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June 18, 2006 at 12:28 am #1298
Does Abe still make cents?
As the cost of making a penny surges, it begs the question . . .
Friday, June 16, 2006
THE COLUMBUS DISPATCH
Dan Rich has a soft spot for pennies.
When he was 10, he would search through his dad’s pocket change every day, hoping to fill the spots in his Whitman penny folder. Now 55, the Worthington Hills resident still picks up pennies he finds on the ground, for luck.
But the penny itself might be running low on luck.
While the penny is the most widely used coin in circulation, a movement to end its use is gaining steam.
Rep. Jim Kolbe, R-Ariz., plans to introduce legislation before the Congressional session ends in October to abolish the coin.
If the bill became law, all cash transactions would be rounded to the nearest 5 cents.
The crux of Kolbe’s argument: It now costs the U.S. Mint more money to make pennies, and nickels, for more money than each coin is worth.
Metal prices have increased because of limited supplies, increased demand in the U.S., China and India, and speculation in the metals markets, said Rich Heidemann, equity analyst with National City’s Private Client Group.
Zinc prices have doubled in the past six months, and copper prices have doubled since last summer, he said.
Pennies are 97.6 percent zinc and 2.4 percent copper. Nickels are 75 percent copper and 25 percent nickel.
“The increase in metal prices raised the (mint’s) coin production costs by 10 (percent) to 20 percent, depending on the denomination,” White said.
The mint estimates that it will produce 8.7 billion pennies and 1.7 billion nickels in 2006.
Making pennies “doesn’t make much sense. Most of them end up in piggy banks,” said Evan Brill, a Columbus coin dealer and collector. “If (the mint) is producing them at a loss, the only reason to keep it is to make change on sales tax.”
A study by the General Accounting Office found most pennies go out of circulation immediately after they are received by the public.
Most people 58 percent immediately stash pennies in a jar or piggy bank. Only 27 percent use them to pay for purchases with exact change, 10 percent throw them in retailers’ take-a-penny/leave-apenny cup, and 2 percent throw them away.
Coinstar, the company that makes the machines that sort change in grocery stores, estimates Americans have $10.5 billion in loose change in jars, piggy banks and ashtrays, an average of about $99 per household.
A Harris Poll found 59 percent of U.S. adults oppose abolishing the penny. A Coinstar survey pegs the number at 66 percent.
Americans for Common Cents, a pro-penny organization, said killing the coin would amount to a $600 million tax on the nation’s poor.
With no penny, retailers would round prices up to the nearest nickel, said Mark Weller, executive director of Americans for Common Cents. “It’s a losing proposition for consumers.”
“I don’t know how we would do without it,” said Rodney Riggle, a retired assemblyman in Springfield who has collected pennies for 53 years.
“Relying on the nickel won’t work,” Riggle said. “We’ll run into the same problem as far as costs.”
The penny wouldn’t be the first coin to land on the chopping block. In 1857, Congress eliminated the half cent.
The proposed legislation wouldn’t be the first attempt to axe the penny. The penny was removed from circulation at U.S. military bases decades ago, because of their transportation costs.
In 1989, three bills seeking to abolish the lowly cent were introduced, although none went far.
In 2001, Kolbe introduced the Legal Tender Modernization Act. The bill called for an end to the production and circulation of pennies, but kept the cent denomination for check, creditcard and debit transactions.
“Pennies have virtually no value,” Kolbe said when introducing the bill to the House in 2001. “Most people stash away or toss aside pennies instead of reusing them, thereby forcing the federal government to produce billions more every year at little, if any, profit.”
Kolbe did not return phone calls seeking details on his new bill.
The U.S. Mint generates about $1 billion in revenue annually through the difference between face value of the money it makes and the cost to produce it. The mint’s profits go into the U.S. Treasury’s general fund.
When the cost of delivering them to banks is factored in, pennies have not turned a profit for the U.S. Mint for at least a decade, according to the Government Accountability Office.
But profitability might not be the heart of the issue.
If we abolish the penny, “we lose part of our heritage,” Riggle said. “The penny is an American icon.”
The penny was the first currency authorized by the U.S. government. It was designed by Benjamin Franklin and first produced in 1787.
“If it doesn’t make economic sense to make pennies, then we should stop,” Rich said. “But for sentimental reasons, I’d like to keep it.”
[email protected] :” title=”Question” />June 25, 2006 at 10:28 pm #6610
No,but I bet he would get his 2 cents in
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