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President Obama participated in Google Plus Hangout yesterday and fielded a question that the event moderator said was the number one question in the economy section of YouTube: why do we still mint pennies?
"I gotta tell you ... I don't know," Obama replied. "It's one of those things where I think people get attached emotionally to the way things have been ... We remember our piggy banks and counting up all our pennies and then taking them in and getting a dollar bill or a couple dollars from them, and maybe that's the reason why people haven't gotten around to it."
Obama said while it wouldn't be a huge savings for the government to discontinue the penny -- each zinc and copper coin costs 2.41 cents to produce and distribute, according to the mint -- the fact that the government keeps spending money on it when it's not being used much may mean it is "an example of something we should probably change."
I haven't seen much in the way of polling on this, and for all I know, Americans love pennies and will find the president's position outrageous. If there's a penny lobby, it's probably churning out all kinds of press releases this morning.
But Obama's observation is nevertheless sound -- remember Sam Seaborn's spiel on this from Season Three of "The West Wing"? -- especially given how much it costs to make pennies that don't serve much of a purpose.
That said, every time this comes up, I'm reminded that there's a compelling flip side to the debate.
I read a piece Eric Wen wrote a while back, noting the economic downsides, and it stuck with me:
A 2001 economic analysis by Penn State's Raymond Lombra found that a post-penny economy -- in which we round to the nearest nickel -- would probably hurt the poor disproportionately. In theory, rounding would balance itself out over time -- with some transactions rounding up and others rounding down. Lombra's simulations, however, which were based on the price book of a major retail chain, found that between 60 and 93 percent of transactions would round up, costing consumers nearly $600 million a year. Because the poor tend to use cash more often [and only cash transactions would be subject to rounding], they would shoulder most of that burden.
It's a debate worth having, but keep these details in mind.
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Anything not worth bending over for is not worth bending over for...
I read through all the posts . You silly people .
It will never happen . The penny has it's own lobby funded buy ....wait for it ...the zinc industry, which supplies most of the metal used in pennies.
Americans for Common Cents issued a press release declaring that two-thirds of us south of the border want to keep the penny.
http://tech.fortune.cnn.com/2012/04/11/penny/
Follow the money ...to the best government money can buy
That means my two cents worth is worth...four cents. A good investment.
Funny that the penny, a copper colored coin, is the only coin we use which isn't made mostly from copper. Curse you, Big Zinc! The last time we phased out a coin denomination was the half-cent piece in the 19th century. We're probably overdue for further changes.
If it were up to me, we'd overhaul the currency. Phase out the penny, nickel, and quarter. Design a new Lincoln Dime and Washington Half-Dollar. Stop printing dollar bills and use $2 bills and dollar coins instead.
That ought to hold things together until cash disappears completely and we pay for everything with our phones or implanted chips.
"...found that between 60 and 93 percent of transactions would round up, costing consumers nearly $600 million a year."
And that's exactly why we still need pennies. Besides, who doesn't mind finding a enough pennies in the seat cushions to go buy a pack of gum?
Actual research with real-world transactions says you are wrong.
Furthermore, that assumes that every retailer is going to round to the nearest nickel.
Here in Canada, we're currently going through the process of eliminating the penny: Many retailers, including one of the main grocery chains, are instituting a policy of always rounding down.
snark button on --
The rich never use pennies, they use credit cards.
Allowing pennies to gradually disappear or even recall pennies will not effect them. Credit cards can still be "to the penny".
Only the poor, like me use cash/pennies. So who needs them?? [Both the pennies and the poor.]
All prices would be rounded to the nearest 5 cents, not just cash purchases. The effect would be the same no matter what payment method one used.
A little check would tell you that Canada just made this move.
$600 million a year? I sincerely doubt that.
Get rid of it or, declare its value to be 3/100 of one dollar.
The penny has so little purchasing power, that it is commonly dropped in parking lots and not picked up. I think it is disrespectful to Lincoln. We can maintain the this subsidy for the low-income folks by replacing the current zinc (copper coated) version with a plastic disk that can be recycled, being something similar to the ration tokens used during WW II.
"Penny wise, pound foolish" has never been so literal. The fact that so many Americans would be hurt by getting rid of the penny ought to be the only point that matters. That a lot of influential people feel otherwise is a sad commentary on this country.
By the way, the President's argument isn't an argument for getting rid of the penny, because you can make the same point about *any* type of cash. His argument is for streamlining the printing/minting process and making it cheaper. I have to wonder why he doesn't seem to realize that.
No. This argument applies specifically to only the penny and the nickel. The problem in these cases is that the commodity cost of the material to produce these coins is greater than the face value of the coin. The government has to pay the cost of the material in order to have it to mint the coin, meaning that the government decreases the value of the metal by making it into a coin. There's no degree of streamlining that can fix this because the government ha already lost money just by buying the materials to mint the coins.
Add to this that it's not clear that the one study reported here is actually correct about the effects. That study presumes that the large majority of cash transactions never involve more than 3 items and that sales tax doesn't change the rounding direction. Among the problems with these assumptions is that the guess about the number of items is based on the average money spent over all cash transactions. But, it's hard to believe that the average spent per cash transaction by people who only use cash is not larger than the average spent per cash transaction in the economy at large.
What about pennies from heaven? Find a penny pick it up and all through the day you'll have good luck.
An old man told me long ago. If you find a penny put it in your wallet and your wallet will fill up. Did'nt work.
Either get rid of it or boost the economy by declaring the penny to have a value of 3/100 dollars.
Not to worry penny lovers. The President seems to be for taking pennies out of circulation. Therefore republicans will want to keep them in circulation. If only to create another manufactured crisis.
Well, they are the party of Lincoln.
We should also get rid of the paper $1.00 bill all other countries have
Why not just get rid of it all. We'll all try to get by on our good looks.
Great point Bill. I loved the introduction of the Presdential Dollar coins. Besides the novel idea of having a coin for every President (a new one was released every 3 months) they would save a ton of money. The average paper dollar has a life of 18 months, whereas a dollar coin has 25 years. Unfortunately Americans are not like their European counterparts when it comes to money. They hate coins.
There are big differences inside Europe on that. Those came to light especially during the debates about the material shape of the Euro currency. E.g. the Italians fought for a 1€ bill because they were used to coins as essentially valueless while the Germans wanted a 5€ coin. In the DM era there were 5 DM coins and 5 DM bills with the latter being quite rare (5 DM = 2.5€). 10 DM coins existed but were not in regular use (in essence collector items). Finnland had to coin 1,2,5 Cent coins but they are not in actual use in Finnland and only of interest to foreign collectors.
We can't get rid of the Penny.
That would totally put a kink into Sheldon Cooper's knock.
Esoteric.
Is that why my J.C. Penney stock is headed South?
Obama wants to get rid of Penneys?
They didn't go to Jareds'.
Just stop making pennies and let them slowly disappear into those black holes that exists in every clothes drier.
No sudden shock just a slow gradual change that people and businesses will adapt to.
I doubt the $600 million would transfer from the poor to rich. But i, like everybody else, really don't know. And why would you report a penny costs 2.41 cents to produce and distribute? Where is the actual total costs? How many do we make? If it cost us a substantial amount more than what consumers will lose, it seems a viable option to at least look into, well other options.
It only cost 2.41 per if it's used once and thrown away. The lifetime of a penny is probably less than that of a dollar coin, but not inconsiderable. Say it's 20 years. I have pennies around in my petty cash from the 1990's easily. Seems like a small amount to pay for a product that works for 20-50 years with no more maintenance or batteries.
That is a good point.
Not really. Old pennies still cost more to make than they are worth, the amount of time they sit around doesn't change anything.
Military overseas did not use pennies when I was there. Here's a thought - change the rounding equation. Three pennies or less, round down. Four pennies, round up. That would be a savings for most of those paying cash.
Nowadays, cash registers are smarter than the operators.
How about a cash register that alternates between rounding up for one customer and rounding down for the next one?
Are you listening, Apple?
Nice idea, Jared, but you know what will happen-- the registers will be programmed to do the rounding internally and display only multiples of 5 so you'll never know what it really is, *and* they'll be set to round up from a tenth of a penny, so anything from 0.1 cents up to 5.0 will show as 5 cents. There aren't enough inspectors in the world to stop this from happening.
Sure there are: They're called people who can do grade school math.
I'll get the signs made, please save the penny. Why bother, we would have to change the name of that very familiar road, Penny Lane.(that's not gonna happen.)
Looks to me like the penny's gotta go. Using it saves consumers $600 million a year? That's a whopping dollar a head. Meanwhile the feds can use nearly $2 billion in saved revenue for something useful, like jobs or debt paydown? Au revoir, Abe. You'll always have the sawbuck.
I seriously doubt that finding about 60-93% of transactions rounding up. I strongly suspect that that applies only when the prices of individual items are evaluated - sure, everyone knows that prices ending in 98 or 99 cents are far more common than those ending in 96 or 97 cents - but that's not how it would work in practice. Even poor people rarely buy only a single item at a store, especially low-price items where an increase of a fraction of a nickel would be a significant percentage of the total. And it's only the final total that's rounded, not the price of each item. Or at least that was the case when I was traveling in New Zealand, where they not only don't have pennies but nickels as well; the smallest coin is 10 cents (and while the NZ dollar was a little lower than the US one when I was there, it wasn't but something like 95 cents US). I'd love to have a dollar coin and get rid of the penny.
Nickels cost more than 5 cents to produce. Does that mean we should quit making those, too?
Canada has 1- and 2-dollar coins (no paper less than $5), UK has 1- and 2-pound coins (no paper less than 5 quid), there are 1- and 2-euro coins (no paper less than 5 euros), but we Americans are VERY attached to our currency.
We say we are, but if the dollar bill were to disappear tomorrow, there would be some crying, but we'd get over it. Then we'd wonder why we bothered with these stupid bill changers for so long.
They had this same argument 30 years ago. It's not that they are worthless that they want to get rid of them. It's all tax revenue. Instead of percentages for sales taxes, now it will be rounded UP to nickels and dimes. For the working class, of course. So instead we get nickeled and dimed to poverty.
Maybe they should get rid of the .9 for buying gas, too. Just go and try to get 5.999 worth of gas and see if you pay 5.99 or 6.00 for that gas. Why not let retailers pull the same sham as oil companies and just charge us the extra anyway?
Our coins in this country are insane.
No other advanced country has a coin in circulation worth less than 1 cent and no other country has the most valuable coin in circulation to be worth less than a quarter.
The Japanese have a coin worth about $6. The Euro has a 2 Euro coin, about $2.65. The UK has a 2 pound coin, about $3.10.
Why should we have a coin worth so little like the penny? Why should we have such small bills like the $1 bill?
We could save money and make life easier for everyone if we got rid of the penny, changed the metal content of the nickel, and got rid of the $1 bill.
In NJ, most grocery store items are not taxed if the items are actually food, though candy soda and perhaps more luxurious items are. Likewise, clothing isn't taxed, except (I think) for high-end items like fur coats.
How about we just round down to the nearest nickel if the items are considered necessities (food and clothing) and/or anything paid with cash, and round up to the nearest nickel for everything else?
And of course the rounding is done on a total bill, not each item on the bill, with stiff penalties for stores trying to game the system.
Unprepared foodstuffs can't be taxed. Basically, if you can use foodstamps on it, you can't tax it. It's part of the basic foodstamp law, and one that actually makes sense.
When I lived in North Dakota, we would prefer to shop for clothes in Minnesota as they didn't charge tax on clothing while ND did. Of course, not many clothing stores in East Grand Forks, at least when I lived in the area.
I'm still not sure it wouldn't be better for the consumer to just keep the penny so stores aren't tempted to game the system. As a taxpayer I think I'd rather contribute my bit to keep the penny going, but would like dollar and five dollar coins to replace the much shorter lived paper money.
I do have to wonder what the background cost of upgrading all of the registers would be. Remember when Pres. Bush moved the daylight savings time back & it ended up costing Hospitals & Medical Staffs millions to update their software?
The penny is the only coin with a Republican on it (they don't make the Eisenhower dollar anymore, do they?). Not going away.
In the 1960s a penny was worth about what a nickel is worth today. Did it harm the poor in the 1960s not to have a coin worth 1/5 of a cent?
It's not the worth of the coin, it's the rounding. As soon as the penny's history, the prices of everything will migrate into the "round up" territory. Make all prices divisible by 5, and reduce the tax tables to 5 cent increments, then it would be fair to everyone.