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Penny debate in the United States

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A proof-quality penny

A debate exists within the United States government, and American society at large, over whether the one-cent coin, commonly called 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 five cents, as the lowest-value coin. On February 15, 2013, President Barack Obama stated his willingness to eliminate the penny.[1]

Legislation

In 1990, United States Representative Jim Kolbe (R-AZ) introduced the Price Rounding Act of 1989, HR 3761 to eliminate the penny in cash transactions, rounding to the nearest nickel.[2] In 2001, Representative Kolbe introduced the Legal Tender Modernization Act of 2001, HR 2526, and in 2006 he introduced the Currency Overhaul for an Industrious Nation (COIN) Act, HR 5818.[3] While the bills received much popular support from the public, and therefore from their representatives, the bills were not made to law when Congress adjourned.[4] There are public pressures on many Representatives to reintroduce these bills back into the legislature. One such example is the constituency of the 2nd district of Colorado, represented by Jared Polis.[5]

Arguments for elimination

  • Production at a loss — As of February 2011, it costs about 2.4 cents to mint a penny.[6] In 2007, the price of the raw materials it is made of exceeded the face value, so there was a risk that coins were illegally melted down for raw materials.[7]
  • Lost productivity and opportunity cost of use — With the median wage in the U.S. being about $17 per hour in 2011,[8] it takes about two seconds to earn one cent. Thus, 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. is about $3.65 per person annually,[9] about $1 billion for all of the USA.[10] Using a different calculation, economist Robert Whaples estimates a $300 million annual loss.[11]
  • Limited utility — Pennies are not accepted by all vending machines or many toll booths, and pennies are generally not accepted in bulk. Pennies often end up sitting in jars or are thrown away and are not in circulation. Economist Greg Mankiw says that "The purpose of the monetary system is to facilitate exchange, but... the penny no longer serves that purpose."[12]
  • Prices would not be higher — 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 effect. Consumers would gain a tiny amount – about 1⁄40¢ or $0.00025 per transaction.[13]
  • Historical precedents — There has never been a coin in circulation in the U.S. worth as little as the penny is worth today, although currently other countries have coins with less purchasing power in circulation. Due to monetary inflation, as of 2007, a nickel is worth approximately what a penny was worth in 1972.[14] When the United States discontinued the half-cent coin in 1857, it had a 2010-equivalent buying power of 11 cents.[15] After 1857, the new smallest coin was the cent, which had a 2010-equivalent buying power of 23 cents. The nickel fell below that value in 1974; the dime (at 10 cents) fell below that value in 1980;[14] the quarter (at 25 cents) fell below that value in 2007.[15]
  • 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 furthermore, zinc and copper digested from the lodged pennies may be toxic. An 11 lb (5-kilogram) dog was fatally poisoned by swallowing two pennies.[16]
  • Ecological/Environmental damage — Zinc is a heavy metal, highly toxic to the environment in its elemental state. The mining and smelting of zinc pollutes the air, soil[17] and freshwater sources,[18] which, when ingested excessively, can cause stomach cramps, nausea and vomiting. High-dose, prolonged exposure can cause cholesterol imbalance, a weakened immune system and sterility.[19] Elevated heavy metal concentrations in crops grown near zinc mining/smelting locations has also been observed.[20] Disposal of large amounts of unused pennies annually has a negative effect on the environment, though the exact degree of this damage has not yet been fully established. [citation needed] adversely causing air pollution.

Arguments for preservation

  • Consumers and the economy — Research by Penn State University Economist Ray Lombra in 1990 shows that if were the penny to be eliminated, consumers might be hit with a "rounding tax". He further stated that rather than eliminate the penny it could make more sense to change the composition of the penny to a cheaper metal than zinc if the costs of zinc do not come down and there continues to be a significant loss per penny.[21]
  • Popular support — A poll conducted March 22–25, 2012 by Opinion Research Corporation International on behalf of the zinc lobby and Americans for Common Cents [22] found over two-thirds (67%) of those surveyed favor keeping the penny in circulation.[23] The poll results showed 77% are concerned that if the government implements a rounding system for cash purchases, businesses might raise prices.

Nickels

Nickels cost around 11 cents to produce.[24]

Lobbying

  • The sole provider of zinc "penny blanks", Jarden Zinc Products, has hired lobbyists to make the case for preserving the penny and their sales.[25]
  • The coin lobby Citizens to Retire the Penny [7]

Other options

Economist François R. Velde has suggested an alternative plan in which the government would make the penny worth five cents. This change would cause minor monetary inflation of $5.6 billion.[26]

Congress passed the Coin Modernization, Oversight & Continuity Act of 2010 requiring Treasury reports on possible new metallic coin materials. [27]

Precedents in other countries

Many countries outside the United States have chosen to remove low-value coins from circulation:

  • Canada has minted a one-cent coin of similar size and color as its American counterpart, with steel as the interior metal instead of zinc, though composition was near identical to U.S. cents prior to 2000; so it circulates at par in small quantities in the United States (and vice-versa). However, on March 29, 2012, the Canadian government announced that it will eliminate the penny from the coinage system.[28] The final Canadian penny was minted on May 4, 2012[29] and active distribution of the coin by the mint was discontinued on February 4, 2013.[30]
  • The Philippines under US territorial administration removed their half-centavo coins from circulation in 1904 because of public rejection of such a small denomination, though introduced only the year before. The Philippine half centavo continued as a proof-only coin until 1908, and a small run of aluminum half-centavo coins was privately struck in 1913 for the Culion Leper colony, but not circulated. In contrast to that however, the Philippine hundredth of a peso denomination (one sentimo) continues to exist as a circulated coin as of 2011 despite a record low value of $0.00024.
  • Sweden removed the one- and two-öre coins from circulation in 1972, by 1991 had eliminated the five, ten, and 25-öre coins, and in 2010 also eliminated the 50-öre coin. Similarly, the Norwegian krone has also eliminated its five, ten, 25 and 50 øre coins.
  • In Denmark the Danish krone has had the 25-øre coin removed from circulation. From the 1st of October 2008, you could no longer pay with it in stores, and from the 1st of October 2011, you could no longer exchange it.[31] Neither in regular banks nor the national bank (Nationalbanken).
  • 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.[32]
  • New Zealand eliminated one- and two-cent coins of the New Zealand dollar in April 1990, and the five-cent coin in October 2006.[33] Before decimalization on 10 July 1967, there were two coins smaller than the decimal cent that were eliminated during the changeover – the halfpenny (5⁄12 cent), and the penny (10⁄12 cent)
  • Mexico's New Peso transition in 1993 made the five-cent coin the smallest denomination of the new currency (the name was reverted to Mexican peso in 1996). In 2009, new coins were minted only for the ten, twenty and fifty cent denominations.[34]
  • Australia eliminated the one-cent and two-cent coins of their dollar in 1992.[35]
  • The Hong Kong government ceased producing the Hong Kong five-cent coin in 1980 and the Hong Kong one-cent note in 1995.[36]
  • Bank Negara Malaysia implemented a rounding mechanism on 1 April 2008 in order to round total bills to the nearest 0.05 ringgit, which made the 1 sen (0.01 ringgit) coin irrelevant to normal circulation.[37]
  • Israel eliminated the one agora coin in April 1991[38] and the five-agorot coin in January 2008.[39]
  • The Netherlands eliminated the one cent of the guilder in 1980 and ceased issuing the one and two cents of Dutch euro coins in 2006. In Finland, the one and two cent of Finnish euro coins are only being minted for collectors and are not in general usage.
  • On March 1, 2008, Hungary eliminated the one and two forint coins and rounded everything to the nearest five forint.[40]
  • In 2005, Brazil stopped issuing one-cent Brazilian Real coins.[41]
  • In 2001, Argentina stopped issuing one-cent Argentine Peso coins.[citation needed]
  • Since 1978, India has in phases eliminated out of circulation 1 paisa (1⁄100 of a rupee), 2 paise, 3 paise, 5 paise, 10 paise, 20 paise, and 25 paise coins.
  • Papua New Guinea eliminated their two smallest denominations, the copper one and two Toea coins, with both coins ceasing to be legal tender in April 2007.[42]
  • At U.S. Military bases overseas, AAFES round up/down to nearest 5 cent denomination.[43]
  • Singapore no longer issues one-cent coins since April 2002.[44]
  • Costa Rica discontinued use of its 1 and 2 colones coins.

However, many nations still use coins of similar or smaller value to the US cent. In some cases, while the nominal value of the coin may be smaller than that of a US cent, the purchasing power may be higher:

  • Russia still issues five-, ten-, and fifty-kopek coins, despite their value being approximately equivalent to $0.002, $0.003, and $0.02, respectively, in U.S. dollars. The issue of one-kopek coins was stopped in 2010.[45]
  • Neighboring Ukraine still issues and uses all kopek coins, even the 1 kopek dating from when its hryvnia was worth more. One kopeck is equivalent to $0.00125 (one-eighth of a U.S. cent).
  • Republic of Korea stopped minting of 1-won and 5-won coins, but 10-won coins are still minted with changing composition.
  • The East Caribbean Dollar Board, the Bahamas, Barbados, Bermuda, Cayman Islands, and Belize all issue one-cent coins.
  • The Solomon Islands, South Africa (1c and 2c were stopped in 2002[46][47]) and Namibia all issue five cent coins valued approximately at or below US $0.01.
  • The Eurozone (except for Finland and the Netherlands) uses 1- and 2-cent coins. As posted prices generally include taxes, it is possible (but not standard) for vendors to round prices to the nearest five cents and eliminate the need for smaller-value coins. In Finland and the Netherlands, all prices are rounded to the nearest five cents.[48]
  • Japan continues to mint the 1 yen coin, and it is in regular usage.
  • Peru's Nuevo Sol still maintains production of 1-cent and 5-cent coins. The 1-cent coin is worth USD 0.0035 US. Much like the American coin, they are only occasionally given out at supermarkets as change and are never used in public. Most supermarkets offer the option of donating the cents instead of receiving the change. This saves time and most people opt for a donation to charity.
  • Croatia still issues and uses 5 lipa (0.05 kuna) coins, worth approximately $0.01 as of January 2013. The 1 and 2 lipa coins haven't been minted since 2009, but are still occasionally encountered.

Other countries listed below also use 1 cent coins identical in size and composition to an American penny, nearly all are either pegged to the U.S. Dollar or circulate alongside the pegged currency. Small amounts of these coins also circulate at par in the United States.

  • Panama still issues a 1-centésimo coin, which is identical in size, composition and value to the U.S. cent, and circulates alongside it.
  • Ecuador still issues a 1-centavo coin, and like Panama, the coin is mostly identical in composition to a U.S. cent, is equivalent in value, and also circulates alongside it.

Laws regarding melting and export

On April 17, 2007, a Department of the Treasury regulation went into effect prohibiting the treatment, melting, or mass export of pennies and nickels. Exceptions were allowed for numismatists, jewelry makers, and normal tourism demands.[49] The reason given was that the price of copper was rising to the point where these coins could be melted for their metal content.[50] In 1969, a similar law regarding silver coinage was repealed. Because their silver content frequently exceeds collector value, silver coins are often sold by multiplying their "face value" times a benchmark price that floats relative to the spot silver price per ounce.[51]

References

  1. ^ Weinberg, Ali (2013-02-19). "Penny pinching: Can Obama manage elimination of one-cent coin?". NBC News. Retrieved 2013-02-20.
  2. ^ H.R.3761 -- Price Rounding Act of 1989 (Introduced in House - IH)
  3. ^ Christian Zappone (2006-07-18). "Kill-the-penny bill introduced". CNN Money. Retrieved 2007-03-21.
  4. ^ "Nickel for your thoughts? US bill seeks penny's end". Reuters. 2006-07-20. Retrieved 2006-07-20.
  5. ^ [1]
  6. ^ Obama wants cheaper pennies and nickels - Feb. 15, 2012
  7. ^ "United States Mint Moves to Limit Exportation & Melting of Coins". 2007-04-17.
  8. ^ "May 2011 National Occupational Employment and Wage Estimates United States". U.S. Bureau of Labor Statistics. 2011-05-01. Retrieved 2012-04-09. {{cite news}}: Cite has empty unknown parameter: |coauthors= (help)
  9. ^ Mallaby, Sebastian (2006-09-25). "The Penny Stops Here". The Washington Post. p. A21. Retrieved 2007-08-09. The median worker earns just over $36,000 a year, or about 0.5 cents per second, so futzing with pennies costs him $3.65 annually. {{cite news}}: Cite has empty unknown parameter: |coauthors= (help)
  10. ^ Mankiw, Greg (2006-09-25). "How to Make $1 Billion". Greg Mankiw's Blog. Retrieved 2007-08-09. Multiply that last figure by the number of Americans & you find that getting rid of the penny would free up economic resources valued at about $1 billion a year. {{cite web}}: Cite has empty unknown parameter: |coauthors= (help)
  11. ^ "The Penny's End Is Near". Consumer Affairs. 2006-07-19. Retrieved 2007-08-09. Whaples said that based on the average American wage, $17 an hour, every 2 seconds of an average American's day is worth 1 cent. "That's going to add up to about $300 million per year for the U.S. economy," Whaples said.
  12. ^ Mankiw, Greg (2006-12-31). "Resolutions for Another New Year". Greg Mankiw's Blog. Retrieved 2009-12-28. {{cite web}}: Cite has empty unknown parameter: |coauthors= (help)
  13. ^ Robert Whaples, "Time to Eliminate the Penny from the U.S. Coinage System: New Evidence," Eastern Economic Journal, vol. 33, issue 1, pp. 139-146 (2007).
  14. ^ a b http://data.bls.gov/cgi-bin/cpicalc.pl CPI Inflation Calculator
  15. ^ a b http://www.westegg.com/inflation/ The Inflation Calculator
  16. ^ Attention: This template ({{cite pmid}}) is deprecated. To cite the publication identified by PMID 10540650, please use {{cite journal}} with |pmid=10540650 instead.
  17. ^ Attention: This template ({{cite pmid}}) is deprecated. To cite the publication identified by PMID 16465871, please use {{cite journal}} with |pmid=16465871 instead.
  18. ^ Attention: This template ({{cite pmid}}) is deprecated. To cite the publication identified by PMID 19775009, please use {{cite journal}} with |pmid=19775009 instead.
  19. ^ Attention: This template ({{cite pmid}}) is deprecated. To cite the publication identified by PMID 21573711, please use {{cite journal}} with |pmid=21573711 instead.
  20. ^ Attention: This template ({{cite pmid}}) is deprecated. To cite the publication identified by PMID 16806473, please use {{cite journal}} with |pmid=16806473 instead.
  21. ^ Managing Change: Is the Penny Worth Keeping? with Raymond Lombra, an economics professor at Pennsylvania State University, and Robert Whaples, a professor and chairman of the economics department at Wake Forest University
  22. ^ http://www.pennies.org/ Americans for Common Cents
  23. ^ Weller, M. (March 30, 2012). "Americans For Common Cents: 66% of Americans Favor Keeping the Penny". Americans for Common Cents. Retrieved October 24, 2012.
  24. ^ "The United States Mint · Coins & Medals". Usmint.gov. Retrieved 2013-05-25.
  25. ^ "Zinc supplier paying thousands to save penny". The Dallas Morning News. 2007-08-19. Retrieved 2010-02-08.
  26. ^ Goolsbee, Austan. New York Times, 2007-02-01. "Now That a Penny Isn’t Worth Much, It’s Time to Make It Worth 5 Cents". Accessed 2007-11-30.
  27. ^ http://www.gpo.gov/fdsys/pkg/PLAW-111publ302/pdf/PLAW-111publ302.pdf
  28. ^ "Budget: Penny pinch — Canada to phase out the copper coin". Canada.com. 29 March 2012. Retrieved 29 March 2012.
  29. ^ "Canada's Last Penny: Final Cent Struck In Winnipeg Friday As Currency Killed". Canadian Press/Huffington Post Canada. 2012-05-04. Retrieved 2012-05-04.
  30. ^ Schwartz, Daniel (Feb 1, 2013). "Obituary: Canadian penny, 1858-2013". CBC News. Retrieved 4 February 2013.
  31. ^ Danmarks Nationalbank - 25-øren afskaffet, the reference document is in danish.
  32. ^ "Halfpenny coin to meet its maker". BBC Online. February 1, 1984. Retrieved August 17, 2010.
  33. ^ History of New Zealand Coinage, Reserve Bank of New Zealand. Accessed 2008-01-02.
  34. ^ [2], Banco de México. Accessed 2010-12-27.
  35. ^ Royal Australian Mint FAQ. Accessed 2008-01-02. Template:Wayback
  36. ^ Ma Tak Wo 2004, Illustrated Catalogue of Hong Kong Currency, Ma Tak Wo Numismatic Co., LTD Kowloon Hong Kong. ISBN 962-85939-3-5
  37. ^ "BNM Rounding Mechanism". Bank Negara Malaysia. Retrieved 2008-04-08. {{cite news}}: Cite has empty unknown parameter: |coauthors= (help)
  38. ^ "Error1-2010". Bankisrael.gov.il. Retrieved 2013-05-25.
  39. ^ "Error1-2010". Bankisrael.gov.il. Retrieved 2013-05-25.
  40. ^ National Bank of Hungary - Forint.hu
  41. ^ [3][dead link]
  42. ^ "One Toea Coin". Bank of Papua New Guinea. Retrieved 2010-02-08.
  43. ^ CONGRESSIONAL RECORD—HOUSE March 19, 2002, gpo.gov, Page H959 (page 21 of the PDF).
  44. ^ [4][dead link]
  45. ^ Мир новостей: Почему похоронили копейку
  46. ^ [5][dead link]
  47. ^ [6][dead link]
  48. ^ "Save the penny or leave the penny?". CBC News. 10 October 2007.
  49. ^ "United States Mint Limits Exportation & Melting of Coins". Press Release and Public Statements. United States Mint. 2007-04-17. Retrieved 2007-08-28.
  50. ^ The United States Mint Pressroom
  51. ^ http://www.coinflation.com/coins/silver_coin_calculator.html Hartford Advocate: News - Penny Ante Profits

External links

Wikimedia Commons has media related to United States cents.
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