That could make this the perfect time to finally get rid of the near-worthless American penny (sorry, Abe).
“Three months into the lockdown, I realized that the paper money and coins I had in my pocket were the same paper coins and money I’d had in my pocket three months before. I just wasn’t using them,” said Henry Aaron, Bruce and Virginia MacLaury Chair senior fellow in economic studies at the Brookings Institution. “In that environment, the disruption that would be caused by buying back outstanding coins would be zilch.”
For 16 years and counting, it has cost the Mint more to make and ship pennies than they’re actually worth because of the rising cost of metals.
So, if the United States ditched the humble one-cent coin, it should have a lot more time and money on its hands to make other, more valuable coins.
“It would certainly help (the Mint) meet their targets.” Aaron said. “For the rest of the economy, the impact would be de minimis. But that’s an argument for doing it. Since we’re spending money pointlessly, why not save a little where we can?”
Why it’s hard to get rid of pennies
To be sure, it could be tricky for the idea to gain traction at a time when the pandemic is disrupting so many other areas of life and when lawmakers have a lot on their plates.
“Compared to the rest of what they’re undergoing these days, it’s minimal, I think,” Aaron said. “We’re not talking rocket science.”
Some fear rounding prices could harm low-income consumers, who are more likely to use cash and have been disproportionately hurt by the pandemic. But experts say the effects would even out; some prices would round up and others would round down.
Businesses could benefit
For that reason, the proposal to ditch the penny could be a win for businesses. Getting rid of the penny could save some serious time for store clerks and consumers, according to Jeff Lenard, vice president of strategic industry initiatives at the National Association of Convenience Stores. He said about 52 million cash transactions occur at convenience stores every day.
“If we save every one of these customers 2 seconds, that’s 104 million seconds or 1,203 days,” Lenard said. “And that doesn’t factor in time compounding — saving 2 seconds for the other people waiting in line before they get to pay. That’s some serious productivity.”
And on top of saving time, “it could minimize contact with coins that are less in favor as consumers seek out contactless payments or at least payments by plastic” during the pandemic, Lenard said.