It is time to kill off the ubiquitous penny
By Andrew Ferguson
The origins of public disputes are often mysterious, so it's probably pointless to ask why so many people have suddenly started arguing about the continued existence of the U.S. penny. Maybe it's just summer boredom. Maybe it's issue fatigue — a lighthearted escape from the weighty questions of war and terrorism.
Whatever the source, one thing is certain: Articles about whether the U.S. government should discontinue minting the 1-cent coin have inspired the greatest eruption of bad headline wordplay in recent memory.
I have seen headlines about "a penny spurned." I have read — perhaps dozens of times — that discontinuing the coin "makes good cents." The idea, says another copydesk punster, is just "plain ol' common cents."
On the other side, advocates say the country shouldn't be "left penniless." Anti-penny activists dismiss such advocates as "copperheads." Noting that pennies are mostly made not of copper but of another mineral, pro-pennyists accuse their enemies of throwing out everything "but the kitchen zinc."
And it goes beyond headline writers. Even the nation's most prestigious organization dedicated to preserving the penny —coincidentally, it's the nation's only organization dedicated to preserving the penny — has fallen for the cutesy puns, starting with its name.
Americans for Common Cents works hard to rebut the arguments against the penny, which are pretty straightforward and gaining strength.
The U.S. Mint announced earlier this year that, thanks to the rising cost of zinc, it now costs more than a penny to produce a penny. The penny has become a monument of economic inefficiency.
"The purpose of the monetary system is to facilitate exchange," wrote Harvard economist Greg Mankiw in April. "When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful."
And the tray at the cash register isn't the only place pennies are left. Finding them inconvenient, consumers empty their pockets each night and let pennies accumulate in jars and desk drawers. According to Coinstar Inc., the Bellevue, Washington-based company that manages coin-counting machines in retail stores, there's roughly $1 billion in pennies out of circulation in the U.S.
To replace the ones that sit idle, the Mint keeps churning out new, money-losing pennies — more than 8 billion last year, almost twice the number of any other coin.
Rep. Jim Kolbe of Arizona estimates that this costs the government $20 million a year — "government waste at its worst," he says. But penny foolishness spreads. Kolbe cites studies showing that the inefficiency created by pennies drains $300 million in productivity from the private economy.
So Kolbe has proposed a wide-reaching currency reform. The centerpiece of his bill is a rounding system for cash transactions that would discourage use of the penny and eventually make it obsolete.
Items that cost 11 or 12 cents, for example, would be rounded down to 10; 13- and 14-cent items would be rounded up to 15.
Pro-pennyists fret that this would lead to a flurry of price-gouging among retailers. But Robert Whaples, an economist at Wake Forest University, compiled data from 200,000 separate transactions at a national convenience-store chain and found that for consumers the rounding effect would be a wash: Prices would be rounded down as often as they were rounded up.
None of this damps the ardor with which Americans for Common Cents defends the maligned penny. Though it might at first glance appear to be a group of charming, penny-addled eccentrics, the ACC is really just another lobbying organization, funded partly by the zinc industry and other self-interested rent-seekers.
Lobbyists specialize in alarmism, of course, so not surprisingly the group presents a picture of a post-penny world that is comprehensively dire, made chaotic by galloping inflation and ruthless price-gouging.
According to the group's literature, "elimination of the penny" — predictably enough — "will hurt those who can afford it least, the poor and elderly," though how these vulnerable cohorts will be singled out is a mystery. Charities, too, having lost the cute gimmick of penny collections, would suffer. Consumer confidence would plummet.
Worse, the discontinuation of the penny would open a hole in the national soul: "The penny has been an integral part of the American experience — whose childhood would be complete without penny candy and other small purchases?"
In the face of such weak arguments, the merits of the penny debate are clear. The coin has outlived its usefulness, and Kolbe's bill, calling for its gentle retirement, deserves to pass.
For most of us, though, one last argument should settle the issue. Even the sober-sided Kolbe can't resist.
"It's time for us to say," he says, "that the penny stops here." The penny — not the buck. Get it? Heh, heh. Glad I didn't think of that.
If Kolbe's bill would bring an end to all this cringe-inducing wordplay, it would be a very small price to pay.
Andrew Ferguson is a Bloomberg News columnist. In 1992, he wrote speeches for President George H.W. Bush. The opinions expressed are his own.