Is It Finally Time to Get Rid of the Penny?

A while back I moved into a new office at work. When I looked in the desk, I found 162 pennies in one of the drawers. I can only assume that the previous owner used the desk as his chosen repository for all the pennies he received in change whenever he went out for lunch.

I can’t really blame the guy who did that. In fact, I think pennies are an anachronism and need to be removed from circulation. Here are several reasons, some admittedly better than others:

1. Inflation has made the penny irrelevant.

In 1857, the United States Congress stopped production of the half-cent piece. In 1857, one-half cent had the purchasing power of 11 cents in 2007 dollars. In essence, when the half-cent was finally discontinued the penny had over 20 times the purchasing power it does today. If the Congress of 1857 was still in power today, not only would the penny be discontinued, but so would the nickel.

2. Pennies are expensive to produce.

By the end of 2010, it cost the U.S. Mint almost 1.79 cents to make a penny. That means that the U.S. Mint is increasing the national debt with every penny they produce.

3. You can’t use them in vending machines.

Well, at least I’ve never seen a vending machine that accepts them.

4. They slow down transactions at retail establishments.

While not as bad as the time I got stuck in line behind a lady who paid for her groceries with only quarters, I hate it whenever I have to wait for folks who dig into their lint-filled pockets for pennies in order to avoid receiving any more of the dreaded coins in their change.

I know what you’re thinking: But, Len, won’t elimination of the penny result in increased consumer costs?

Uh oh. I see you’ve fallen for the fairy tales being spouted by Americans for Common Cents, a pro-penny group that is backed by the zinc industry (pennies are almost 98% zinc). Let’s look at their two primary arguments in favor of keeping the penny:

1. Rounding prices up to the nearest nickel would result in higher prices.

Past evidence shows that this claim is utterly baseless, for if this were true one would expect inflation to have occurred in the years immediately following the abolition of the half-cent in 1857. However, in fact the opposite effect occurred; the United States actually suffered from a significant bout of deflation the following year.

To wit, here are the rates of inflation between 1858 and 1861:

1858: -7.1% (deflation)
1859: 3.8%
1860: 0.0%
1861: 0.0%

2. Many charities are totally dependent on pennies for their donations.

This claim is so absolutely preposterous that it should be dismissed out of hand, but I’ll address it anyway. To make such an argument presupposes that Americans, the most charitable people on earth, would suddenly stop putting money in the Salvation Army kettle or handing coins over to other charities simply because the smallest coin they have in their pocket would now be a nickel instead of a penny. But it actually makes more sense that charities would see an increase in their contributions. Why? Because although a nickel is worth five times as much as a penny, it does have one big thing in common with its copper cousin: absent additional cash, you simply can’t buy anything with it. You know I’m right.

The United States Congress is responsible for regulating the national currency. What do you think? Should Congress abolish the penny? If you’ve got a moment to spare, please share your thoughts on this, because I really want to know.

In the mean time, I’m going to the grocery store to find something I can buy for $1.62 — all in pennies, of course. Hopefully you won’t be the lucky person that gets stuck behind me at the checkout counter.



Comments

  1. 2

    Red Sox Fan says

    I don’t mind pennies at all. They kind of work like a forced savings account for me. Every year I take the pennies in my penny jar that I got in change, take it to Coin Star and end up with between $50 and $100 in my pocket.

  2. 3

    says

    @Mark: I love it! Why didn’t I think of that when I was a kid? Instead of giving up soda and candy, I could have told my parents that I was giving up pennies. So does that mean you now throw all your pennies in the change cup when you get your change?

    @Red: Wow. That is a lot of pennies to collect in a year! What the heck do you do to collect so many pennies at one time? I never thought folks could really save enough of them to make it worth the hassle of storing them, but it looks like I was wrong!

  3. 4

    Jeff S. says

    Another great article, Len! You’re quickly becoming my new favorite PF blogger.

    For what it’s worth, I say the penny should have been ditched long ago. But nobody ever listens to me.

  4. 6

    says

    I like pennies, but then again I like all coins. Unfortunately, I hoard my coins rather than putting them back into circulation. I don’t know why, but it is just something I do.

    I remember back when I was young where you could drop a penny into the gumball machine, or two pennies into the candy machine and walk away with a nice little treat. Today, if the machine takes a quarter for the same gumball or candy, you are lucky. My how things have changed.

    As far as charities go, you might find this one interesting. A few months back, my nieces were having a fundraiser at schools using coins. Pennies were used as positive points while the other coins were used as negative points. Each class were competing against each other by trying to collect as many pennies as possible while sabotaging the other classes by dropping other coins into their collection bins. Knowing that I collect/sort all my coins, my nieces came over and asked if I could have all my pennies. I gave them almost $50 (placed into two containers so they could carry the weight) and they went home with big grins on their faces. So, the pennies still have some practical use. :)

    In the world we now live in where people use their credit and debit cards more than change, I don’t think we would see a big change in the cost of goods if the Mint stopped producing pennies. That doesn’t mean we take the pennies out of circulation, since I think there might be enough out there currently to meet the demands of the economy. On the other hand, companies could price their products accordingly so that the costs (including taxes) of the goods are divisibly by a nickel.

  5. 7

    says

    I try to get rid of my coins as fast as possible unless they are dated 1964 or earlier. I collect old coins too.

    And, wow… what a great idea for a fundraiser! I think I am going to propose that one to my kids’ elementary school for next year.

    I’m 45 (insert your old-fogey joke here), and I remember being able to ride my bike to the Thrifty drug store so I could buy myself a single scoop ice cream cone for 5 pennies. Of course, my allowance was 25 cents a week. lol

  6. 8

    says

    I think many of us have those “I remember when” stories that make us feel old. I use to walk down the street to buy a big piece of licorice for two pennies, and be content all day long. Of course, growing up next to a railroad track, there was always the temptation to lay the penny on the rails to see if the train would flatten it. :)

  7. 9

    says

    I used to lay pennies on the rails all the time when I walked to school. Couldn’t wait for the walk home to see the flattened coins!

    (Kids, it’s very unsafe to trespass around railroad tracks. Please do I say, not as I do!) :-)

    • 11

      says

      The inherent privacy that comes with using paper bills is invaluable, Matt. Besides, currency is not the real problem. It’s the government’s inability to control its spending. Yes?

  8. 12

    mcsteiger says

    Thanks Len! I am doing a debate for school and this website has been both informing and interesting. I think that we should get rid of pennies, because most people don’t like carrying them around and when they bring them home they don’t get back into circulation. I also agree that pennies are a waste of time, back when I used to work in a grocery store I hated counting pennies in transactions and when I closed my register. Thanks!

    • 13

      says

      I’m glad you found the article helpful. Pennies are pretty much considered worthless now by most everyone. When was the last time you bent over to pick up a penny? I’ve actually seen pennies in trash cans. Yep. Some people would rather trash a penny than have to carry it in their pocket! :-)

  9. 14

    mikele says

    I know this is an old one but something to add. When my ex and I were stationed overseas all prices were rounded up or down to the nearest nickle because pennies were just too expensive to fly over. I loved it, everything so neat and tidy. It was a real shock to come back stateside and deal with pennies again.

    • 15

      says

      Wow, that’s really interesting! So the practice of rounding to the nearest nickel HAS been put to use – and the sky didn’t fall down either. ;-) That is great to hear! Thanks for sharing that, Mikele.

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