Would You Stop to Pick One Up – We Should Eliminate the Penny

The U.S. penny, a one-cent coin featuring Abraham Lincoln’s profile, has been a staple of American currency since 1909. However, in recent years, the penny has become a subject of some debate. Critics argue that it is an outdated and inefficient form of currency, while supporters believe it holds cultural and economic value. As the cost of producing and distributing pennies continues to rise, the question of whether the U.S. should stop making the penny has gained traction. But why should you care?

The Case for Eliminating the Penny

One of the most compelling arguments against the penny is its cost of production. In recent years, it has cost more than one cent to produce a single penny. For example, in 2022, the U.S. Mint reported that it cost approximately 2.72 cents to make each penny. This means the government loses money with every penny it produces. Eliminating the penny would save taxpayers millions of dollars annually, which could be redirected to more pressing needs.

Pennies are often seen as a nuisance in everyday transactions. They slow down cash transactions at stores, banks, and vending machines. Many people discard or hoard pennies rather than using them, reducing their circulation and utility. By eliminating the penny, transactions could become faster and more efficient, particularly in an increasingly cashless society.

The penny’s purchasing power has eroded significantly over time due to inflation. In 2023, one cent is worth a fraction of what it was worth when the penny was first introduced. Many items can no longer be purchased for a single cent, and prices are often rounded to the nearest nickel. This makes the penny increasingly irrelevant in modern commerce.

Producing pennies requires significant amounts of raw materials, including zinc and copper. Mining and processing these materials have environmental consequences, including habitat destruction, pollution, and greenhouse gas emissions. Eliminating the penny would reduce the demand for these materials, contributing to a more sustainable economy.

Several countries, including Canada, Australia, and New Zealand, have successfully eliminated their lowest-denomination coins without adverse effects. These countries rounded cash transactions to the nearest five cents, simplifying transactions and reducing costs. The U.S. could follow their example and streamline its currency system.

The Somewhat Weak Case for Keeping the Penny

The penny holds a special place in American culture and history. It features Abraham Lincoln, one of the nation’s most revered presidents, and has been a symbol of thrift and charity for over a century. Many people associate the penny with traditions like penny drives and “lucky pennies,” making it a sentimental part of American life.

Pennies play a significant role in charitable donations. Many organizations, such as the Leukemia & Lymphoma Society’s “Pennies for Patients” program, rely on small donations collected in penny drives. Eliminating the penny could reduce the amount of money raised for these causes, though some argue that rounding donations to the nearest nickel could offset this loss.

Critics of eliminating the penny argue that it could lead to price inflation. Without the penny, businesses might round prices up to the nearest nickel, increasing costs for consumers. While studies in other countries have shown a minimal impact on prices, some worry that rounding could disproportionately affect low-income individuals who rely on cash transactions.

Eliminating the penny would require a significant transition period. Businesses would need to update their pricing systems, cash registers, and vending machines to accommodate rounding. The government would also need to manage the withdrawal of pennies from circulation, which could involve logistical challenges and short-term costs.

The penny is often used in psychological pricing strategies, such as pricing items at 4.99 instead of 5.00. Retailers argue that these pricing tactics influence consumer behavior and increase sales. Without the penny, businesses might lose this marketing tool, potentially affecting their revenue.

Potential Solutions and Compromises

If the U.S. decides to eliminate the penny, several strategies could mitigate the potential downsides.

Rounding Rules - Implementing fair rounding rules, as seen in other countries, could minimize the impact on consumers. For example, transactions could be rounded to the nearest nickel, with amounts ending in 1, 2, 6, or 7 cents rounded down and amounts ending in 3, 4, 8, or 9 cents rounded up.

Phased Approach - A gradual phase-out of the penny could allow businesses and consumers time to adapt. The government could stop producing new pennies while allowing existing ones to remain in circulation until they are naturally withdrawn.

Promoting Digital Payments - Encouraging the use of digital payment methods could reduce reliance on physical currency, making the elimination of the penny less disruptive.

The debate over the U.S. penny highlights the tension between tradition and efficiency. While the penny holds cultural and historical significance, its declining utility and rising production costs make it a prime candidate for elimination. By learning from the experiences of other countries and implementing thoughtful policies, the U.S. could streamline its currency system without causing significant harm to consumers or businesses. Ultimately the decision to eliminate the penny will require careful consideration of its economic, cultural, and practical implications. Its fate, much like a lot of our day to day interactions with physical cash, will reflect broader trends in how society values and uses money in an increasingly digital world.