Are you one of those people who still feels a nostalgic desire to keep the penny around? Don’t get me wrong… there is a lot to be said for nostalgia. I’m one of those relics who can actually remember buying penny candy as a child and looking forward to having some coins. But times have changed. I actually saw a gumball machine this week that took quarters, and the gumballs were not particularly large. So is it time to get rid of the penny?
Canada is taking the plunge.
Canada will withdraw the penny from circulation this year, saving taxpayers about C$11 million ($11 million) annually and forcing retailers to round prices to the nearest nickel, the government announced in its budget today.
The Royal Canadian Mint, which has produced 35 billion pennies since it began production in 1908, will cease distribution this fall due to the coin’s low purchasing power. Production and handling cost for the one-cent coin are a C$150- million drag on the economy, according to a 2006 study by Desjardins, a Quebec City-based bank.
“Pennies take up too much space on our dressers at home,” Finance Minister Jim Flaherty said in the text of his budget speech in Ottawa. “They take up far too much time for small businesses trying to grow and create jobs.”
Doug Mataconis offers a few arguments in favor of the US following the example of our neighbors to the north.
The situation is actually even nuttier here in the United States, where it costs 2.4 cents to produce each penny, but efforts to eliminate the penny have always died in Congress. The President’s new budget included a proposal to allow the US Mint to study the use alternative metals in coin production in the hope that this would reduce costs, but that’s likely only a short term measure. Given its almost non-existent purchasing power, there’s really no rational reason to keep pennies around. This is a Canadian idea we should think about doing ourselves, it seems.
I suppose logic could be on his side. Of course, others have published books taking the opposite view. One theory is that it will result in an unofficial “tax” on consumers because retailers will simply round everything up, artificially inflating prices. The counter-argument is that the invisible hand will balance it all out as other things are “rounded down.” But this is capitalism we’re talking about here! Who is going to “round down” when they could round up?
How much will it hit you in the wallet? (Or… err… purse. We’re equal opportunity here, you know.) Well, how many purchases do you make with cash each day? Remember… this change wouldn’t affect any credit or debit card purchases, personal checks or electronic and e-commerce transactions. The most you’ll get popped for is four cents each time. Even if you shop a lot it sounds like we’re not talking much more than ten dollars a month. (And before you go telling me how much that is to the very poor, the very poor aren’t shopping that often.)
I’m not sure if nostalgia is enough to keep the penny around. Perhaps it’s simply time to move on.
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