Will The U.S. Penny Be Discontinued?

Rumors go round and round about the future of the US penny. Nostalgics hate the idea that there would be no new pennies put into circulation. Practical people love the idea of streamlining the cash process by ridding their pockets of the annoying “worthless” coins. Vending machines, parking meters, and most toll booths will not accept pennies because it is not worth the hassle. Even military bases outside of the United States discontinued using pennies several decades ago citing that they are too heavy to ship.

With Canada, New Zealand, and Australia having already phased out use of their one cent coins without significant adverse effects to their economies, many believe it is only a matter of time until the Lincoln head coin will see its final days. Ultimately, however, to end the minting of the United States’ smallest valued coin, it would take an act of Congress. Literally. And so far the bills that have been presented to the branches of government have not passed.

President Obama rides on the practical side of the fence, believing that the penny is not used enough to be worth the effort and cost of making it. He also realizes, however, that Americans are attached to the US penny and some of the decision may simply be based upon that. The President has conceded that if such a bill to discontinue production of the penny was passed, he would agree to its implementation.

The decision to end use of the US penny would be based upon more than just a question of convenience. There are many economic, logistical, and political considerations for those defending or debunking the use of the penny. The mint in Denver produces most of the pennies that are being made currently, and discontinuing that would certainly have a negative impact on the economy of the city. It would take a great deal of adjustment to balance out the effect that ceasing penny production might have.

Some people who believe the penny should be discontinued realize that its worth has dwindled rapidly. Even in 1857 when the 1/2 cent was discontinued in the US, it was worth at least ten times what  the penny is worth to the average consumer today. In circulation, a nickel is now worth about what a penny was over 40 years ago. The fact that it costs more to produce a penny (over 2 cents) than a penny is actually worth indicates the rate of inflation over many years. Until the mid 1980s pennies were actually made from mostly copper, but since then they have been minted from zinc plated with copper in order to keep costs down.

Organizations and lobbyists have been active in an effort to draw attention to this issue, either for or against the penny. While some people believe that charities who collect pennies will be adversely affected, others claim that the charities will simply move to collecting nickels instead.

Most people think it would just be easier to create a system to round cash purchases up or down and give change in multiples of five with nickels, dimes, or quarters. That creates the concern, in some opinions, that there will be a higher demand for nickels; nickels also currently cost more than double their actual value to produce. There are also those who believe that rounding purchases out would mean more cost for consumers, but countries who have done this in the past have been able to implement systems fair for both consumers and businesses. Other people worry that the practical side of removing the penny from circulation would create accounting and bookkeeping difficulties related to computer software.

Many coin collectors seem to be of the opinion that the decision to remove the US penny is not far off and they are anticipating what this could mean for the coin collection industry. Recently a coin collector paid $1 million for the purchase of one erroneously minted penny from 1943. Discontinuing pennies completely would certainly impact US coin collectors by creating a whole new set of coins that are no longer in production. This doesn’t immediately render them rare or valuable, but it could change the rate at which pennies are circulated therefore decreasing the wear and tear on the coins simply from daily use.

So far, however, there are no immediate plans in the works to end the use of this beloved, collectible, American icon. And with the red tape that Congress requires in order to get something of this magnitude passed, it could be many years before Honest Abe’s face disappears from our pocket change. But, if the penny does go, Mr. Lincoln will still be honored on the more valuable (and less costly to produce in relation to its value) $5 bill.

Monday, May 20th, 2013 Blog

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