Tags: US | penny | Canada | keep

Would It Make Sense (Or Cents) to Kill the US Penny?

Friday, 08 Feb 2013 08:31 AM

By John Morgan

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It sounds like a money-losing proposition. The U.S. Mint spent 2 cents to produce each of the 5.8 billion pennies sent to banks last year, according to CNNMoney.

The losses cannot be justified, says Terry Neese, an Oklahoma City businesswoman who in 2005 turned down an offer to serve as director of the Mint.

“As a business owner if you’re producing a product that’s costing you twice as much as what you’re selling it for, why would you continue to produce it?” Neese asked MSN News.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

But both popular opinion and also lobbyists — a powerful combination — are aligned in keeping the Abe Lincoln coin in circulation.

Penny advocates include Americans for Common Cents, a trade group supported by Jarden Zinc Products, which makes the zinc and copper blanks turned into pennies by the Mint, according to CNNMoney.

The group commissioned a poll last year that found two-thirds of Americans want to keep the penny.

Robert Whaples, a Wake Forest University economics professsor, conducted a study that showed consumers would break even if stores rounded to the nearest nickel, a conclusion disputed by a rival study from Jarden, CNNMoney reported.

Greg Mankiw, chairman of the President’s Council of Economic Advisers under President George W. Bush, said American consumers do not really value the penny coin, despite the lobbyist-sponsored polls.

“When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful,” he told CNNMoney.

The penny is in the news because the Royal Canadian Mint officially began to eliminate Canada’s own penny coin, on grounds it is a money-loser and a nuisance.

Other countries that have dropped their pennies in recent years include New Zealand, Australia, the Netherlands, Norway, Finland and Sweden, according to The Associated Press.

The Star, a Toronto newspaper, used the occasion for some good old-fashioned U.S.-bashing.

The Star said the U.S. holdout on keeping the penny means that “now the tail wagging the elephant is Jarden and U.S. vending machine and laundromat operators that object to having to retrofit their machines.

“The U.S. doctrine of ‘American exceptionalism,’ dating back to the beginning of the Republic, is less often a virtue than a stubborn resistance to progress,” The Star said.

“It means being one of the few remaining holdouts against metric and peacekeeping; the lone affluent country without universal single-payer healthcare; alone in the West in clinging to the barbaric practice of capital punishment; the contradiction of being pro-gun and anti-abortion; of pledging allegiance to the pursuit of happiness yet denying same-sex marriage; and conducting federal elections differently in each of Iowa’s 99 counties.”

But according to Wharples, it may be simpler than that. “The vast majority want to keep a [U.S.] penny, regardless of all the good arguments against it. It’s a sentimental attachment,” he said.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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