With government spending and deficits at record highs, some have called for a return to balanced budgets. Of course, the main way to achieve this would either be through raising taxes or cutting spending, neither of which is a popular option. Others have proposed eliminating corruption and waste in government spending. This approach might bring to light a long-running part of America’s currency system – the penny.
So what does the penny have to do with government waste? For starters, the penny’s value isn’t what it used to be. Despite many popular culture adages such as “getting your penny’s worth” or “putting in my two-cents worth,” the penny’s market value has dropped considerably during the past few decades. I have talked with my grandparents about how the prices of many everyday items were much lower in the 1950s and 1960s. You could get a hamburger for 25 cents and a gallon of gasoline for about the same amount. The average home cost less than a brand-new car does today.
Those numbers can be deceiving, however. The main reason for everything being worth more is an economic process called inflation. Over time, goods and services in an economy gradually move up in price. Wages eventually catch up, and the cycle continues. During long periods of time, that translates to what seems like extreme price differences. For example, the median home price in 1950 was $7,354. In 2014, that number was $188,900. This doesn’t mean people are making less money, as average family income in the same time period grew from $3,300 to $51,017. Inflation just translates to individual units of money being worth less on their own over time.
That is especially apparent on small denominations like the penny. A dollar doesn’t go as far as it used to, but there are still plenty of items just one dollar can buy in 2016. If we wanted a challenge, I would try to find if there is anything that can be had for the price of one cent. That drop in value doesn’t only affect purchasing power, it affects the very production of the pennies themselves. The U.S. Mint has been producing pennies since 1793. To the present day, the penny’s value has been going down, but the materials used to produce one don’t always follow that trend.
The penny was originally 100-percent copper. This value has shrunk considerably throughout the centuries. In 2016, that value is only two-and-a-half percent. Even with the modern penny using 97.5-percent zinc in its composition, the cost for the U.S. Mint to produce one penny in 2014 was one-and-two-thirds cents. The raw materials in pennies are now worth more than they are in circulation. The federal government took a $55-million loss to produce pennies in 2013. That is money the government is sending straight down the drain.
So is it worth it? Most prices across a spectrum of goods and services end in “99 cents,” such as 19.99 and so on. If there were no penny, those prices would have to be changed, perhaps rounded up to the nearest zero. Although one extra cent per purchase might not seem like much, it would add up dramatically over time. On the other hand, credit cards and other electronic payment methods have proliferated in recent years, meaning we could keep the prices the same if desired.
But not everyone carries credit cards, and many still prefer to use cash. How would a penniless world work in those situations? For help, we can look to our northern neighbor, Canada. In 2012, the Royal Canadian Mint stopped producing pennies because of the loss being taken in producing them. Pennies are still legal tender in Canada, but any that are collected are sent to the Canadian Mint for scrapping to take them out of circulation. Purchases made in cash are rounded to the nearest five cents.
Though eliminating the penny would be good for both efficiency and reducing wasteful spending, it’s part of the American tradition. I have many memories of collecting pennies, and doling out and receiving them as change. It would be quite a shock to get down only to the nearest nickel when determining prices. Abraham Lincoln, one of our greatest presidents, graces the obverse side of the penny. While I have a great deal of respect for pennies, this problem may be a simple measure of economics. If we’re losing money on them, they’re not making a whole lot of cents.
Connor Kockler is a Sauk Rapids-Rice High School student. He enjoys writing, politics and news, among other interests.
