By Mark Falanga
Photo by Caitlin Reagan.
As of the writing of this article, Congress is fighting over the nation’s debt ceiling and how to curb spending over the long run. Saving money seems to be in vogue recently, with coupon clipping on the rise across the U.S. Despite this, one obvious way to save $58 million has been overlooked since 2006: eliminating the penny.
That year is significant because that’s when the metal composition in the penny cost more than the coin itself. This year, the metal in the penny officially doubled, costing two cents for the 1-cent coin.
Many argue that phasing out the penny will be hard to do or too complicated. For that, we just need to look at our neighbor to the north. As part of Canada’s Economic Action Plan 2012, the Canadian government voted to stop producing the penny and start taking it out of circulation on February 4 of this year.
Their plan is quite simple, if the price ends in a three or a four, it gets rounded up to five. If it ends in a one or two, the price rounds down. However, this only affects transactions that are paid in cash. Therefore, using a credit or debit card wouldn’t affect the price, hence, Canada can still base their monetary system on the cent.
Besides sentimental reasons, there are two major reasons why the penny has been tough to eliminate. The first being that the 5 cent piece, the nickel, costs roughly 11 cents to make at current metal prices. Minting more nickels to fill in the void left by the penny would make little sense.
A solution would be easy, as we would again look to Canada to set a good example. From 1982 through 1999, the Canadian nickel had the same composition as the United States’ nickel: 75 percent copper and 25 percent nickel. In 2000, with the rising costs of those metals, Canada switched to 94.5 percent steel, 3.5 percent copper and 2 percent nickel plating. This not only uses cheaper metals but also lightens the weight of the coin. Therefore transporting the coins would require less energy and increase the overall savings.
The second problem that prevents the government from getting rid of the penny is that the coin made from 1982 and earlier is too valuable to lose. By no longer making pennies legal tender, people having them could melt them down for their copper and sell on the open market. In 2006, the same year that pennies and nickels became worth more than their face value, the government made it illegal to melt down the one and five cent coins. The benefits of which are well known by those hoarding these coins, waiting the day that they can melt them down and sell them for roughly three times their face value.
Regardless of what the outcome is for the debt ceiling crisis, changing the way our money is made will have an immediate affect on our national debt. Doing so becomes more urgent as more than half of Americans don’t pay with any form of cash and strictly use electronic forms of payment. So it doesn’t matter which way you lean in the political spectrum, the simple fact is that pennies are bullshit.