Increasingly, and with certain logic, calls arise for stopping the production of the 1 cent coin (everybody calls it a penny, but that?s a misnomer because we haven?t spent pence since the days of the Revolution). And there?s been a like cry over the 5 cent piece clamoring to do away with that denomination. The reason given for discontinuing the cent, and a good one at that, is that it costs more (almost 2 cents) to mint the coins and, with that being the case, we?re into negative seignorage territory.
Even though the government is losing on the deal, the question that should be posed is, ?Can we afford not to make these coins??
It is true that other countries, like the United Kingdom and New Zealand, have abandoned their smallest coins, mainly because they just had no buying power. The United Kingdom lost the half new penny about a quarter of a century ago within just a couple of years of its introduction at decimalization, so there was no real sentiment attached to that coin. The New Zealand change is more recent and it has by all reports been a success.
That much having been said, dropping the low denominations is not something can happen here, for a number of reasons.
First, there is an emotional attachment to the penny. After all, it was one of the first denominations struck at the fledgling United States mint in Philadelphia back in the 1790?s. Over the two centuries of its life, the cent has gone through a number of changes ? it has shrunk in size, its design has evolved and its composition has been reconfigured more than once. What once started out as a large copper coin may soon be a small steel one.
There is however a practical side to this issue, one which has not been considered, or if so not fully. The fact is we need the penny. Without it prices will be rounded up or down, with no set rule in whose favor the rounding goes. My personal experience with this phenomenon was in Portugal in pre-euro days, when some items were priced to the half escudo.
The only problem was that there was no half escudo coin, though there was a 2 1/2 escudos ? which circulated only barely because no one liked it. If memory serves, things were usually rounded in favor of the customer, unless there was a 2 1/2 escudos at hand and making exact change was possible.
There have been some rounding up or rounding down bills brought before the Congress but with little effect or encouragement. With the latent affection for the penny, the support just wasn?t there.
Now then for us, we need pennies, and we need them because of taxes. Most cities and states have some sort of sales tax, or meal tax, or whatever, and when the tax percentage is added to the basic cost, the total is going to arrive as an odd number, requiring pennies either in payment or in change. Suppose for instance you live in a place with a 5 percent sales tax, and you buy something for $1.97. Then the tax due would be 10 cents, bringing the total to $2.07.
Your option at this point is to pay $2 in cash and 7 cents in change (say a nickel and two pennies to make it exact) or give a dime and get three pennies back. No matter which way you go you need pennies. If there were no cent coins and you were paying with a credit card there would be no problem because the amount would be posted in e-pennies (now there?s a thought). Computers deal easily with minute amounts of money. But not everyone uses plastic.
Consider this, whenever you buy gasoline, you pay an amount in a denomination that doesn?t actually exist (never has). The price at the pump is $3.039, and since the last nine (in mils or thousandths of a dollar) is usually in tiny print, you feel like you?re only paying $3.03 when you?re actually forking over nearly $3.04 ? it?s as though something ending in ?99? is more palatable than something ending in ?00.? It?s just that little bit more which counts, and when you think about it all those mils add up.
And so, the penny is necessary and useful in everyday commerce. It doesn?t buy much all by itself, and probably hasn?t for quite a while. Penny candy is an oxymoron. And the penny post card is history. The coin is, to borrow a phrase from the poet Sylvia Plath, ?a companionable ill.?
Jan M. Dyroff is a hobbyist from Roxburg, Mass.
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