When a dollar isn’t enough to buy a bottle of water, it’s easy to rationalize throwing pennies in the trash. When you conduct almost all of your transactions with a debit card, the few pennies that come your way probably ride around in your wallet for weeks, either forgotten or not worth counting out. I’d encourage you to enjoy those rare, triumphant moments of presenting exact change to an unimpressed cashier while you still can, because pennies (and even nickels) may not be around forever.
A Penny Minted is More Than a Penny Spent
According to the US Mint’s annual reports, the cost of producing a penny surpassed $0.01 in 2006, and the cost of producing a nickel surpassed $0.05 in 2009. So why does the Treasury still mint these coins? If you’ve seen that one episode of The West Wing, you’ve heard some of the arguments: The government’s admission that one cent is practically worthless would destroy people’s faith in the economy, and no politician wants to lose votes in The Land Of Lincoln. A little exaggeration, for sure, but the debate is worth some attention.
Americans for Common Cents is a lobbying organization devoted to protecting the penny. In 1996, when minting pennies still generated a profit for the Treasury, ACC executive director Mark Weller testified before Congress in defense of the penny. He cited a handful of polls demonstrating public support, and predicted that eradicating the penny would encourage retailers to round their prices up. Weller told the committee that this “rounding tax” would cost Americans $3 billion over five years.
The Zinc Lobby Strikes Again
In a 2008 article for The New Yorker, columnist David Owen revealed that ACC’s funding comes primarily from Jarden Zinc Products. Pennies minted since 1982 are 97.5% zinc, and Jarden supplies zinc blanks for coins to the US and Canadian Mints. Before we dismiss the proliferation of pennies as a conspiracy by Big Zinc, we might note that Jarden’s recently-expanded facility in Greeneville, TN continues to add jobs in an area facing a 12% unemployment rate.
Congress sets the composition guidelines for coins, and has changed the makeup of coin currency several times in the past hundred years. Copper was added to quarters and dimes to combat the rising price of silver, steel was added to coins during WWII due to copper shortages, and pennies were made from aluminum for a brief period during the seventies. Raising the zinc content of pennies allowed the US Mint to continue making a profit off the coins into the 21st century, but rising energy costs and the prices of zinc and copper have made even the zinc-based pennies unprofitable. On top of that, research from the Duke University Department of Radiology shows that zinc-based coins are far more dangerous when swallowed than coins composed of other metals. The Duke physicians also noted, “Coins are the foreign bodies most frequently ingested by children.”
Does the Solution Make Cents?
If we all agree to not let children eat zinc-based pennies (or any other currency, for that matter), we’re looking at a choice between losing money by minting pennies and nickels, or losing money to vendors who will charge one to four cents more for every purchase. But, as Owen points out, American consumers willingly pay Coinstar’s 8.9% fee to exchange their coins—more than twenty billion pennies each year. That translates to $200M, of which Coinstar collects $17.8M. So much for Weller’s $3 billion we’d lose over five years, even if we adjust that figure for inflation and growth since 1996.
Economist François Velde of the Federal Reserve Bank of Chicago has a solution that might be agreeable to penny enthusiasts, zinc miners, superstitious numismatists, Sam Seaborne, and all the rest of us who don’t especially care what happens to pennies. He proposes repurposing pennies as five-cent coins, keeping them in circulation alongside nickels and “simply declaring that pennies are henceforth worth five cents.” This would also help to devalue the nickel below its current cost of production, since there would be more five-cent coins in circulation. Velde’s research in the history of coin use, minting, and societal relationships to coin currency is compelling and certainly worth a look, even if his solution offers nothing to protect our children and pets from zinc poisoning.
So what should you do with your pennies? Save them for a road trip to Illinois (where toll booths accept pennies), donate them to one of the penny-based charities linked on ACC’s website, leave them heads-up on the street for the luckless to find, or soak them in baking soda so they get really shiny. Just don’t drop them from tall buildings or send them to the BankSimple office, because our dogs will eat anything.