Eliminate the penny?

I have a hard time believing this made the news, but since it did...

A penny costs 1.2 cents to produce. They are a bit of a nuissance and tend to just get thrown in the car ashtray (sadly a lot of people are so lazy they just throw them out with the ashes instead of ever cashing them in).

Congressman Jim Kolbe of Arizona plans on trying again to get rid of the penny.


Is anybody else a little puzzled at how a US congressman has an idea this bad? The value of money is not really in its face value, but in its ability to move goods and services. That's why the GDP is higher than the amount of money in circulation. (Incidentally, anything raising the GDP raises tax revenues, assuming it doesn't involve changing the tax rate).

So great, the penny costs 1.2 cents to make- almost a sure sign they'll be able to sell people on getting rid of it- but what is a penny worth? By estimating the medium possible return in pennies (2 per transaction) and just under 3 transactions a day, i came up with pennies being worth maybe $40 bucks a year to me. If the deficit on minting pennies is 2 cents on the dollar, and sales taxes are around 7 cents on the dollar, not to mention other taxes, the penny is making Uncle Sam more than it's costing him.

But consider what happens if the penny goes away, if my average return on a transaction is 2 cents, then rounding up will cost me another 3 cents. I spend another 60 bucks on top of the 40 i'm no longer saving, meaning that eliminating the penny costs me 100 bucks a year total (which happens to be around one percent of my spending power while I'm a college student). Yet uncle sam makes money, not only on the reduced spending but because transactions being taxed are rounded up in amount. And does the savings come back to us in taxes- unlikely, but if it did, it's a very creative (albeit very small) regressive tax move all the same.

It's amazing what silly stuff I can put thought into, I know. I was just struck by the stupidity of the first thing I read in the news article on this subject being that pennies cost than their face value to mint, and that drove me to look for flaws and rant for a sec.

I'm not sure if this is relevent, but I was watching an episode of WestWing a while back (2-3 years) and the president (Martin Sheen) mention this and says the reason they aren't getting rid of it is because the state where Lincoln is from would not allow it. (lobby groups, etc.)

Maybe the statement has something to it.

The Vagabond you also have to bear in mind that inflation will often render lower value currency to be quite useless for example one and two cent coins are no longer in circulation .
When the coins where pharsed out the only thing that they brought were small individual lollies such as jelly beans.
Your argument would hold weight with the five cent coin thou 99% of people will pay $10 instead of $9.95 unless they are using EFPOS or a credit card. So you always get the five cents change.

Has the penny "lost its value " for the lack of a better term just like one and two cent coins did in Aust and NZ ?

Here's one such Lobby Group (although I don't think they're from Abe's home state)
www.pennies.org...

and there seems to be conflicting opinions: You quoted 1.2, they quote .97

The penny makes a profit for the government. It costs .97 cents to make, based on fiscal 2005 Mint data.
www.pennies.org...

[edit on 3/7/06 by ConspiracyNut23]

Cost of a penny

For the first time, the U.S. Mint has said pennies are costing more than 1 cent to make this year, thanks to higher metal prices.

The lobby was citing 2005 numbers.

I understand the rationale for eliminating the penny, and I realize that it will probably make sense before very long, but not at the moment. At the moment, the penny is still profitable, potentially saving enough spending power per person to make it just barely worthwhile.

Now here's the big question in my mind: the problem is in fact the coin, not the application of cents to pricing. So it begs the question, do they abolish the denomination itself, or just the coin? I'd sack the estimated 40 bucks a year just to have my purchases not be filed in computer records personally, so if they do it that way i'll keep using cash and just lose the loose change, but you've gotta wonder how many thrifty types will be more conscientious about staying on the grid to save 2 cents.

Not to mention that if enough people had that mentality (we can guage that by simply checking the census information on senior citizens I think), then the card companies would stand to make a pretty... um... nickel (though a trifling one).

i don't see why the government dosn't considder re-valueing the mony one decimal place. this idea seems to freak people out. they say it would destroy the ecconomy. how? all it would realy mean is that $10 now equils $1. if you now make $8/hour you would now make $0.80. if your car payment is $204/month then it would cost $20.40. nothing is realy lost or gained. it would even out.

Of all the things on this board and this is what Im gonna debunk! I don't buy it!

I think the cost of making it has been inflated to help the cause to get rid of it.

When you manufacture such a simple product, its very easy to meet economies of scale. The things that make it economical are the minimal raw material requirement plus bulk discounts on RM procurement.

Then consider relatively simple manufacturing process and throw in the sheer quantity and it would cost hardly anything, way less than 1 cent per unit.

Basically, they want rid of it because it's pain in the backside to deal with and they probably make more in the long run by having a higher denomination piece at the bottom of the currency spectrum. They probably calculated, they could make $10 trillion dollars per year buy rounding stuff up a few cents.

[edit on 21/7/06 by Prote]

it used to be another day worked, another dollar earned, now it seems like another penny earned when you take into accout the taxes, and living expenses..... do away with the penny and will it will be like working for nothing!!!

Wouldn't the soloution finding a diferent metal to make a penny from.Besides didn't the fall of Mexico's economy come from rounding up the peso.

Originally posted by The_Result_was
Wouldn't the soloution finding a diferent metal to make a penny from.Besides didn't the fall of Mexico's economy come from rounding up the peso.

We could go back to steel pennies like during WWII, but I forgot the US doesn't make steel anymore....we would have to buy it from Malaysia.

Well if they do that, nothing can ever have a .99 attached at the end to make it look less expensive to some.

I have read that people have been melting down their old pennies and selling them to scrap yards, and they are getting more money for them than their actual monetary worth. I thought that this was a federal offense, but how could the government track your actions of melting down coins and selling them?

How would the government get ahold of your DNA then? I ask you? And what of the companies that manufacture smash a penny into something for a quarter?

I realy don't like pennies, and I also think they need to get rid of the paper dollar and produce a thick dollar coin.

But the penny is part of american culture its what you throw to of in to state your opinion. Also think of the ramifications to chainge making? Everything rounded to the nearest 5c? I don't think so.

I hate the penny. I'd be happy with nothing smaller than a 50 cent piece, of course they'd have to adjust all the prices so they they come out even.


Also we should switch to Metric, but thats a totally different thread.