In response to a question on the evening of February 14 during an online chat with political bloggers and commentators, President Obama came out in favor of what a growing number of people have been saying, thus far to no effect: It’s time to ditch the penny.
When asked why the United States continues to mint a coin that has virtually no purchasing power and costs more to produce than it’s worth, Obama replied, “I got to tell you, I don’t know. It’s one of those things where people get attached emotionally to the way things have been.”
Emotional attachment is the only reason that even faintly makes sense to keep producing and distributing pennies, because the case against the one-cent piece (its official name — “penny” is a term we inherited from the days of the British Empire) is almost ridiculously easy to make.
Let’s take a little trip back in time 40 years ago to the winter of 1973. The last American ground troops were leaving Vietnam. Richard Nixon was in the White House, with the Watergate scandal that would eventually drive him from office just starting to get traction. “The Godfather” was about to be named Best Picture at the Academy Awards. And a penny was worth, well, not much, but something. Penny candy was still around, parking meters still took them, that sort of thing.
If you went into a store in 1973 and bought a loaf of bread for 45 cents plus tax, did the sales clerk ask you for 47.7 cents? And did you reach into your pocket for some fraction-of-a-cent coins — let’s call them “semi-pennies” — to make up that seven-tenths of a cent? Of course not. Every transaction was rounded to the nearest penny so you paid 48 cents.
In short, we were getting along perfectly well without coins worth less than a penny, in fact, we had since before the Civil War, since the United States stopped making a half-cent coin in 1857.
But today when you reach into your pocket for a few cents to pay the exact cost of a purchase, or the clerk reaches into the cash drawer for some pennies to give you your change, you or the clerk are doing the exact equivalent of what would have been preposterous in 1973. That’s because the cost of living has risen just about five times in the ensuing four decades. Thus, today’s penny has the purchasing power of two tenths of a cent then. In 2013, the nickel is the almost exact equivalent of the 1973 penny in value.
Ergo, if we didn’t need fractional-cent coins in 1973 we don’t need pennies today. If transactions were rounded to the nearest cent then, round them off to the nearest nickel now. QED.
But the fact that the penny is needless, useless, pointless — call it what you will — is only part of the story. It’s actually a drain on the economy.
Last year the U.S. Treasury minted more than 5.8 billion pennies, about $58.4 million worth. You’d think that making money, literally, would be a profit-making operation but the goevernment lost money on the deal, just about that same $58 million, mostly because of the cost of the zinc, which makes up 97.5 percent of today’s penny. It cost two cents to make and distribute a penny last year.
And that’s just the tip of the iceberg, because time is money.
In 2006, a Wake Forest University economics professor, Dr. Roger Whaples, studied the impact of the penny and estimated that the time spent by retailers and consumers in fiddling with these virtually valueless coins was costing them and the economy the equivalent of about $300 million dollars a year. He also concluded that rounding off every transaction to the nearest nickel would have a negligible impact on the consumer.
The joker in the deck is that in places where the costs and benefits of dealing with pennies have to be taken seriously, they already know all this and act accordingly.
How many times have you been at a convenience store and fished for a few cents to give the clerk exact change when he or she takes a couple of pennies from a cup by the register to make up the difference? Or simply been waved through when your bill was $5.02 and you handed them a five dollar bill? They’re literally giving you money because they know that the time spent dealing with pennies is worth more than the pittance your two cents is worth.
Or consider the Defense Department. It created its own form of currency, plastic tokens known as “pogs” after the pieces used in the popular children’s game, so that it wouldn’t have to use valuable space and weight shipping coins to supply base exchanges in Iraq and Afghanistan. Pogs come in five-cent, 10-cent, and 25-cent denominations — no pennies: they don’t need them. All transactions at those exchanges are rounded to the nearest nickel.
In 2013 there’s no excuse for not freeing all Americans — not just our troops overseas — from the pointless, time-wasting penny. Let’s follow the example of our neighbor to the north, Canada, which on Feb. 4 stopped distributing new pennies to financial institution in a first step toward getting rid of them completely.
Buggy whips, typewriters, slide rules — they all once filled a need. It’s time for the one-cent piece to join them in the niche of history reserved for objects that outlived their usefulness.
And if we get rid of the penny, we’ll have the satisfaction of knowing that as a nation we’d done something completely rational, sensible, and money-saving. Wouldn’t that be refreshing?