The national currency shortage caused by the coronavirus pandemic has rekindled a debate: is now the time to eliminate the penny?
During the blockades, consumers stayed home and avoided emptying their coin banks in exchange for paper money. Shoppers have also chosen to rely on credit and debit cards instead of touching cash.
With the shortage of coins, the Federal Reserve formed a US Coin Task Force, which will make recommendations on how to deal with the shortage.
The shortage has led to further discussions about the fate of the penny, which has seen its purchasing power fall due to inflation, while its production costs have increased.
Sunde White, the 46-year-old small business owner in San Francisco, said the shortage of coins was one more reason to withdraw the penny.
“I hate pennies,” White said, adding that they are so useless that he generally throws them to the ground when he retrieves them as change. “They are so stupid.”
Even before the coin shortage, he had already valued his greeting cards and coloring books at 50 cents or $ 1 increments for sales at festival stands to save him the trouble of having to use pennies, he said.
Given the economic crisis facing the United States, the government could use the money it would save by ending penny production for more important reasons, he said. The Mint manufactured over seven billion cents in fiscal year 2019, with a loss of nearly $ 70 million.
Canada stopped earning pennies in 2012, following other countries, including Britain and Australia, which have already abandoned their smaller denominations. Canada got rid of pennies for reasons that also apply in the United States: They’re not very useful, with too many sitting in jars and costing more than they are worth.
Each penny costs around 2 cents, according to a 2019 report by the United States Mint. Pennies accounted for 59 percent of the 12 billion coins mint made last year.
But the movement to cut pennies faces significant opposition.
Some people support the penny for sentimental reasons. It was one of the first coins made by the Mint after it was established in 1792.
Another reason, offered by the Americans for Common Cents, an advocacy group that provides research for Congress on the value of the penny, is particularly pertinent during a pandemic: Older pennies are made primarily of copper, which is antimicrobial.
Proponents of the penny also argue that removing pennies would amount to a one-cent sales tax for consumers because prices ending at 99 cents are common.
Robert Whaples, professor of economics at Wake Forest University, said his research, which examined data from a chain of convenience stores, showed that customers ended up coming even over time because prices were rounded up as well as up, considering that people buy multiple items and when accounting for taxes.
“Right now, with the shortage of coins, it is a good opportunity to take advantage of the problem,” he said, arguing that pennies should be removed from circulation.
The argument for ditching the penny, said N. Gregory Mankiw, a professor of economics at Harvard University, has only grown stronger over the decades, as inflation has suppressed the purchasing power of the penny. Still, he said he didn’t think any change would happen soon.
“Of all the problems we face, it is probably not a major one at the moment,” said Professor Mankiw.
Congress, rather than the Treasury or the Federal Reserve, has the authority to decide whether to withdraw the currency, and past legislative attempts have struggled to gain ground. The biggest change was in 1857, when Congress suspended half a cent, which was unpopular at the time.
Jim Kolbe, Republican of Arizona, introduced legislation in the early and mid-2000s to eradicate the penny while in Congress. He said his efforts were hampered because Dennis Hastert, the then Speaker of the House of Representatives and other Illinois representatives, opposed the legislation, in part because the penny since 1909 has carried the image of Abraham Lincoln, who spent eight years in the Illinois Legislature.
But now, when there is a shortage of coins, it makes no sense for the mint to spend money to produce more pennies, he said.
“I am amazed that we have not changed in all this time, but this pandemic and the shortage of coins may be what does it,” Kolbe said.
