyone understands the quarter. 10 new pennies to the quarter. 4 quarters to the dollar. 10 dimes to the dollar. 4 pennies to the dime. When the 2 1/2 piece has fallen far enough in value, eliminate it and bring back the nickel as a smaller coin than at present. While we're at it, get rid of the $20 bill in favor of a new $25 bill and drop the $10 bill. Issue a lot of fives. We then have only three coins and three bills (including the $100) in circulation. By and by, we can drop the dollar coin in favor of a $2.50 coin, and drop the quarter in favor of a half dollar. Drop the $5 in favor of a new $10. We still have only three coins and basically three bills in circulation. You see how this goes. Everyone will be happier and all of our wallets and purses will be easier to manage. I proposed this to the Treasury about 15 years ago. Never got an answer of any kind. For the sake of nostalgia, the lowest domination can always be referred to as the penny.
- roidubouloi
December 16, 2009 at 1:59pm