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Why Do Pennies Still Exist?
April 4, 2013 - Ray Tsuchiyama
Yes, there are Ninety-Nine Cents Sales (fewer now than before) and Sales Taxes added-on your grocery purchase in many regions in the United States to make a final price $2.49, but if there was a law that mandated all pricing to be rounded-up to the nearest ten (we follow so many rules and regulations and even file taxes – to keep our status and fulfill our legal obligations as U.S. citizens), it seems easy to – Wow! – eliminate pennies entirely in the U.S. (except for collectors of rare pennies, worth hundreds, or even thousands of dollars).
Is there an “economic” purpose today to use the penny somewhere in the United States? How about using pennies for a soda can in a dispensing machine?* Paying for a parking meter? Paying for income taxes – try mailing in $200 in pennies – wait, isn’t the IRS mandating electronic filing? Isn’t that the future – electronic payments? Do we still live in the 19th century when a one cent actually bought an apple and candy and more? Isn’t this 2013? The reason there is paper money and coins is they have an economic purpose – people using the currency often for daily transactions. Does the penny fit that definition?
Every time I go to a Kihei supermarket there are people bringing loose change in plastic bags, pouring them into a machine, and receiving coupons to buy something (more than half of the coins are brown, tiny pennies), so even giving a fee (yes, it is not free) to a coin-machine is worth getting rid of the coins to these people. There must be millions of dollars in pennies across the United States in basements, dens, bedroom bureaus, and yes, children’s piggybanks.
For the Federal government, it is more than just the issues of manufacturing the coins by the millions and distributing them to banks throughout the U.S. in armored cars – now a penny actually costs more than a penny to make (actually 2.41 cents or double its actual purchasing power – you have to think a bit about this factoid), primarily due to the skyrocketing market price for zinc (copper was abandoned years ago due to its rising cost – unfortunate people today are electrocuted in many cities trying to steal copper wiring laid by electric utilities in order to sell for money).
Even President Obama has said on February 18 this year to a reporter’s question on keeping or ditching the U.S. penny: “Anytime we’re spending money on something people don’t actually use, that’s an example of things we should probably change.”
Furthermore, he called pennies “obsolete” and a "good metaphor" for some of the more frustrating aspects of government waste -- that is, is it OK for the Federal government to spend 2.41 cents of taxpayer taxes to manufacture one penny that has no purpose for its existence?
Yet, the entire annual cost of minting pennies is barely $60 million. That’s more than a few pennies, but not $600 million, when we start talking real money. So, why bother in the sea of ga-zillions of Federal expenditures, for the lowly penny?
Other countries have gone the no-penny route, including Australia, Canada, New Zealand, and other countries – yet the fact that other countries do something has little to do with what the U.S. does or not do. If it wasn’t invented here, it is probably not worth it (the NIH thinking, very prevalent in major corporations where large departments are frightened of new developments and lose jobs and so become dinosaurs).
Ultimately, the countries’ no-penny financial systems have not created economic crises (even after spending to changing financial software for banking, government, and business for no pennies, Australia is doing quite well, thank you).
All U.S. Army and Air Force military base commissaries and Post Exchanges “round” purchases for some time now, and they have not gone under, but merrily still doing business. (Navy exchanges probably will not follow Army practices.)
It is not an idea of 2013 -- more than a decade ago, in 2001, a House member introduced the “Legal Tender Modernization Act,” which would have made pennies obsolete by requiring retailers to round up or down to the nearest nickel on cash purchases. It failed.
So we go on, spending $60 million a year as a global leader in e-commerce, Internet banking, and innovation -- and carrying pennies in our pockets.
*When you did last find a soda machine that actually took your quarters or even dollar bills?
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