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.