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The poll, commissioned by ACC, found that about two-thirds of Americans support keeping the penny, and not for nostalgic reasons. The respondents feared that eliminating the penny would lead to the sort of rounding tax Lombra detailed in his study. But dozens of countries over the years have gotten rid of their lowest-denomination coins without raising prices for consumers.
Charities don't seem too concerned about the potential impact either. Weller cites the Leukemia & Lymphoma Society's Pennies for Patients campaign as an example of a cause that would be hurt by the absence of the penny, but the society says its drives bring in millions even without the 1¢ coin. The Salvation Army, another organization with lots of coin donations, is similarly unfazed. "If pennies were to be removed from circulation, the Salvation Army hopes the American public will continue to donate generously, to help people in need," says Major George Hood, the group's community relations and development secretary.
But Weller does have one strong argument for keeping the penny, and that's the problem with the nickel.
NICKELED TO DEATH
Unlike the U.S., Canada is doing something about its skewed penny-production costs. In March 2012, the Canadian government announced it would no longer distribute pennies, which cost 1.6¢ to make, and it estimates that it will save $4 million a year as a result. The government even made a point of saying it would work with charities that rely on pennies for fundraising activities.
Without the 1¢ coin, Canada believes it will need to produce more nickels. "We don't know the number, but there will be an increase," says the Royal Canadian Mint's Christine Aquino, referring to how many 5¢ coins will be minted after the penny is eliminated. That happened in Australia, which gradually increased its nickel production after scrapping the penny in 1990.
Each nickel costs the U.S. Mint 10¢ to make. If eliminating the penny led to a greater reliance on nickels, then wouldn't that be trading one bad value for another?
François Velde, a senior economist at the Federal Reserve Bank of Chicago, thinks so. He proposes getting rid of the penny and the nickel, forcing cash transactions to be rounded to the nearest dime. His plan does, however, call for preserving the denominations as price points for debit, credit and mobile payments. Those noncash transactions, after all, are a primary reason for the declining utility of the penny.
THE MINT'S CONDITION
One thing both sides in the penny debate can agree on is that the costs of minting U.S. coins dropped in 2012, the first time that has happened in several years. There was still no positive seigniorage on pennies or nickels, but the combined effect of a slight dip in metal prices and new efficiencies at U.S. Mint plants in Denver and Philadelphia eased production costs. It also focused attention on operations at the Mint.
According to a study of 2011 figures by consulting firm Navigant that was conducted when a penny cost 2.4¢ to make, the Mint bought each penny blank for 1.1¢, meaning 1.3¢ per penny went to strictly fixed production costs at the Mint. If the penny were eliminated, the study says, those fixed labor and distribution costs would be shifted to the production of other coins, raising their minting costs. Had the nickel replaced the penny that year, the report suggests, it would have cost the Mint almost $11 million.
"The penny represents 60% of the Mint's coin volume and absorbs a proportional share of Mint fixed overhead costs," Jarden president Tom Wennogle said via e-mail. "Without the penny, the costs for all other coins would increase significantly."
Mint spokesman Michael White disputes the report's findings, saying the costs to produce the penny don't relate to the production of other coins. "You're dealing with different metals, a different alloy. The cost to produce the penny isn't directed toward the nickel," he says.
As Obama urged in his budget proposal, the Mint could explore using cheaper metals. Steel, which was used instead of copper during World War II, is less expensive than zinc and is used by other countries for coinage.
But with two-thirds of all in-store purchases now made with debit or credit cards, it will only get harder for penny advocates to defend their coin — no matter what it's made of.
"I think we're closer today than we were then," says Lombra, the Penn State economist, comparing the current prospect of eliminating the penny with 23 years ago, when he first testified in front of Congress. "Clearly it's something becoming less important over time. There are lots of reasons why it has survived, including historical and maybe cultural. But it's also pretty clear at some point that the economics are going to overtake it and Congress, with a lag, will probably recognize it."
That perspective may not be exactly why ACC turned to Lombra back in 1990, but it's a sign of just how bad things have gotten for the penny.