“HERE’S THE PENNY FOR YOUR THOUGHTS” (27)
In an effort to discuss issues small as well as large in this column, I will devote the space this week to the penny. Our penny coin was originally named after the British penny, and the first one was designed by Benjamin Franklin, made out of pure copper, and first minted in 1787.
The first Lincoln penny was issued in 1909 in honor of Abraham Lincoln’s 100th birthday, and it replaced the Indian Head penny. This new penny was the first coin in the U.S. with a picture of a president, and was made out of 95 percent copper and 5 percent tin and zinc.
In 1943 the Lincoln penny was made out of steel with a zinc coating, because most of the copper in the country was being used for the war effort. But after the war we returned to the prior composition. That lasted until 1982 when, due to the rising prices of copper, the content of the penny was changed to 97.5 percent zinc and only 2.5 percent copper. And today there are more than 150 billion pennies in circulation.
Now there are plans to mint and release a new Lincoln penny in 2009 in honor of Lincoln’s 200th birthday. If these plans are carried out, Lincoln’s portrait will still grace the front of the coin, but the back will depict a scene from his earlier life, such as Lincoln speaking before the Illinois legislature.
But let’s focus upon the question of whether it is really in our interest to continue to produce and circulate the penny. Of course the penny is a part of our history and our legacy. For example, frequently included in our daily lives is the comment “A penny for your thoughts,” and also Ben Franklin’s oft-quoted phrase “A penny saved is a penny earned.” But is that enough when considering the following economic realities?
Today it costs the taxpayers about 1.67 cents for each penny that is produced. So since the U.S. Mint produces about 7 billion pennies every year, we are paying more than $115 million every year alone just for this to be done. And how much of an undertaking it is to produce even one billion pennies? Well think of it this way. If one billion pennies were packed together they would be almost the same size as five 41 foot-long school buses, and if placed on top of each other they would rise almost 1,000 miles into the air. And how high is that? Well, to give you some perspective, the space shuttle orbits only about 225 miles above the earth. And we produce seven times those numbers every year.
So economically is it worth it? When we eliminated the half-penny coin in 1858, it was worth at least ten times of the value of today’s penny. And since the value of the zinc in one penny is rising to the extent that it is almost worth more than one cent, soon people will be melting down the pennies for their zinc content, just as they did a few decades ago when the value of the silver in our dime coin exceeded ten cents.
And how much is the penny itself worth in today’s world? You can judge for yourself, but I assume your experience is the same as mine. For example, how many of you have seen panhandlers out on our streets asking for donations, while at the same time you see a few pennies under their feet that they do not even take the trouble to bend down and pick up? To me that says a lot about how much those pennies are worth.
Then there is the nuisance issue. How much time on the average does it take to try to reach into your pockets and come up with the correct change for cash purchases that you are involved in? The estimates are that each cash transaction takes an average of two to two and a half seconds longer because either the purchaser or the seller is required to find the right number of pennies to complete the sale. That means that with three cash transactions per day, each person spends more than three hours each year just in dealing with pennies!
So what are the forces behind the continued use of penny coin? There are probably three. The first is that it is simply tradition, as we have already discussed, and the second is the lobbying efforts of the zinc manufacturers. The effect of each of these two reasons is hard to assess. But the third reason for the penny’s perpetuation is probably the strongest, and that is that people are now being forced to make change in odd amounts of money because of the sales tax. The only response for this would be to recommend that we round off the final amounts of our purchases up or down to the nearest nickel. Of course that means, as a practical matter, that the customer will virtually always end up paying the extra two cents for larger transactions, because merchants will probably figure out a way for that to occur. But all in all, for the savings of taxpayer money and everyone’s time, I think that would be a small price to pay.
So for the reasons discussed above, I believe we should recognize the economic reality in today’s world and discontinue the manufacture of the penny. This will cause its use eventually to be phased out, which actually will be no great loss.
But “Penny for your thoughts.” What do you think?
James P. Gray is a judge of the Orange County Superior Court in California, the composer of the high school musical “Americans All,” and can be reached at JimPGray@sbcglobal.net, or at his blog at JudgeJimGray.JudgeJimGray.com.