POLITICS: Penny Wise
Fund, John H.
POLITICS ] Penny Wise A Coin Too Small to Be Useful "-N THE 1960S AND 1970S the price of silver rose enough that some Americans melted down their then fullsilver quarters for scrap. It could...
...No major problems with transactions were reported at a time that predated the many cashless means of electronic transaction we enjoy today and which, even after penny abolition, can preserve prices to the exact cent if people so choose...
...Others used the so-called Swedish rounding system in which transactions ending i n ' T ' or"2" went in favor of the consumer, and those ending in "3," "4," or "5" were rounded in the store's favor...
...Few people now bother to pick up a penny when they see it on the street...
...That exceeds twice the annual output of all other coins combined...
...But why not solve the problem of the penny once and for all by abolishing it...
...Most retailers I visited rounded down in favor of the consumer...
...Nor were 46 THE AMERICAN SPECTATOR JUNE 2006 JOHN H. FUND there any real problems with shortchanging when pennies were eliminated in New Zealand in 1990...
...Professor Mankiw says it's not even a close call as to what should be done with the penny: file it in the history books...
...Pennies are a nuisance that is proliferating...
...Production is up in part because of hoarding, in part because more and more people are throwing them in jars or drawers and never taking them out again...
...It's simply not worth the effort...
...The average person has more money than that tied up in the penny jar he keeps in his closet...
...That's unlikely...
...I know that some people are upset when their favorite aphorisms become anachronistic," he says, "but a nickel saved is also a nickel earned...
...At current prices the value of the metal in a pound of pennies is $1.36 per pound, or approaching its stated monetary value...
...Mint more than its face value to make a penny...
...in 1857, when it eliminated the half-cent, the lowest valued coin of the day at the time...
...The purpose of the monetary system is to facilitate exchange, but the penny no longer serves that purpose," says Harvard professor Gregory Mankiw, a former chairman of President Bush's Council of Economic Advisers...
...The transition worked so well that Kiwi central bankers are now seriously considering discontinuing the five-cent coin...
...Many stores such as supermarkets continued to price items to the nearest cent with only the final bill being rounded to the nearest five cents, and then only for those customers paying by cash...
...When the half-cent was abolished in 1857 it was worth more than eight cents in today's currency...
...This year, the Mint will churn out nine billion of them...
...But why not instead follow the example of the U.S...
...The Mint could always return to making steel pennies, like it did during World War II, when other metals were needed for the war effort...
...John H. Fund, The American Spectator's Politics columnist, is author of Stealing Elections: How Voter Fraud Threatens Our Democracy (Encounter Books...
...A growing number of experts are concluding the penny is too picayune to bother with...
...He also says the critics of penny abolition exaggerate the net cost to consumers...
...If you drag 160 pennies out of your bedroom drawer it will weigh a pound and have a monetary value of $1.60 at current prices, taking into account that each penny is now 97.5 percent zinc and 2.5 percent copper...
...If someone engages in two such transactions per day using pennies, over a year they would lose $14.60...
...JUNE 2006 THE AMERICAN SPECTATOR 47...
...Prices didn't rise in the way that critics assumed they would...
...Consider the worst-case scenario in which businesses consistently round against their consumers, ignoring any complaints in order to squeeze the last nickel out of them...
...People afterward had no problem living and conducting business, even though the new smallest unit of currency--the penny--was worth more than our dime is today...
...On average, the customer will lose two cents in each transaction...
...Mark Weller, the head of Americans for Common Sense, says that many people fear being shortchanged if sellers round up to the nearest nickel...
...But David Bookstaber, a leading advocate of ditching the penny, notes that there is currently a real economic cost to keeping all those brown tokens around: "Money spent minting these coins, distributing them to every cash register, and then processing the small fraction that aren't thrown away back through the banking system represent a real and unnecessary economic cost," he says...
...Weller ignores the fact that already the sales tax in states is rounded up to the nearest penny with no detectible complaints...
...I was visiting New Zealand at the time and found people happy with the changeover...
...That's the price of a suburban train ticket or a large pizza...
...When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful...
...Without a circulating penny, academic research conducted by a former Federal Reserve economist shows that the vast majority of transactions will be rounded up, not down, and consumers will be hit with a rounding tax totaling hundreds of millions of dollars annually," he says...
...R EGARDLESS WHICH WAY the rounding goes, it doesn't represent a net economic loss because money is simply transferred from customers to business, which will turn over much of its windfall to government through taxes...
...Opponents of penny abolition point to polls that still show support for the penny...
...More and more litter on our streets now consists of pennies...
...Already it costs the U.S...
...It could soon be worth doing that again with pennies, if zinc and copper ,_.prices continue to go through the roof...
Vol. 39 • June 2006 • No. 5
