Isn't it about time to get rid of the penny?

by Joe Mavretic, former House Speaker and NC SPIN panelist, July 25, 2018.

My friend, E. Michael Latta, used to write articles that started with the phrase, "Isn’t It About Time." Michael’s thoughts were usually common-sense, contemporary and on-point. I’ve decided to use his phrase to start my series of articles about issues in America and North Carolina…so here goes.

My wife, Laura, and I recently spent a few days traveling across western Canada. We ate wonderful meals, saw beautiful mountains, stayed in great old hotels, rode trains, and talked with delightful people about"no pennies."

Every time we paid our bills in cash the total was rounded off to either a "5" or a "0" and there were no one cent/penny coins. When we asked Canadians about this, they were in favor for several reasons.  First, less of a hassle when paying cash. Next, fewer coins to jingle about in pockets or purses. Then, over the long run, rounding off seems to be 6’s and 6’s—-a Canadian way of saying it equals out. Finally, given the cost of just about everything these days, a penny doesn’t have much purchasing power.

Canadian merchants don’t seem troubled by the rounding process. There are government guidelines for the rounding process that are clear, easy to understand and taught in the schools. The rounding process applies ONLY to cash transactions. Bills paid by check or electronic means are carried to the penny.

The Canadian penny is still "Legal Tender" but the Royal Canadian Mint no longer makes pennies, or distributes them to financial institutions, so eventually the penny will disappear from commerce and become a collectors’ item like their 1936 Dot Penny.

The Royal Canadian Mint believed that the production costs of making a penny exceeded its monetary value so it stopped minting it on 4 May 2012 and withdrew it from circulation on 4 February 2013. In Canada, eliminating the penny coin saves the nation over ten million dollars a year. Australia decided to do away with both the one cent and the two cent coins due to loss of purchasing power and cost of production. When the lowest denomination coin was eliminated in Israel, a major company began just rounding down.

In America, it costs at least 1.5 cents to make a penny and we have been losing money minting pennies for over ten years. Each year the cost of minting pennies is about 45 million dollars. Forty five million dollars is not a big number as a part of the 2019 4.4 trillion dollar U.S. budget but let’s remember that, "A penny saved is a penny earned."

Whenever we think about a United States Federal Government issue, at least two things must be considered. First, what was the original intent and how has that been distorted over time? Second, who gets the money/advantage?

Article I of the United States Constitution gives Congress the power to coin money and regulate the value thereof. Congress decided to adopt a decimal monetary system with the lowest unit being one thousandth or a "mil" (that’s how the price of a gallon of gasoline is advertised and our property taxes are levied). Next up in value was the penny. Over the past centuries, America has adjusted its currency to meet changing times and moods. What began as a silver standard changed to a gold standard and is now a free-floating standard. We no longer use a "Half cent" or a "Twenty-cent piece" or a "Double Eagle."

There are at least two thoughts about the second consideration:

1. According to the firm, 2018 MeasuringWorth the purchasing/buying power of the U.S. Dollar from 1774 to 2012 decreased about 97%. In 2018, our penny doesn’t buy much of anything.

2. A US penny is minted at the rate of 97.5% zinc and 2.5% copper. So, who sells the copper to our federal mints? Who profits when our mints circulate a coin that costs more to produce than its worth?

Isn’t it about time to follow the Canadian and Australian leads and get rid of the penny? If America did, then the value of an Uncirculated 1909 S VDB penny would be over $650.00 and Laura and I could stop debating whether gasoline costs $2.50 ($2.50&9/10) or $2.51 a gallon!