David Owen makes the case in The New Yorker:
[P]roducing a penny now costs about 1.7 cents. Since the Mint currently manufactures more than seven billion pennies a year and “sells” them to the Federal Reserve at their face value, the Treasury incurs an annual penny deficit of about fifty million dollars—a condition known in the coin world as “negative seigniorage.” The fact that the Mint loses money on penny production annoys some people, because one-cent coins no longer have much economic utility. More than a few people, upon finding pennies in their pockets at the end of the day, simply throw them away, and many don’t bother to pick them up anymore when they see them lying on the ground. (Breaking stride to pick up a penny, if it takes more than 6.15 seconds, pays less than the federal minimum wage.)
Various people have proposed various remedies, one of which is to get rid of pennies altogether. This is a step that many countries have taken with their least valuable coins—among them the United States, which stopped making half-cents in 1857, when a half-cent, by almost any measure, had significantly more purchasing power than a dime does today. There are problems, though. One is that many people are quite attached to one-cent coins. Another is that some people fear that merchants in a penny-free economy, when making change on cash purchases, might be more inclined to round up than to round down, thus penalizing consumers. A third is that eliminating pennies would increase our reliance on nickels, which now cost almost ten cents to manufacture and so generate even more negative seigniorage, per coin, than pennies do. What is to be done?
Umm, get rid of nickels too.
Only an institution as insane as government would continue producing something that costs twice as much as a it’s actually worth. Besides, who really uses nickels and pennies these days anyway ?
H/T: Matthew Yglesias
