The Costly Quest to Eliminate Pennies: A Look at Why the US Might Follow Canada's Lead

Over the years, the ongoing discussion about discontinuing the penny in the United States has not reached a resolution. Despite ongoing debates and several reasons supporting the elimination of pennies, the US has not officially stopped their production as of my last update in August 2023.

Why the US Might Follow Canada’s Lead

Canada's decision to cease penny production has been a significant milestone in the ongoing debate. With the Canadian government opting to eliminate pennies in 2012, it set a precedent for other countries, including the United States, to reconsider their own coinage practices. By taking this step, Canada aimed to reduce the unnecessary cost of minting coins that have limited practical value in a modern, cashless world.

High Production Costs

One of the primary reasons behind the discontinuation of pennies in Canada and other countries like Australia, is the high cost of minting. It has been widely reported that the cost of producing a single penny in the US can exceed its face value. For example, the U.S. Mint spends about 1.76 cents to produce a single penny. This discrepancy means that every penny produced incurs a loss to the government.

Not a New Issue

The high production cost issue has been a topic of discussion for many years. Since the United States never actually stopped producing pennies in 2023, the focus has shifted to adopting sustainable and cost-effective solutions. The suggestion to round transactions to the nearest nickel has gained support as a practical and efficient alternative.

Historical Context

It is also worth noting that the origins of the penny in the United States have distinct historical roots. During the late 18th century, after the American Revolution, the country deliberately chose to adopt a different coinage system compared to that of England. While England used the pound/shilling/pence system with 240 pennies to the pound, the United States defined its currency based on a dollar subdivided into tenths and hundredths. The small coin in this system was named the cent, derived from the Latin word for hundredth.

Current Denomination Debate

Today, the debate around eliminating the penny continues. Advocates for its removal argue that pennies have become increasingly irrelevant in a cashless society. With more transactions moving towards digital payments, the practicality of carrying small coins has diminished significantly. Additionally, the significant cost of minting pennies continues to be a major burden on the government's budget.

Alternatives and Simplifications

One proposed solution is to round up or down to the nearest nickel, which has been advocated by several experts and policymakers. This method simplifies transactions and reduces costs associated with low-denomination coins. Another suggestion is to evenly distribute the cost of rounding among merchants and consumers, ensuring a more equitable solution.

Conclusion

While the US has not officially stopped making pennies, the ongoing discussions and the precedents set by countries like Canada make it clear that the conversation about eliminating pennies is far from over. As society continues to evolve towards a more cashless environment, the question of whether the penny remains a necessary part of the currency system remains a topic of heated debate.

Ultimately, the decision to eliminate pennies will depend on a variety of factors, including public opinion, economic considerations, and the practicalities of transitioning to a new system. However, the growing recognition of the high cost of minting pennies is a strong indication that change is on the horizon.