In the years when a man’s wages were seldom more than a dollar a day, such a minuscule denomination made sense. But by 1857 — even though it was still worth as much as 1/18th the average hourly wage, more than eight cents in today’s money — the half cent’s obsolescence was already apparent, and it was discontinued with little fuss or bother.
A century and a half later, the US mint expects its presses in Philadelphia and Denver to issue 8.7 billion pennies by the time 2006 is over. It’s not just the sheer numbers that are amazing (compare that many pennies to just 1.7 billion nickels minted); it’s the cost. Four years ago, it cost 0.98 cents to manufacture and distribute a penny. Now, thanks to rising zinc prices caused by speculation and increased industrial demand — especially in China, leading The Week to jokingly call the potential demise of this American icon a “communist plot” — it costs about 1.4 cents to mint and distribute a single coin. (Pennies are 97.5 percent zinc.) As is often said, it may not sound like much, but it adds up: $121,800,000 to make $87,000,000 worth of pennies.
US Representative Jim Kolbe of Arizona has taken it upon himself to clean up this unconscionable government waste — and perhaps, in doing so, enrich his home state. In 2002, Kolbe introduced the Legal Tender Modernization Act, which sought to encourage the penny’s ignominious demise. Although it stipulated that “all coins and currencies of the United States . . . shall continue to be legal tender,” it would have required the rounding of all cash transactions of three cents or more to be rounded to the nearest nickel: prices ending in a one, two, six, or seven would be rounded down; those ending in three, four, eight, or nine rounded up. But that bill was killed.
This July, Kolbe proposed the 2006 Currency Overhaul for an Industrious Nation (COIN) Act. Clever title, no? This one will again seek to “reduce demand for the penny” via compulsory rounding. It would also require a Government Accountability Office study on alternative composition for the coin, as well as the eventual replacement of the dollar bill with a one-dollar coin.
“Our currency and coinage policies are quite simply pound wise and penny foolish,” punned Congressman Kolbe, who was unavailable for comment for this article, upon the bill’s introduction. “The penny has been a nuisance for years, but now that the cost of a penny exceeds its value, the landscape of the debate has completely changed.”
Like its predecessor, this bill seems destined to croak in committee. But it’s worth noting something that Kolbe often fails to mention in his ceaseless quest to drive the pesky penny from this great land. It’s not just the negative seigniorage (revenue drawn by the government from the difference between the face value of the coin and the cost of production) that has Kolbe steamed. It’s not just, as he plainly puts it, that “the penny has no purpose.”
No, it’s also that Kolbe comes from Arizona, which happens to be the country’s largest copper producer. American pennies used to be made entirely of copper, but they haven’t been since 1856. Nickels, meanwhile, are mostly made of copper; they’re only 25 percent nickel. For those keeping track at home: fewer pennies = more nickels. (Kolbe’s dollar coin would presumably also be made mostly of copper.)