Eliminating the penny has been up for debate for many years. Considering it costs the Treasury Department more to mint the coin than it is worth has deemed the currency has been deemed inefficient. Plus, many have cited environmental concerns, which add to pollution issues. However, completely eliminating the coin may have consequences as well. The debate continues to be heated on both sides. But, other countries have successfully eliminated their lowest coin currency or penny. The question is whether the United States could eliminate the penny with similar results.
Australia and Canada as an Example
Australia and Canada have led the way in eliminating the lowest-value coins with good results. Canada saved $11 million per year by eliminating penny production. While there was initial skepticism, both countries have successfully eliminated their lowest-value coins with minimal impact. In Australia’s case, cash transactions were rounded to the nearest 5 cents. Through a public awareness campaign and recycling initiative, the transition was relatively smooth.
Why Eliminating The Penny Makes Sense
According to Wake Forest Professor of Economics Robert Whaples, “In 2024, it cost the U.S. Mint 3.7 cents to produce and distribute a penny. This means taxpayers are essentially subsidizing the production of a coin with very little purchasing power. If we get rid of the penny, it saves money. And I think it’s good for the government to be as efficient as possible. But the biggest benefit is actually not savings. If we could make a penny out of thin air, it would still be time to get rid of it. On average, Americans earn about one cent every two seconds. If it takes you longer than two seconds to use your penny, it’s using up time that is more valuable than the coin itself.”
It costs about 14 cents to make a nickel, significantly more than the 3.7 cents to make a penny. Why not eliminate the nickel? In 2024, fewer than 70 million nickels were minted, while 3.2 billion pennies were minted. The problem then with the penny is that many are made and are not kept in circulation, whereas the nickel is a different story. People are more likely to pay with a nickel, but hold onto a penny. So, the government is making more pennies each year. In fact, there are about 240 billion pennies in circulation.
Consequences To Consider
Rounding Up
Rounding up may have unintended consequences for consumers, since many goods will increase in price. This could lead to more inflation. However, in some instances, consumers will pay less with rounding rules. In many ways, rounding will not have an economic impact.
Resistance
Many businesses are not on board with eliminating the penny, even though it may cut down on transaction times. Although the penny has little purchasing power, many systems are ill-equipped to adapt and would require rounding rules. There definitely would be an adjustment period for most businesses. It does, however, encourage electronic payments and less reliance on coins.
Historical Significance
The Lincoln penny has been in circulation since 1909 and is the first U.S. coin to feature a real person, marking Abraham Lincoln’s 100th birthday. Many people are against eliminating the penny due to its historical significance and nostalgia.
What do you think about eliminating the penny? Do you think it will be a smart move or a financial mistake? Let us know your thoughts in the comments.
Read More
Can You Remove an Eviction From Your Credit Report? Here’s the Truth!
25 Fun and Interesting Things You Can Do with a Dollar Bill
Read the full article here
