As the dollar coin goes, so goes the penny?December 16, 2011: 11:24 AM ET
The dollar coin is being retired, so perhaps now it's time to revisit efforts to kill off the penny, the nickel, and even the dollar bill.
FORTUNE – In a money-saving move, the U.S. government this week announced it would stop making presidential $1 coins. Apparently, nobody wants them.
The coins were created in 2005, as part of a mandate to produce four coins each year bearing the semblance of past presidents. The U.S. Mint, the government agency that produces the currency, reports there are enough $1 coins sitting in the Federal Reserve vaults to meet demand for a decade. Eliminating them, officials say, would save taxpayers $50 million a year.
This isn't the first time Washington has moved to kill a currency. The penny has had its fair share of detractors over the years. Those copper-colored coins are known to sit in jars for years, get lost in couch cushions, and gather in the bottom of handbags. When we drop them, we often don't bother to pick them up. That fact has not been lost on former Republican Congressman Jim Kolbe of Arizona. In 2001 and 2006, he led the charge to kill off the penny, saying it has been "a nuisance for years." In his latest attempt, Kolbe pointed out that producing the penny was costing more than it was actually worth as prices for its main components, zinc and copper, rose.
In 2010, the cost to produce one penny surged to 1.79 cents. So it takes nearly two pennies to make one -- a taxpayer cost of $62.3 million. That's higher than the previous year's cost of 1.62 cents per penny and even higher than the 1.42 cents before that, according to the U.S. Mint.
But killing off the penny on the basis of costs alone would open the nickel to scrutiny. In 2010, the cost to manufacture the coin came in at 9.22 cents per coin.
Still, Kolbe says the penny isn't worth keeping. "It has less and less value," says the former congressman who is now a fellow at the Washington, DC-based think tank German Marshall Fund. "In fact, I find that when I go to stores, about half don't give you pennies when you ask for change. They just round it to the nearest five cents." His 2006 proposals asked that transactions (outside of credit and debit cards) ending in 1, 2, 6 or 7 cents be rounded down to the nearest 5 cents, while those ending in 3, 4, 8 or 9 cents be rounded up.
That may work. But it seems Americans have no qualms with paying more for the simple comforts of pennies, if not for their intended use. Say, the pennies in our loafers; the pennies we throw and make a wish with; those we find and take it as luck.
But maybe we're all wrong to focus on costly coins. Arizona Republican David Schweikert says that if the government really wants to save money, the U.S. would phase out one-dollar bills and use dollar coins instead. Doing so could save the government about $5.5 billion over 30 years, according to a Government Accountability Office study. Whereas a dollar typically lasts an average of about three years, dollar coins can circulate for three decades before they wear out. Also, vending machines seem more willing to take coins than a wrinkled dollar.
Needless to say, the move to kill the presidential coins doesn't help Schweikert's case. And what gives a currency lasting power becomes even less clear. Penny for your thoughts?