Penny-wise and pound-foolish

President Obama wants to get rid of the penny. That defenseless, shiny piece of metal that poses more danger to a curious infant than to the U.S. government. I’ll be honest – my reaction to this proposal traveled from disbelief to anger to grudging agreement, and now it hovers at mild to extreme amusement at the incredible capacity for puns that this issue affords. But in all seriousness, this issue, while seemingly mundane, is a good opportunity for our country to start reevaluating even the most cherished American traditions in a more logical way, especially during a time when many Americans barely have two pennies to rub together.

Once upon a time, the most I could tell you about a penny was that it is made out of copper, is worth one cent and has Abe Lincoln’s face on it. Turns out I was about 33.3% right (which is more than I can say about my recent midterms).

Back in 1982, the penny reversed composition from 95 percent copper and 5 percent zinc to 97.5 percent zinc and 2.5 percent copper. And if that didn’t already make matters worse, today pennies actually cost 2.41 cents to make, which is a value that will only increase due to costly manufacturing shifts of zinc and copper in China. It’s as if the relationship I personally developed with pennies – digging them out of my wallet at Coupa, saving hundreds of them in tin cans and cashing them in banks, tossing them down wishing wells – was a terrible hoax (I always wondered why none of my wishes actually came true).

I realized that my main motivation for opposing the bill stemmed from nostalgia for a time when pennies actually made me pretty rich among my seven-year-old companions. But truthfully, nostalgia for a coin that really just made me enemies at the local Wells Fargo is no reason to hate a bill that actually makes cents, pun very much intended. The dollar has a buying power today that the quarter had thirty years ago. The penny’s current worth is simply depressing – in fact, the U.S. military has already dug the penny an early grave and rounds all cash purchases up or down to the nearest nickel.

There are serious (and not so serious) concerns about the elimination of the penny. Research dictates that goods will more likely be rounded up, not down, to the nearest nickel, causing slight to moderate inflation. There are also legitimate cultural concerns – Abraham Lincoln is and will always have great poll numbers, which only got a boost from Daniel Day-Lewis’s superb portrayal.

Indeed, it seems even the most staunch penny supporters have a sense of humor; the pro-penny group “Americans for Common Cents” can speak volumes about the historical importance of the penny. And finally, some argue that eliminating the penny puts much more pressure on the nickel, which will lead to an increase in the demand for nickels and, ultimately, negate the economic benefits of eliminating the production of the penny in the first place, since it costs 10 cents to make a nickel.

However, it’s dubious that even the combination of these three concerns is serious or accurate enough to justify maintaining the $58 million net loss on producing pennies annually. Plus, I’m all for nickels. As a Stanford entrepreneur and columnist, a nickel for my thoughts sounds a whole lot better than just a lousy penny for some of my more fantastic ideas.

The West Wing, which I am beginning to suspect foreshadows much of what goes on today in government, had an episode about a bill that would eliminate the penny (much like the real “Legal Tender Modernization Act” from 2001). Creator Aaron Sorkin wrote some snappy one-liners about the worthlessness of the penny, essentially saying that the sole reason for keeping pennies in circulation lies in the preservation of gumball machines. In the end, however, the White House Chief of Staff decides not to back the bill, because at that time, the administration needed the support of an Illinois congressman. Turns out, Abraham Lincoln was a member of the House of Representatives from Illinois’s 7th district.

Well, if I recall correctly, President Obama was a senator from Illinois, has a house there and loves the Chicago Bulls – you see my point. This is not an issue about whether Abraham Lincoln was loved or not, this is not about American identity and this is not about President Obama’s neighborhood. This is an issue about a coin that costs more than its static value, results in lost productivity, remains useless for the vast majority of coin-accepting tollbooths and vending machines and causes more digestive problems in dogs and children than I’d like to go into.

The U.S. government needs to start thinking analytically about how it spends its money. Sometimes, the nontraditional and culturally offensive solutions offer the most rationally sound conclusions that are at least worth talking about. If the president had not publicly said anything about this penny problem, I would still be saving them in my wallet without thinking twice.

Thus, just as it is President Obama’s duty to keep an eye on such expenditures, it is our civic duty to let go of some of our deeply-held ideological beliefs about these budget issues and isolate what’s helping and, more importantly, what’s harming our nation today.

Seventy-seven percent of Americans oppose eliminating the penny. Why? Well, considering the fact that most people are not actively involved in the Americans for Common Cents coalition, it would seem like a majority of Americans don’t have any reason for opposing penny elimination much better than simple regret about the time they’ve spent peering into wells. Heck, the pennies I value the most are the ones that got flattened for the infuriating price of $0.50.

So perhaps you’ll come away from reading this article caring even less about pennies than you did five minutes ago. And that’s fine – I’ll be busy collecting them en masse for my coffee allowance till they actually do become worthless. But like it or not, Obama’s making some change.

Send Uttara a penny for her thoughts at usiv@stanford.edu.

About Uttara Sivaram

  • A thought

    pennies (and nickels) should definitely go. Tax should be included in prices, and all prices should be multiples of 10 cents.