A Penny Saved or a Penny Spurned?

  Jerome Shea       July 22, 2008      Weekend Wonk

Last week I outlined Question 1 on the AP exam: should we get rid of the penny?*

Representative Jim Kolbe of Arizona, sponsor of the Legal Tender Modernization Act, thinks we should. He would have the nickel do the penny’s job by simply rounding sums up or down in cash transactions. It should also be noted that the LTMA would not abolish the penny. It would still be legal tender, would still be minted. Kolbe’s bill would simply make it irrelevant and work to drive it out of circulation. Those students who took Kolbe’s side usually mustered practical arguments. Thanks to inflation, pennies are virtually worthless these days, so why on earth should we keep churning them out? And many students did know that pennies cost more to make than they are worth.

Certainly one can make a strong practical argument against the penny, which is why most penny proponents wisely took a different tack, a sentimental one. The penny, authorized in 1787, is our oldest coin. To mess with the penny is to mess with the nation’s soul! (Sometimes one could hear anthems rising in the background.) And then there is Abe Lincoln, arguably the greatest president we have ever had, the man who preserved the Union and freed the slaves. Would we deny him his numismatic distinction? The anti-penny people pointed out that Abe still has the five dollar bill, the Lincoln Memorial, and Mount Rushmore—what are those? chopped liver? And what honor accrues to Abe when we step on his face on the sidewalk or suffocate him in those sofa cushions? The pro-penny people did try to make the argument that rounding upward would hurt those who could least afford it (Kolbe maintains that it would be a wash). In the Harris penny popularity poll, only 16% of people earning less that $25,000 per year were for abolishing the penny, contrasted with exactly twice as many (32%) in the $75,000+ group. Do the poor people instinctively know something that the rest of us don’t? For some, the Harris poll was the clincher: if the people want to keep the penny—59% did, overall—that should settle it.

Much was made of William Safire’s rant on the “outdated, almost worthless, bothersome and wasteful penny.” He pointed out correctly that you can’t buy anything for a penny these days. But that, of course, is a red herring. You can’t buy anything for a penny, but the humble penny does enter into most transactions, such as in that grocery bill for, say, $20.04. Kolbe would round it up to $20.05. Problem solved. But until then, we’re gonna need pennies. Incidently, the way I read LTMA, a huckster could still advertise his widgets for the time-honored “$19.98”—where would we be without such lures?—but the promise would be hollow. You’d still pay 20 bucks for that widget. I was curious about sales taxes, too, they being so often a ragged addendum. Again, as I read LTMA, the rounding would happen after the sales tax was added to the bill. But how would the state or municipality sort things out with the retailer?

Let’s suppose your local government levies a tax of 5.5%. So the widget “costs” $19.98. Tax on that comes out to $.9999. The simplest thing is to round that out immediately to a dollar, which is what we usually have to do with taxes. Now we have a total of $20.98, and we round THAT figure up to $21.00. Who gets what? My head hurts.

Speaking of silly lures, has gasoline always been sold with 9 mills tacked on (e.g., $3.889)? What’s with that? Such is the power of the eye, I suppose, that we think of that as $3.88, when it is effectively $3.89. Needless to say, the final figure at the pump is a rounded figure (rounded to the penny). It has to be.

Hey, maybe we should start minting mills! Just a thought.

I say we keep the penny. Yes, pennies can be a bother, and to have them is to harbor a paradoxical hope of getting rid of them. Almost every time we buy something we play a “gotcha” game with the clerk. Do I have enough pennies to cover this bill that comes to, say, $2.17? If I have a dime, a nickel, and two pennies, I am in luck. Or maybe I have a dime and SEVEN pennies! Or a nickel and TWELVE pennies! Gotcha! A small triumph, but one that can brighten your day like, well, like a new penny. Instead, I have only two bucks and a quarter. Grinning, the clerk loads me up with eight pennies. Gotcha! But in that gotcha is a minuscule but important human transaction.

And let’s not forget the “penny cup” that sits alongside most cash registers, a very sensible ameliorative that required no federal legislation. Power to the people!

Keep the penny, and for goodness sakes keep it copper-colored, whatever alchemy that takes. If we can make it for less and still keep the magic, well and good. But the penny is part of our folklore. A penny saved is a penny earned. Bright as a new penny. A penny for your thoughts. Penny-ante. Pennywise and pound foolish.

Ever seen a toddler’s eyes sparkle when she spies a bright, shiny nickel?

Neither have I.

*A couple of clarifications in re last week’s wonk. My latest information is that it costs about 1.7 cents to make a penny these days, so the cost is inching up to twice what the penny is worth. And it turns out that I was not so off base in thinking that the 1943 steel penny was zinc. In fact, it consisted of a steel core plated with zinc. A friend from the Midwest says they were known as “white pennies,” while a friend from the Bronx says they were called “lead pennies,” and many storekeepers wouldn’t accept them. They were universally disliked. Pennies, by golly, are supposed to be copper-colored! Throughout most of our history, pennies have been made of bronze or brass, two alloys that are 95% copper.