Why haven't we gotten rid of the penny yet?
"I don't know," Obama said in his Thursday Google+ hangout, regarding the feasability of the 1 cent coint.
The president said he felt Americans were just too attached to pennies.
Cutting the penny out of the currency would save the government $100 million over a decade.
"This is not going to be a huge savings for government, but any time were spending money on something people aren't going to use, it's not necessary," Obama said.
The penny is a metaphor for some of the failures of government, Obama said. The president alluded to the fact that he wants to re-organize organizations and departments created decades ago and which are now out-dated and inefficient.
We're constantly trying to reduce these inefficienses ... everything
So why not pull the plug on pennies?
"The penny is something I need legislation for, and given the bigger problems days in and day out, we're not able to get to it," the president said.
Here are some arguments for and against the penny:
Arguments for elimination
- Production at a loss — As of February 2011, it costs about 2.4 cents to mint a penny. In 2007, even the price of the raw materials it is made of exceeded the face value, so there was a risk that coins were illegally melted down for raw materials.
- Lost productivity and opportunity cost of use — With the median wage in the U.S. being about $17 per hour in 2011, it takes about two seconds to earn one cent. Thus, it is not worthwhile for most people to deal with a penny. If it takes only two seconds extra for each transaction that uses a penny, the cost of time wasted in the U.S. is about $3.65 per person annually, about $1 billion for all of the USA. Using a different calculation, economist Robert Whaples estimates a $300 million annual loss.
- Limited utility — Pennies are not accepted by all vending machines or many toll booths, and pennies are generally not accepted in bulk; however, Illinois does accept pennies in its toll booths. In addition, people often do not use cents to pay at all; they may simply use largerdenominations and get pennies in return. Pennies end up sitting in jars or are thrown away and are not in circulation. Economist Greg Mankiw says that "The purpose of the monetary system is to facilitate exchange, but... the penny no longer serves that purpose."
- Prices would not be higher — Research by Robert Whaples, an economics professor at Wake Forest University, using data on nearly 200,000 transactions from a multi-state convenience store chain shows that rounding would have virtually no effect. Consumers would gain a tiny amount – about 1⁄40¢ or $0.00025 per transaction.
- Historical precedents — There has never been a coin in circulation in the U.S. worth as little as the penny is worth today, although currently other countries have coins with less purchasing power in circulation. Due to monetary inflation, as of 2007, a nickel is worth approximately what a penny was worth in 1972. When the United States discontinued the half-cent coin in 1857, it had a 2010-equivalent buying power of 11 cents. After 1857, the new smallest coin was the cent, which had a 2010-equivalent buying power of 23 cents. The nickel fell below that value in 1974; the dime (at 10 cents) fell below that value in 1980; the quarter (at 25 cents) fell below that value in 2007.
- Hazards — The reduced-cost clad zinc penny, which has been produced since mid-1982, holds additional dangers when swallowed by children and others, unlike all previous U.S. coins. If the copper plating is breached, the penny quickly corrodes into a sharp-edged object, which is more likely to lodge in the digestive tract. Injury is more likely and furthermore, zinc and copper digested from the lodged pennies may be toxic. An 11 lb (5-kilogram) dog was fatally poisoned by swallowing two pennies.
Arguments for preservation
- Consumers and the Economy — Research by Penn State University Economist Ray Lombra in 1990 shows that if were the penny to be eliminated, consumers would be hit with a rounding tax. He further stated that rather than eliminate the penny it would make more sense to change the composition of the penny to a cheaper metal than zinc if the costs of zinc do not come down and there continues to be a significant loss per penny. In addition, the penny is a hedge to inflation.
- Popular support — A poll conducted March 22-25, 2012 by Opinion Research Corporation International on behalf of the zinc lobby and Americans for Common Cents found over two-thirds (67%) of those surveyed favor keeping the penny in circulation. The poll results showed 77% are concerned that if the government implements a rounding system for cash purchases, businesses might raise prices.
- Demand for Nickels — Some advocate that rounding to the nickel might also lead to a demand for increased production of nickels, costing around 11 cents to produce.
- Charities — The penny aids charities in raising hundreds of millions of dollars each year for important causes and clearly demonstrates the coin's value. Notable charities like Ronald McDonald House Charities, the Leukemia & Lymphoma Society, School and Youth Programs, Pennies for Patients, and countless local groups rely significantly on small penny contributions.
- Software Costs — The cost of modifying or replacing software nation wide due to the elimination of the penny would be in the billions of dollars.