We are rapidly approaching an era in which coins are obsolete. Consumers and businesses alike seem to be forgoing the penny when it comes to purchases, and what’s more, retailers are starting to refuse to sell items that cost less than a dollar. The problem is that because of our decades-long reliance on them; pennies still have a high manufacturing cost even though their actual worth is very little.
With most electronic transactions, the amount is rounded to the nearest nickel. However, pennies still have to be dealt with when you make changes to something. That means that every time somebody buys a $1.01 item or something along those lines, the seller has to hand over two pennies.
In recent years, the U.S. Mint has reduced producing new pennies to focus on higher denominations and improve their production efficiency. The country’s chief monetary authority, the Federal Reserve, has also urged Americans to save money by hoarding cash instead of spending it. Their argument is that if cash is seen as worthless, people will spend less of it, which will make the U.S. economy healthier overall.
However, some economists have a different view on what should happen with the penny. They think the penny should be disposed of altogether and that its retirement would help improve the country’s economy by encouraging people to spend more.
The case for killing the penny rests on four main points:
- The penny’s value is extremely low—just one-tenth of one cent of the U.S. dollar- making it useless for people to save since they can’t even buy a loaf of bread with it. Moreover, the penny’s usefulness has been steadily declining as the U.S. dollar has kept losing its value over the last decade, hurting the purchasing power of low-income citizens who use cash for their daily transactions. Despite a budget cut requiring the government to eliminate smaller denominations in favor of larger ones, the federal government has not yet resolved to kill the penny.
- The penny’s cost to taxpayers is significant. The U.S. Mint’s production costs for a penny are 1.5 cents, with the metal in it worth about one cent. The mint also produces more than 300 million pennies each year, but the coin only circulates for about a year before sitting idle in jars and drawers around the country.
- There’s no need to keep the penny in circulation. The argument is that the U.S. Mint doesn’t need to create new pennies because people are slowly getting rid of them anyway. The penny is an outdated, cash-wasting nuisance with few redeeming qualities. It’s time to just get rid of it and put a stop to its pointless existence.
It has been argued that the penny is useful as a numismatic item. Numismatists are collectors of coins, paper money, and tokens. Although pennies have no real value to most people, they have some value to coin collectors. However, if the only reason people want pennies is to put them in a jar at home and look at them every now and again, then we can surely do without the penny in circulation.
- Getting rid of the penny is also a form of de-regulation that can help improve economic growth. Getting rid of coins altogether will reduce the amount of cash people have to keep in their wallets, making it easier for them to spend money in stores or online. It may also stimulate the economy because it will incentivize people to stop hoarding money at home and instead spend it.
With these four points in mind, there’s an argument to be made that the U.S. government should get rid of pennies altogether — and just make them stop circulating completely. It’ll save taxpayers millions of dollars per year (if not tens of millions) while encouraging people to spend money more freely, which could help boost the economy in general.
While the American penny has been a fixture on U.S. soil for more than two centuries, its utility may finally be coming to an end. Like the U.S., many other countries have abandoned coins of low value, opting instead for paper currency — and there’s a good argument that America should follow suit by getting rid of pennies once and for all.
Nevertheless, getting rid of the penny would not be as easy as merely changing out the current coin for another one. The United States is unlike other countries that have gotten rid of older currency in favor of a new and improved model.
