Does it make sense to keep minting pennies?
I have a question for you. How much does it cost to make an individual penny? Also, how many are made each year? (OK, so it's more than one question.) Are they ever going to stop manufacturing them?
A lot of people have been wondering about this. The mint makes something like 13 billion pennies a year, accounting for two-thirds of all U.S. coinage. Half of these pennies will disappear from circulation within a year, having been squirreled away in penny jars and who knows where else. The U.S. General Accounting Office estimates that of the roughly 170 billion pennies currently in existence, two-thirds have been effectively withdrawn from circulation by people who think they're too much trouble to carry around. The penny has by far the lowest seigniorage (profit) rate of any U.S. coin. Each costs four-fifths of a cent to make, netting Uncle Sam just one-fifth of a cent, or 20 percent. The profit on a quarter, by comparison, is more than 20 cents--80 percent. Were the penny still made mostly of copper, as it was until 1982, the government would have to manufacture them at a loss. (The coins are now copper-plated zinc.) The time has come to ask--hell, it came long ago--why are we doing this, anyway?
The issue came up most recently in 1996, when the GAO concluded that, figuring in the cost of overhead and distribution, the U.S. Mint loses $8 million a year manufacturing pennies. The agency suggested eliminating the penny and rounding all cash transactions to the nearest nickel. Mint officials disputed the GAO's numbers, claiming the coin earns the government $18 million to $27 million annually. Congress held hearings, but opinion was sharply divided, not only within the government but among merchants and ordinary citizens. In the end nothing was done.
Too bad. The arguments in favor of retaining the penny are weak, arising from the same wellspring of nostalgia and we've-always-done-it-this-way inertia that's hindered conversion to the metric system. The real question is not whether the government makes money on pennies but whether the coin serves any commercial purpose. The "take a penny, leave a penny" jars that many merchants keep by their cash registers suggest strongly that it doesn't. If people don't want to make change with pennies, why bother?
Some claim that if pennies are eliminated consumers will get screwed. In a 1989 Atlantic article one penny advocate claimed, "Get rid of [the penny] and nothing will cost less than a nickel." Baloney. No one is suggesting that all prices be rounded to the nearest nickel. Real estate tax rates have been computed in mills, a tenth of a cent, since the foundation of the republic, but no mills have ever been minted; the sums are just rounded. Others claim that merchants will use rounding as an excuse to gouge consumers, either by raising prices or by cheating. But competitive pressures are likely to keep most retailers honest, and in any case the amounts are trivial.
Many other nations cease minting low-value coins when they become irrelevant. The U.S. doesn't, feeling no doubt that we've got a big-time currency here and its value is like unto the Rock of Ages. By eliminating the penny we'd be admitting that we're just like other countries. But in the 30s a penny was worth the equivalent of today's dime; in the 50s it was worth today's nickel. Now it's not worth the trouble.