It's Time To Stop Making Pennies

Canada did a smart thing a few days ago. They decided to stop making pennies. The pennies cost more to make than they are worth, and are virtually worthless when it comes to buying something (since there is nothing that costs only a penny or two anymore). People using debit or credit cards will still pay the exact amount, but for those paying with cash, their purchase will be rounded up (if the last digit is 3 or 4) or down (if the last digit is 1 or 2) to the nearest nickel.

This is something the United States also needs to do. People won't even bother to bend over and pick up a penny or two if they drop them, and as Greg Mankiw (economic advisor to President George W. Bush) says, "When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful." He's right. People just don't value pennies any more, and there's no reason they should. Most refuse to even carry pennies in their pocket, and stuff them in a jar when they get them.

The government produces about 5.8 billion new pennies each year, and loses money on each one. It takes two cents to produce the one cent coin. The parties in Congress both complain about how much money is being spent by the federal government each year. If they were serious about that, they would just stop making pennies. That would save $116 million each and every year. That won't balance the budget by itself, but it's $116 million that wouldn't have to be cut somewhere else (like food, shelter, or health care for poor children).

There are two main reasons given for keeping the penny. The first excuse says the rounding off of purchases will cost consumers significantly over a period of time. That is just NOT true. Just as many purchases would be rounded down as rounded up, and over a lengthy period this would mean the customer is neither paying more or less (but the same amount they currently spend).

The other excuse is that polls show most people (about two-thirds) say they would prefer to keep the penny. That's simply because most people don't like to change something that has been in effect for many years, even though it would have no financial effect on them. Most of these same people stuff their pennies in a jar somewhere, leave them in a store penny tray, or simply refuse to pick them up when they are dropped. They don't really value the penny. They just don't like change -- any change.

I think it's time for the United States to stop making pennies. They have little use in this economy, and we could save a nice chunk of government money by stopping the production of them. What do you think?