Getting Rid of the Penny

Transcript

The US one-cent coin has been a part of American currency since the country started issuing money in 1793. As inflation has continued to creep up, the cost of making a one-cent coin is now more than it is worth.

Unsurprisingly, people have been starting to question if we should continue using the penny.

Learn more about the past, present, and future of the United States penny in this episode of Everything Everywhere Daily.

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The official name of the smallest coin in the United States according to the US Mint in the “cent”, and it is called the “One Cent Piece” by the US Treasury.

I mention this because there is officially no such coin as a “penny” in the United States.

The name penny was borrowed from the English coin known as a penny which was 1/240th of a pound. The name itself comes from the word “pennyweight” which is the unit of weight for 1/240th of a troy pound of silver.

The coins used in the United States were set by the Coinage Act of 1792. It noted:

That the money of account of the United States shall be expressed in dollars or units, dismes or tenths, cents or hundredths, and milles or thousandths, a disme being the tenth part of a dollar, a cent the hundredth part of a dollar, a mille the thousandth part of a dollar, and that all accounts in the public offices and all proceedings in the courts of the United States shall be kept and had in conformity to this regulation.

You might notice that the United States doesn’t’ have a coin called the mille. We never have in fact. However, we did have a coin called the half-cent. The half-cent was a five mille coin in the same way that a nickel is a five-cent coin.

We eventually got rid of the half-cent coin in 1857, and that was the last time we eliminated an entire coin value from the US roster of coins.

Most people think that the penny is made of copper. This used to be true, but it isn’t anymore.

The first penny issued from 1793 to 1857 were 100% copper. Since then, the amount of copper in the coins has kept going down as the value of copper has gone up, and the value of the penny has gone down.

The first penny weighed 13 and a half grams. Today, by comparison, the penny is only 2.5 grams.

Moreover, since 1982, the penny is now made of 97.5% zinc, and only 2.5% copper which is used as a coating.

In 1943, for one year as a materials savings measure during World War II, one-cent coins were made out of steel with no copper in the coin at all.

Despite the reduction in the size of the penny and the percentage of copper in the penny, about 10 years ago we passed the point where the cost of making a penny exceeded its value.

This ability to make money from the production of coins is called “seigniorage”. It has been a source of revenue for kings and countries for millennia.

While there has been talk of getting rid of the penny for a long time, the issue came to greater prominence in the last decade when the penny became a money-losing proposition.

Today, the United States is now losing over $90 million per year on the creation of pennies.

The United States is currently one of the few countries to issue a coin that costs more than its value.

Sweden removed their 1 and 2 öre coins in 1970.
New Zealand got rid of their 1 and 2 cent coins in 1990.

Australia eliminated their 1 and 2 cent coins back in 1991.

Brazil stopped producing the 1 centavo coin in 2005.

Canada chucked the penny in 2012.

The Euro Zone does have 1 and 2 cent coins, but they are being phased out as more and more countries in the Euro Zone have stopped making them.

The vast majority of pennies in the United States are not even in active circulation. They sit in jars and coffee cans in most people’s homes as they are collected. People don’t want to carry them, so they just hoard them at home.

They have so little value that there is often a container of them near most cash registers to help people round off purchases.

It has been calculated that the time it takes to pick up a penny off the ground is now less than the federal minimum wage.

Vending machines do not accept pennies, and it is all but impossible to even find a gumball machine anymore which will take a penny.

The biggest cost, however, is just the drag on the economy of handling pennies. It might not seem like much, but when you factor in the time spent by 330 million people every year, it adds up. A few seconds spent with the coins can ripple through everyone standing in a line, for example, or cars paying a toll with pennies. In any individual case, the amount of time is tiny, but in the aggregate, the net economic cost can be in the billions.

So why wouldn’t we get rid of the penny?

The biggest reason, to be honest, is the zinc lobby. Yeah, big zinc. They obviously have the biggest incentive to keep the penny. They created a lobbying group called Americans for Common Cents (cents, get it?) and they’ve been the primary group working against it.

There have been attempts in Congress to do this, but they haven’t gone anywhere. In 1990 Representative Jim Kolbe of Arizona proposed the Currency Overhaul for an Industrious Nation or C.O.I.N. Act.

The legislation never went anywhere.

In 2017, Senator John McCain of Arizona and Senator Mike Enzi of Wyoming introduced the Currency, Optimization, Innovation, and National Savings or C.O.I.N.S. Act (I have no idea why this issue attracts so many cute acronyms or puns). This bill just advocated a 10-year freeze on the minting of pennies, but it too never went anywhere.

As much as I would like to demonize the forces of big zinc, the truth is that there just wasn’t a whole lot of interest with the other members of Congress. Both pieces of legislation died from apathy. Neither political party has really taken any stance whatsoever on the penny. People who have supported it have been on both sides of the aisle, but there just aren’t enough of them.

Americans a really fussy about their money. They like pennies enough to say so in a survey, but not enough to actually bend over and pick one up.

So what would getting rid of the penny look like?

Actually, it would be really easy. We just stop making them. That’s it.

All of the 240 billion pennies floating around in circulation would still be legal tender. Banks collect old coins and return them to the mint for recycling. That would continue.

Over time, there would just be fewer and fewer pennies.

How would we deal with pricing? That too is really simple. It’s called Sweedish Rounding because it was first practiced by Sweden when they got rid of their small coins, and it is done all over the world.

You just round the price of any transaction paid in cash to the nearest nickel. That means that the most you will pay on any transaction is 2 cents, and on average, you won’t pay more at all. This isn’t on a per-item basis, but rather on a per-transaction basis.

Studies done on prices in stores shows that rounding up and rounding down would balance each other out.

All transactions done with credit or debit cards wouldn’t need to be rounded at all.

Believe it or not, we already do this sort of rounding with 1/10 of a cent prices. Almost all gas prices in the US are priced down to 1/10 of a cent, yet as I mentioned above, we don’t have a mill coin. Most people don’t even know or care, but fractional cent prices are clearly visible on most gas pumps.

Despite the fact that the penny is now a money-losing proposition, the reality is we will still be living with it for some time to come, Not enough people care to take action, and most people seem fine with jars full of pennies.