COMMENTARY — A penny saved

Americans are demonstrating continual, overwhelming support for the penny.

Recently, the future of the coin was discussed at a hearing presided over by Congressman Michael Castle, chairman of the House Banking Subcommittee, which oversees U.S. monetary policy.

Three out of four adults favor keeping the penny in circulation, according to a poll conducted by Opinion Research Corp. of Princeton, N.J. The survey revealed that public support for the penny remains strong and widespread.

Seventy-three per cent of adults oppose removal of the penny from circulation, while only one in five (23%) are in favor of its elimination.

Support is strongest among the elderly and those under 25 years of age, and with those of limited education earning less than US$25,000 annually.

Mark Weller, executive director of Americans for Common Cents, says he sees the results of the poll as a verification that the penny continues to receive strong and steady support.

These results, however, are down slightly from a 1995 poll conducted by the same company, which found that 76% of Americans supported the penny. A 1992 survey by Time and Cable Network News found that 74% of Americans favored keeping the penny, while a 1990 Gallup poll found that 62% of Americans were supportive.

Weller has speculated that Americans support the penny because its removal would result in rounding cash transactions to the nearest nickel, which would lead to higher prices.

Testifying at the congressional hearing, a representative of the General Accounting Office said Americans prefer final purchases to be rounded to the nearest nickel. George Vary, executive director of the American Zinc Association, claims, however, that the elimination of the penny would be inflationary and hurt lower-income groups, who make a considerable number of small cash purchases.

Raymond Lombra, a professor of economics at Penn State University in Pennsylvania, has found that there is no incentive for firms to price in a way that will lead to rounding down cash transactions. The Lombra analysis suggests that pricing schemes would be designed in a way that leads to net rounding up, costing consumers more than $3 billion over five years.

Said Weller: “Altering our money system to remove the penny will confuse countless citizens; consumers will despise the hassle and feel they are being cheated by merchants and the government.”

— This article is reprinted from a release of the American Zinc Association.