Efforts to eliminate the penny in the United States

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A debate exists within the United States government, and American society at large, over whether the 1-cent coin, commonly known as the penny, should be eliminated as a unit of currency in the United States. Two bills introduced in the U.S. Congress would have ceased production of pennies, but neither bill was approved. Such a bill would leave the nickel, at 5¢, as the lowest-value coin.

Contents 1 Legislation 2 Arguments for elimination 3 Arguments for preservation 4 Other options 5 Precedents in other countries 6 Current status 7 References 8 See also 9 External links

[edit] Legislation

In 2002, United States Representative Jim Kolbe (R-AZ) introduced the Legal Tender Modernization Act, and in 2006 he introduced the Currency Overhaul for an Industrious Nation (COIN) Act).^[1] Both bills failed to advance in either house, and died when Congress adjourned.^[2]

[edit] Arguments for elimination

• Production at a loss — As of July, 2006, it costs 1.4 cents to mint a penny.^[3]

• Distribution costs — The Federal Reserve incurs the costs of distributing pennies.

• Lost productivity and opportunity cost of use — With the average wage in the U.S. in 2006 being about $17 per hour, it takes about two seconds to earn one cent. Because of this it is not worthwhile for most people to deal with a penny. If it takes only two seconds extra for each transaction that uses a penny, the cost of time wasted in the U.S. per person is about $3.65 annually,^[4] about $1 billion for all America.^[5] Using a different calculation economist Robert Whaples estimates a $300 million annual loss. ^[6]

• Limited utility — Pennies are not accepted by vending machines or toll machines,^{[citation needed]} and pennies are generally not accepted in bulk.^{[citation needed]} In addition, people often don't use the penny to pay at all. They pay with larger denominations and get pennies in return.^{[original research?]} Many do not consider the time required to count pennies to be justifiable in busy stores.^{[citation needed]}

• No higher prices — Research by Robert Whaples, an economics professor at Wake Forest University, using data on nearly 200,000 transactions from a multi-state convenience store chain shows that rounding would have virtually no impact. Consumers would gain a tiny amount -- about one-fortieth of a cent per transaction.^[7]

• Historical precedents — There has never been a coin in circulation in the US worth as little as the penny is worth today. Due to inflation, as of 2007, a nickel is worth approximately what a penny was worth in 1972 (35 years ago).^[8] When the United States discontinued the Half Cent in 1857, it had a 2007-equivalent buying power of 11¢.^[9] After 1857, the new smallest coin was the cent, which had a 2007-equivalent buying power of 22¢. The nickel fell below that value in 1974; the dime fell below that value in 1982^[10]; the quarter may fall below that value in 2011.

• Hazards — The reduced-cost clad zinc penny, which has been produced since mid-1982, holds additional dangers when swallowed by children and others, unlike all previous U.S. coins. If the copper plating is breached, the penny quickly corrodes into a sharp-edged object, which is more likely to lodge in the digestive tract. Injury is more likely, and zinc and copper digested from the lodged pennies may be toxic. A dog was fatally poisoned by two swallowed pennies, though this was likely due to dogs' higher sensitivity to zinc toxicity and lower body weight.^[11]

[edit] Arguments for preservation

• Need for small change — Some states, local governments, and private interests minted one-mill ($0.001) coins and tokens, possibly as late as 1960.^{[citation needed]} Only when the mill tokens were discontinued did the penny become the smallest unit of currency throughout the United States. Thus the penny remains useful for small change until the nickel shrinks to the same value that the penny had when the mill tokens disappeared (if it has not already).^{[improper synthesis?]}

• Concealing or denying inflation — As a consequence of inflation, small coins gradually become overvalued, too expensive to produce, or too insignificant to trade.^{[citation needed]} Governments have coped by revaluing currency, discontinuing small coins, debasing coins, and/or ignoring the problem. Debasing coins is one of the least visible, and is less objectionable than ignoring the problem.^{[citation needed][improper synthesis?]}

• Higher prices — Rounding to the nickel, if it occurred, would effectively raise prices.^{[improper synthesis?]} Raymond Lombra, an economics professor at Pennsylvania State University, estimates using simulations from convenience stores that rounding would force an annual $600 million "rounding tax" on consumers;^[12] this amounts to about $2.00 per person per year.^{[improper synthesis?]}

• Targets lower class and charitable causes — Elimination would hurt those who can afford it least: the poor, the elderly and charities.^{[citation needed]} Increased prices due to rounding, if it occurred, would fall disproportionately on those least able to afford it. Some organizations rely on donations from the collection of pennies.^{[citation needed]}

• Historical sentiment — The cent was one of the first coins authorized to be minted by the American government, and the first to be put into production. Patterns were minted in 1792, and circulating issues have been minted every year since 1793 except the year 1815. It has been "an integral part of the American experience".^{[citation needed][improper synthesis?]}

• Regional sentiment — Because the Penny depicts former President Abraham Lincoln, representatives of the State of Illinois (official nickname "Land of Lincoln") have been vocal in their opposition to the elimination of the penny.^{[citation needed]}

• Decrease dependence on copper — The penny is 97.5% zinc,^[13] and its removal might require more nickels. The nickel is 75% copper, and copper is less abundant than zinc. (The cost to produce a nickel is also more than its worth, about 5.5¢.^[14])^{[improper synthesis?]}

• Price changes — Retailers have not taken a lead in abandoning the penny.^{[citation needed][improper synthesis?]}

[edit] Other options

The economist François R. Velde has suggested an alternative plan in which the government would make the penny worth 5 cents. This change would cause minor monetary inflation of $5.6 billion.^[15]

[edit] Precedents in other countries

Sweden removed the 1 and 2 öre coins from circulation in 1972 and by 1991 had also eliminated the 5, 10 and 25 öre coins, the same as with Norway, and Denmark (kept the 25 øre).^{[citation needed]}. The decimal British half penny (£0.005) was first issued in 1971. Being worth 1.2 pre-decimal pence, it enabled the prices of some low-value items to be more accurately translated to the new decimal currency. Inflation over the ensuing 13 years led to the coin being withdrawn from circulation in December 1984. New Zealand eliminated the 1 and 2 cent coins in 1990 and the 5 cent coin in 2006.^[16] Australia eliminated the 1 and 2 cent coins in 1992.^[17] The Dutch eliminated the 1 cent of the Gulden in 1980 and ceased issuing the 1 and 2 eurocent in 2006.^{[citation needed]} In Finland, 1 and 2 cent coins are only being minted for collectors, and are not in general usage.^{[citation needed]} Starting in March of 2008, Hungary will eliminate 1 and 2 forint coins and round everything off to the nearest 5 forint.^[18] After removal of the low denominated coins, all countries adopted a method of rounding known as Swedish rounding.^{[citation needed]}

However, many nations still use coins of similar or even less value. Russia still issues 1, 5, 10, and 50 kopek coins, despite their value being approximately equivalent to $0.0004, $0.002, $0.004, or $0.02, respectively, in U.S. dollars.^{[citation needed]} Canada, the East Caribbean Dollar Board, Bahamas, Barbados, Bermuda, Cayman Islands, Belize, and Fiji all issue one-cent coins, and the Soloman Islands and Namibia both issue five-cent coins valued approximately at or below 0.01 USD.^{[citation needed]} Most of the Eurozone uses 1 cent and 2 cent euro coins, despite their perceived impracticality, with a euro cent valued somewhere between 0.01-0.02 USD.^{[citation needed]}

[edit] Current status

On April 17, 2007 a Department of the Treasury regulation went into effect which prohibited the treatment, melting, or mass export of cents and nickels. Exceptions were allowed for numismatists, jewelry makers, and normal tourism demands.^[19] The reason given was that the price of copper was rising to the point where these coins could be melted for their metal content.^{[citation needed]} In the 1960s similar attempts had been made with silver coinage and they failed.^{[citation needed]}

[edit] References

[edit] See also

• Legal Tender Modernization Act
• Coin Coalition
• Cent (United States coin)
• Swedish rounding

[edit] External links

• Ban The Penny (Forbes Magazine)
• Should the penny go? (CNN)
• Americans for Common Cents, a pro-penny organization
• Man tries to get rid of million pennies, USATODAY/AP, 7/1/2004
• Not So Common Cents - shortage of pennies, FindArticles, August 16, 1999
• Citizens for Retiring the Penny