Washington Hunter
Well-known member
Fri Jul 21, 2006 2:39 AM ET
By Helen Chernikoff
NEW YORK (Reuters) - Look out, Abe Lincoln. The campaign against the penny, the copper-coated coin stamped with the face of the former U.S. president, gathered momentum this week with the introduction of legislation to pull it from circulation.
Rep. Jim Kolbe, Republican of Arizona, on Tuesday introduced a bill that would phase out the coin by rounding all transactions up or down to the nearest nickel, or 5 cents.
Pennies are copper-coated zinc, and due to a recent run-up in the prices of those metals -- with zinc up to about $1.49 cents a pound from about 50 cents in 2000 -- the penny now costs 1.4 cents to make, according to the United States Mint.
Producing and handling pennies costs the United States about $900 million a year, according to Wake Forest University professor Robert M. Whaples, whose research Kolbe cites.
And analysts say prices for the metal are unlikely to come down any time soon.
"The penny has been a nuisance for years but now that the cost of a penny exceeds its value, the landscape of the debate has completely changed," Kolbe said .
The bill is considered to have only a slim chance of passing, but it has drawn attention to the debate over the coin. And cynics note that both the pro- and anti-penny camps have a financial stake in the outcome.
With penny production now losing money, one betting agency, YouWager.Com, is even taking bets on whether the penny will be abolished: Odds are eight to one against its demise, said general manager Freddy Harris.
A PENNY FOR YOUR THOUGHTS?
Despite the venom directed at it, the penny has its supporters, even some from overseas.
Kevin Federline, husband of pop star Britney Spears, and Sir Richard Branson, chairman of Britain's Virgin Group <VA.UL>, last month threw a "Save the Penny" show in Times Square in New York to publicize the penny's plight and a deal for Virgin Mobile USA to charge a penny for every cellphone text message.
Americans will surely protest attempts to kill the penny, which has earned a hallowed place in popular culture. The humble coin, minted since 1793, has inspired everything from old-fashioned penny candy to the famed 1936 Bing Crosby movie "Pennies from Heaven," expressions such as "a penny for your thoughts" and Benjamin Franklin's famous maxim that "a penny saved is a penny earned."
But nostalgia aside, the anti-penny camp notes that a single penny can't really buy anything these days -- not even another penny.
And penny opponents take heart from knowing that Australia and New Zealand stopped producing their own pennies over a decade ago with few, if any, ill effects. The U.S. Mint, which is being careful not to take sides in the penny debate, churned out some 4.8 billion pennies in the first half of this year.
The penny makes more sense if the government profits from it, said Stephen J. Dubner, who co-wrote the bestselling popular economics book "Freakonomics" and has done research on the psychology of money.
When metals cost less, the government's penny production is a "brilliant arbitrage game" in which it would sell the coins for a cent and then see them disappear from circulation into gutters, couches or drawers, Dubner said.
"The only reasons for wanting a penny now are nostalgia and inertia, and those are two pretty bad reasons for doing anything," said Dubner.
Dubner is waging his own small-scale battle against the penny. When he receives change, he picks out the pennies and either gives them back or throws them in the garbage. "Why would I want to carry about this extra weight in my pocket?" he asked.
Lelawattie Jodah, custodian of the change vault at a New York City bank, asks the same question but on a larger scale.
Every two weeks her bank accumulates about 10,000 pennies, or $100, and it's her job to count, sort, store and lug them around until her Washington Mutual <WM.N> branch sells them to some other bank, just to get rid of them. "They just take up so much space," she said.
PENNY CONFIDENCE
If Kolbe's bill was passed, it would increase the need for nickels -- and that's what Kolbe is really after, contends Americans for Common Cents, a coalition opposing the bill.
Kolbe's state leads the country in the production of copper, which has a $3.3 billion direct and indirect impact on Arizona's economy, according to the state Department of Mines and Mineral Resources.
And the nickel -- despite its name -- is composed mostly of copper and coated with nickel.
"We just believe this is special interest legislation at its worst," said Mark Weller, a Washington lobbyist who heads the Americans for Comments Cents organization and acknowledges that he works for a zinc-mining company.
Penny supporters claim that Americans would end up paying $600 million more a year if the coin were scrapped because sellers would round prices up to the next nickel.
But there's also a loftier reason for preserving the penny.
The penny is a symbol and an important one, said Anil Kashyap, an economist at the Federal Reserve Bank of Chicago.
The coin's very existence inspires confidence in the ability of the U.S. central bank, the Federal Reserve, to control inflation and prevent money from losing its value.
"I think it's important for the public to have some faith that money is going to retain its purchasing power," Kashyap said. "(The penny is) a valuable piece of money now debased. "Do you want the dime or the quarter to go the same way?"
By Helen Chernikoff
NEW YORK (Reuters) - Look out, Abe Lincoln. The campaign against the penny, the copper-coated coin stamped with the face of the former U.S. president, gathered momentum this week with the introduction of legislation to pull it from circulation.
Rep. Jim Kolbe, Republican of Arizona, on Tuesday introduced a bill that would phase out the coin by rounding all transactions up or down to the nearest nickel, or 5 cents.
Pennies are copper-coated zinc, and due to a recent run-up in the prices of those metals -- with zinc up to about $1.49 cents a pound from about 50 cents in 2000 -- the penny now costs 1.4 cents to make, according to the United States Mint.
Producing and handling pennies costs the United States about $900 million a year, according to Wake Forest University professor Robert M. Whaples, whose research Kolbe cites.
And analysts say prices for the metal are unlikely to come down any time soon.
"The penny has been a nuisance for years but now that the cost of a penny exceeds its value, the landscape of the debate has completely changed," Kolbe said .
The bill is considered to have only a slim chance of passing, but it has drawn attention to the debate over the coin. And cynics note that both the pro- and anti-penny camps have a financial stake in the outcome.
With penny production now losing money, one betting agency, YouWager.Com, is even taking bets on whether the penny will be abolished: Odds are eight to one against its demise, said general manager Freddy Harris.
A PENNY FOR YOUR THOUGHTS?
Despite the venom directed at it, the penny has its supporters, even some from overseas.
Kevin Federline, husband of pop star Britney Spears, and Sir Richard Branson, chairman of Britain's Virgin Group <VA.UL>, last month threw a "Save the Penny" show in Times Square in New York to publicize the penny's plight and a deal for Virgin Mobile USA to charge a penny for every cellphone text message.
Americans will surely protest attempts to kill the penny, which has earned a hallowed place in popular culture. The humble coin, minted since 1793, has inspired everything from old-fashioned penny candy to the famed 1936 Bing Crosby movie "Pennies from Heaven," expressions such as "a penny for your thoughts" and Benjamin Franklin's famous maxim that "a penny saved is a penny earned."
But nostalgia aside, the anti-penny camp notes that a single penny can't really buy anything these days -- not even another penny.
And penny opponents take heart from knowing that Australia and New Zealand stopped producing their own pennies over a decade ago with few, if any, ill effects. The U.S. Mint, which is being careful not to take sides in the penny debate, churned out some 4.8 billion pennies in the first half of this year.
The penny makes more sense if the government profits from it, said Stephen J. Dubner, who co-wrote the bestselling popular economics book "Freakonomics" and has done research on the psychology of money.
When metals cost less, the government's penny production is a "brilliant arbitrage game" in which it would sell the coins for a cent and then see them disappear from circulation into gutters, couches or drawers, Dubner said.
"The only reasons for wanting a penny now are nostalgia and inertia, and those are two pretty bad reasons for doing anything," said Dubner.
Dubner is waging his own small-scale battle against the penny. When he receives change, he picks out the pennies and either gives them back or throws them in the garbage. "Why would I want to carry about this extra weight in my pocket?" he asked.
Lelawattie Jodah, custodian of the change vault at a New York City bank, asks the same question but on a larger scale.
Every two weeks her bank accumulates about 10,000 pennies, or $100, and it's her job to count, sort, store and lug them around until her Washington Mutual <WM.N> branch sells them to some other bank, just to get rid of them. "They just take up so much space," she said.
PENNY CONFIDENCE
If Kolbe's bill was passed, it would increase the need for nickels -- and that's what Kolbe is really after, contends Americans for Common Cents, a coalition opposing the bill.
Kolbe's state leads the country in the production of copper, which has a $3.3 billion direct and indirect impact on Arizona's economy, according to the state Department of Mines and Mineral Resources.
And the nickel -- despite its name -- is composed mostly of copper and coated with nickel.
"We just believe this is special interest legislation at its worst," said Mark Weller, a Washington lobbyist who heads the Americans for Comments Cents organization and acknowledges that he works for a zinc-mining company.
Penny supporters claim that Americans would end up paying $600 million more a year if the coin were scrapped because sellers would round prices up to the next nickel.
But there's also a loftier reason for preserving the penny.
The penny is a symbol and an important one, said Anil Kashyap, an economist at the Federal Reserve Bank of Chicago.
The coin's very existence inspires confidence in the ability of the U.S. central bank, the Federal Reserve, to control inflation and prevent money from losing its value.
"I think it's important for the public to have some faith that money is going to retain its purchasing power," Kashyap said. "(The penny is) a valuable piece of money now debased. "Do you want the dime or the quarter to go the same way?"
