Should we abolish the penny? Rep. Jim Kobe of Arizona thinks so, and with some good reason:
Over half of the U.S. Mint’s coin production comes in the form of pennies, which are made of 97.5 percent zinc. Since the Mint doesn’t stockpile its inventory of materials, it is sensitive to fluctuations in zinc’s price.
The cost of producing the coin has risen from .97 cent per penny in 2005 to 1.4 cent per penny. At that rate, the Mint would spend some $44 million producing pennies this year, nearly $14 million more than in 2005.
Zinc prices are up because of China going from a net exporter to a net importer — though that may only last a few years.
Of course, it may not all be magnaminity from Kobe. Though the biggest opponents of the move have been Americans for Common Cents, which has ties to the zinc industry, Kobe represents Arizona, which is a copper producer, which, in turn, is the primary ingredient in nickels.
(Everyone pause for the irony of copper-colored pennies being primarily zinc, while silvery nickels are primarily copper.)
Kobe’s scheme is a little dodgy to consider.
Kolbe’s 2001 legislation proposed that cash transactions ending in 1, 2, 6, or 7 cents should be rounded down to the nearest 5 cents, while transactions ending in 3, 4, 8, or 9 cents would round up. Credit and debit card transactions could still be valued to the nearest cent.
Okay … I guess that makes sense: 0 <1 <2 3> 4> 5 <6 <7 8> 9> 0
And, evidently, something like this works just fine in Australia.
Australia eliminated its one and two cent pieces in 1992 after a surge in the country’s consumer price index twenty years before eliminated their usefulness. The change affected only cash transactions — interest is earned and bills are paid to the cent.
At the time of the transition, according to Michael Skully, Professor of Banking at Monash University in Melbourne, the Australian government kept a close watch for profiteering associated with the elimination of the penny, while the nation’s major retailers rounded totals down. The elimination of 1 and 2 cent pieces did not “disproportionately hurt the poor” as ACC asserts it would if rounding was imposed in the United States. “I certainly don’t recall any riots in the street when it happened,” said Skully.
For what it’s worth, nobody thinks the plan has any chance of success.
(via Neatorama)