He?s back!
Just when the cent thought it was safe, Rep. Jim Kolbe is back with a proposal to again eliminate it. North Carolina?s News & Observer broke the story May 14 in a column ?It?s time to pitch the penny.?
Numismatic News confirmed it with a call to Kolbe?s Washington office.
?With the recent increase in production costs of the penny and the nickel, I have decided to revisit legislation I introduced in 2001 to reform our legal-tender system. This new legislation will look at our currency system as a whole and how it can be modernized,? Rep. Kolbe told me May 23.
Reports that Kolbe had introduced a bill were erroneous, but he believes it?s time to revisit the issue. ?We shouldn?t burden our economy with an inefficient legal-tender system,? he said.
Rationale for this action, according to the column: ?He has proposed it a few times. My bet is that now with the price of the penny, the zinc, soaring so much that probably some steam will start building up again. I have no idea how it will play out politically, but I think the reasons for getting rid of the penny are getting stronger and stronger.?
Demise of the cent was just one of five components in legislation introduced July 17, 2001, by Rep. Jim Kolbe, R-Ariz., then an eight-term member who chaired the House Appropriations subcommittee with jurisdiction over the Treasury Department, the Bureau of Engraving and Printing and the Mint.
Recent upward spikes in the costs of copper and zinc make the U.S. Mint?s cost to produce a cent greater than its face value. This has revived Kolbe?s idea for its abolition.
The cent survived a severe shortage in the early 1970s that led to consideration of an aluminum composition for 1974. The current composition of copper-coated zinc was introduced in 1982 following another bout of shortages. Since then, supply in circulation has not been an issue, but it might be again, if metals continue their uptrend.
Research Triangle Institute recommended in 1980 that cent production be terminated because it is ?both less costly and generally more acceptable to user groups than any of the alternative solutions to the penny dilemma which RTI examined.?
A generation later, Kolbe agrees. ?Since there has been so much attention given to this issue, let me explain in more detail the rounding system I am proposing to reduce the use of the penny. The penny would continue to be legal tender, but would not be necessary in cash transactions.? Kolbe would ?round? up or down and essentially have the cent become a purely numismatic item for collectors.
RTI?s conclusion claimed elimination of the cent ?will be less costly than increasing Mint capacity to meet an artificially-high demand due to attrition caused by the cent?s declining purchasing power? and then said elimination would ?permit the Mint to reduce its operating costs as well as to avoid the expense of constructing new capacity.?
Kobe accepts that argument, too.
By September of 1979, a Treasury Department Task Force, including representatives from the Mint, Bureau of Engraving and Printing and Federal Reserve, concluded that ?there are several serious disadvantages? to the RTI proposal to eliminate the cent.
This included rounding prices in over-the-counter transactions (thought to be inflationary), opposition from more than half of state revenue authorities that utilize the cent for sales tax collection and ?strong political resistance to any proposal for its elimination.?
The cent has long been a stalwart that has the affection of the American people. This was made clear on May 23, 1990, when a Gallup survey revealed that 62 percent of the public wanted the cent retained. This support has not diminished. Americans for Common Cents suggest that the coin is not a denomination that time, or progress has passed by.
