Colloquium Spring 2018 Full

A Quest for Common Cents The Future of the Penny in United States Currency By Ethan Starr ’21 Since its creation in 1793, the United States penny has enjoyed nearly uninterrupted production. Te cent’s long-term durability can be matched only by its adaptability, evidenced by its numerous designs before the advent of its modern iterations. Tis paper follows the penny throughout American history, from its origins through its evolution into the nation’s most unproftable and insignifcant piece of currency. As a combination of perpetual infation and rising costs of compositional metals renders continued production of the single-cent coin costly and unsustainable, the United States government must take immediate action to evaluate the coin’s status within circulating currency. Te only forward-thinking and cost-saving solution to the inefciencies of penny production entails elimination of the one-cent coin. Tis paper outlines the processes crucial to the eventual retirement of the single-cent coin from American currency, including necessary interventional measures that minimize negative economic im- pacts, potential difculties afecting the passage of currency reform packages in Congress, and instances of unsuccessful past attempts at eliminating the penny. Finally, the essay evaluates the likelihood of eliminating production of the penny through legislative action in the present day, as the coin’s dissolution becomes more imperative. COLLOQUIUM Idly they lie in the depths of piggy banks, the to signifcant opposition from self-interested fssures of mall fountains, and the gutters of city groups. Informed in these considerations, the streets. Some are amassed and stockpiled; others United States Congress should explore discontin- collect only the eerie green patina of a watery ne- uation of the penny in order to eliminate excess glect, or the flthy black sheen of incomprehen- government spending on a single-cent coin that sible substances. Tese little, copper medallions is unnecessary and irrelevant in modern America. are rendered untouched, unnoticed, and unap- Te penny has undergone a number of trans- preciated by modern American society. formations throughout its history and had con- Despite its status as the most numerous sistently adapted to the conditions within the item of metal currency in the world, the pen- nation. Te United States’ one-cent piece, infor- ny remains America’s forgotten coin. Te same mally known as the penny, has been in circula- metal token that survived World War rationing, tion in a number of diferent forms since 1793, underwent frequent metallic and dimensional becoming the lowest minted denomination of adjustments, and was emblazoned with images American currency in 1858. Te obverse of the as iconic as Abraham Lincoln, faces a sudden early ‘large cent’ coins displayed variations of and irreversible incompatibility with contem- Lady Liberty, with a simple wreath illustration porary American life. Modern externalities like surrounding the denomination on the reverse. infation and non-cash transactions threaten the Te post-1857 ‘small cent’ penny transformed penny’s purchasing power and solubility, while the coin into a size and weight more familiar the coin’s production costs simultaneously sky- from a modern perspective, featuring subsequent rocket to greater degrees of unsustainability. designs of a fying eagle and an Indian head be- Te United States government continual- fore the coin was fnally graced with the profle ly subsidizes production of the most unproft- of Abraham Lincoln in 1909. Following the able major American currency in history while laurel wreath on the reverses of the coin were simultaneously maintaining an infexibility that wreaths of oak leaves and then wheat, before the hinders currency innovation and modernization. Lincoln Memorial appeared starting in 1958.1 While the average American could easily iden- Following the recent centennial of the Lincoln tify the uselessness and wastefulness of contin- penny in 2009, the Mint exhibited their continued penny production, voices for reform within Congress are met with signifcant opposition, denying proper attention to the issues of necessary currency modernization. Tis comprehen- sive examination of currency reform will analyze the necessity of penny retirement, as well as the procedures and obstacles involved in the processes of currency legislation. Close analysis and consideration of these incentives, as well as the difculties of currency discontinuation, should inform future governmental actions toward the single-cent coin. Future progress towards curtail- ing government waste in the form of continued penny production must overcome the margin- alization and gridlock of Congress in addition PAGE 31 ued willingness to adapt coinage, with a ‘Union time period, one cent would have been rough- Shield’ design. Perhaps more consequentially, the ly equivalent to one quarter in today’s money. United States Mint has also regularly adjusted While the Consumer Price Index (CPI) should the metal composition of the cent coin, often in be taken only as a broad estimate, as its measure- response to rising production costs. Currently, ment is independent on many other external eco- the penny is composed of 97.5% zinc and 2.5% nomic elements, the value of pennies has clear- copper, with a weight of 2.5 grams.Te modern ly decreased in daily transactions. Diminished composition is a result of the rising price of cop- purchasing power of the penny only further in- per coupled with rapid infation in the 1970s centivizes individuals to discontinue use of the which forced the adjustment of the metal con- coin, which efectively removes the coins from tent, from pre-1982 levels of 95% copper and circulation. Infation presents a signifcant obsta- 5% zinc.2 An additional noteworthy example is cle for the future solubility of a single-cent coin, the 1943 steel cent, for which the Mint adjust- as annual decreases in purchasing power push ed penny metal composition to a steel coin with the coin ever-closer to an inevitable extinction. only a thin outer coating of zinc. In reaction to Production costs of the penny present the wartime shortages in copper, the steel penny sym- most striking evidence of the coin’s long-term bolizes the adaptability of coinage to refect the unsustainability, with metallic composition once condition of the nation. Just as post-Civil War again acting as a decisive factor in the cent’s fu- America required a downsizing of the penny and ture. Te calamitous relationship between a con- the 20th century Mint developed a cost-saving tinually falling purchasing power and increasing adjustment for the cent coin, the future will re- costs of production create staggeringly wasteful quire the extraordinary step of eliminating the costs for production of the penny at the United nation’s smallest denomination of currency. States Mint. An individual penny’s production Perhaps more than any physical change, cost in 2016 was 1.5 cents, including both the infation has afected the evolution of the sin- prices of raw materials and distribution to the gle-cent coin in the American economy. As the Federal Reserve Banks. Production cost reached purchasing power of the penny continues to fall, an all time high in 2011, when each penny re- the coin becomes increasingly irrelevant in every- quired 2.41 cents to mint. Although the price day transactions as well as the greater American fuctuates, pennies have consistently cost more economic landscape. As Stephanie King states in than their face value since 2006, with their pro- her analysis of penny retention and elimination, duction totaling about 300 million dollars in the penny “has outlived its usefulness in the U.S. loss for the Mint from 2010-2015.5 Additional- economy due to its somewhat insignifcant mon- ly, since zinc and copper prices fuctuate mostly etary value.”3 For example, a penny would have due to the burgeoning economies in Asia, metal around the same purchasing power in 1965 as 8 commodity prices are not expected to fall in the cents today. In fact, the value of a penny did not coming years, with some projections expecting fall below the equivalency to today’s nickel un- a loss of at least 2 billion dollars in penny pro- til well into the infationary decade of the 1970s. duction from 2016-2031.6 Alongside the nickel, Due to continual infation, prices in the United the penny represents a rare example of the Mint States have increased roughly 25-fold since the producing currency at a fnancial loss. Because early 20th century and the introduction of the the Mint produces most coins at costs below face Lincoln penny.4 Despite the penny remaining the value, they derive a proft from selling the coins lowest denomination of legal tender during that at face value to the Federal Reserve Bank. Tis COLLOQUIUM process is ofcially known as seignorage and the continued production of the 1 and 2 cent piec- Mint’s profts from coin production enabled a es. While additional countries have taken similar 2016 proft of $550 million, which is then giv- steps to combat infation and production costs, en to the Treasury Department. Seignorage from Canada, Australia, and New Zealand each intro- other coins reverse the losses of the penny, leav- duced a rounding system to fnalize the absence ing the losses from penny production inconspic- of their lowest currency denomination.10 A simi- uous in budget reports. Despite the skyrocketing lar price rounding system for retail, cash transac- costs of production,

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