Should we get rid of the penny? Believe it or not, many Americans have allocated a lot of their time, effort and money towards tackling this question. A war of irreconcilable beliefs has since broken out between pro-penny and anti-penny lobbyists. Today, we present both sides of the coin, so that you may decide for yourself if the penny is really worth keeping.
Lobbyists with the organization Americans for Common Cents say that getting rid of the penny will cause merchants to round up to the nearest nickel. Although consumers who pay by card would not be affected, it would have an adverse affect on those most likely to use cash—primarily low-income Americans.
In 2000, Americans for Common Cents commissioned economist Raymond Lombra for a study on the ability of pennies to mitigate consumer costs. Lombra concluded that without the penny, the 300 million American people would be made to pay an extra $600 million in costs each year.
Lombra focused primarily on convenience stores and worked under the assumption that consumers typically purchase 3 or more items during each visit. According to Lombra, the no-penny policy would increase the CPI (consumer price index—approximately a measure of inflation) and all government expenditures tied to it such as social security.
Some members of the pro-penny movement argue that getting rid of the penny would be a slap in the face to one of the nation’s most beloved presidents—Mr. Abe Lincoln.
In 2006, Americans for Common Cents teamed up with Virgin Mobile and Kevin Federline to campaign for the continuance of the penny. The campaign involved Kevin Federline hopping out of a red truck, while wearing a Lincoln mask.
Federline resigned himself to this life of activism after a bout of introspection wherein he discovered “he likes to text message.”
Virgin mobile subsequently introduced its one-cent texting option.
Pro-penny lobbyists also claim that the elimination of the penny would lead to reduction in charitable donations. The penny’s benign impact on the wallet causes Americans to collectively donate hundreds of millions of dollars in pennies every year.
On the Flip Side
In 2007, a study by economist Robert Whaples appeared in the Eastern Economic Journal disproving Lombra’s findings. Whaples pooled data from 200,000 convenience store transactions across 7 states to conclude that after factoring in taxes and fees, the process of rounding to the nearest nickel would have consumers paying slightly less than they currently do. Further, in the event that prices did increase, the minute change would leave the CPI largely unaffected.
Moreover, it now costs the United States Mint 1.7 cents to make each one-cent coin. By the end of the year, the mint will have spent $136 million to produce only $80 million in pennies. For a denomination of currency that is typically unused, this isn’t necessarily the best long-term investment for the U.S. government.
At this rate, pennies would be less of a burden if relegated solely to the wishing well, suggests comedian John Oliver.
“You can throw a penny in a fountain to make a wish, but at its current value no fountain is granting your wish unless it's incredibly small like ‘I wish somewhere in the world a mouse has a good day, or I wish I knew what a penny looked like underwater,’” joked Oliver.
Opponents also rebut the claim that charities’ reliance on pennies justifies the penny’s existence. They remind us that even if the penny were to be retired, the process would not occur overnight. Pennies would be taken out of circulation gradually, while the ones still in circulation would retain their value. Stores, however, would be less likely to accept the penny as payment, meaning more pennies would potentially be given to charities.
DISCLAIMER: Video contains language that some may find offensive.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.