Abolishing penny could decrease national debt
Plunge your hand into your pocket and you are most likely to find some zinc dinero. No, you have not found treasure; the pennies hidden in the myriad of couch cushions and the forgotten cavities of your purse or wallet won’t buy you an extra minute at the meter. In fact, you can’t even purchase another penny with your penny. According to the price data charts of the U.S. Mint, it costs $1.99 to make a penny. While the United States spends only $116 million per year on the production of pennies, it is a cost that can easily be eliminated without major negative consequences. President Barack Obama recently acknowledged the need to go through with this decision during a Google Plus hangout session with the public. Argentina, Australia, Brazil, Canada, Costa Rica, Hong Kong, the United Kingdom and numerous other countries have all eliminated their penny. During a time of fiscal austerity and the need to reduce budget deficits, it is exactly these types of costs that must be sought out for elimination.
While some may argue that charities, which depend on coin drives for a large share of revenue, will suffer the most from such a move, the argument’s validity is mitigated by the fact that electronic forms of payment are on the rise and that the new lowest coin denomination will be the nickel. Thus, a lot of costs associated with sorting and accounting for pennies will be reduced by the efficiency of e-payments and the new reflexive donation will be in the amount of five cents instead of one. To the young economists out there: Such a move is not one that will spur real inflation, rather it is a way of catching up to the times. We live in an age where the penny’s value is already meaningless. Some justify eliminating the penny by claiming some prices will be rounded up the nearest nickel, while others will be rounded down (essentially prices would balance out). But knowing business behavior, it is unlikely that this would occur. Businesses already charging above a certain dollar amount have no motivation to round down, as the psychological effect of the dollar price is still there. In essence, eliminating the penny will act as a minor tax on all consumers, but one that would benefit all, regardless of political affiliation.
Fiscal conservatives should be happy that inefficient federal government spending is reduced, while liberals should be happy that overall sales tax revenue (which goes to local governments) should increase as prices increase incrementally. As a result, we have the best of both worlds — a reduction in unsustainable fiscal deficits as well as a new easy-to-swallow revenue stream for financially struggling municipalities and counties. We must escape the nostalgia of an obsolete currency.