SENATE BILL: Kill the Penny Act (Failed)

[Marokai Backbeat]

I've taken a random interest in this bill!

Using real life stats, according to the Mint, it cost 1.79 cents to make a single penny, meaning for every penny we make, it's created at a 0.0079 (of a dollar) loss. In 2010, we created four billion pennies, which amounts to a loss of $32 million. This act would reduce the supply of pennies that would've otherwise been in circulation by (using the last six years to create the average) an average of 5.8 billion pennies a year.

At the current loss, an average of 5.8 billion pennies a year amounts to roughly $45.8 million a year in savings.

But Duke's comment deserves some attention:

This makes fiscal sense. It costs more to produce a penny than they are actually worth. There's no reason to continue to make pennies.

The Senator is correct, it doesn't make fiscal sense to continue to make pennies, but it also doesn't make fiscal sense to continue to create nickels, either.

It costs at least 7.1 cents to make a nickel. (Some other sources put that number at 7.7 cents.) Using the same six year average (which is lower than the actual average, really, given the tightening of the money supply in 2009), we created an average of 943.2 million nickels a year.

At a 0.021 loss in creating each nickel, we lose an average of $19.8 million a year creating a comparatively much smaller amount of nickels.

As penny supplies in the overall economy tighten in the coming years, we may be in a bit of a bind. If we eliminate pennies altogether and round up prices, the Mint will be forced to create a lot more nickels, which would more than offset the savings we would make by stopping penny production due to the loss on nickels being nearly three times the amount of loss on manufacturing pennies. Even simply stopping penny production indefinitely but not mandating prices must be rounded up may cause penny shortages after several years, with some retailers rounding up prices independently, forcing the mint to create more nickels to compensate anyway.

Because of that, and the halfhearted method of this bill in trying to stake out a position somewhere in the middle of the status-quo and stopping penny production and the legal tender of it altogether, I don't actually believe this bill will really do much. Short term savings will, in substantial likelihood, be erased by increased losses after several years' time anyway.

[Marokai Backbeat]

Perhaps we could get rid of the penny and start minting zinc nickels? There's no reason why we have to spend 7.1 cents per nickel when we can clearly mint coins cheaper.

I definitely think that if we're going to get rid of pennies at all we should go at it very seriously with a more comprehensive plan than this. Stop penny production, and eventually, mandate rounding up prices, and use a similar formula we make pennies with to make nickels instead. It makes nickels cheaper, rounds up costs, and at that point no coin we make is at a loss.

[Marokai Backbeat]

What if I don't want to pay $1.50 instead of $1.46???

Well personally I don't mind having pennies. Talk to Jbrase.

[Marokai Backbeat]

This makes fiscal sense. It costs more to produce a penny than they are actually worth. There's no reason to continue to make pennies.

/sigh

In the short run it makes fiscal sense. In the long run, it is confusing, will tighten the penny supply without any plan on how to deal with prices, and will force the Mint to increase production of nickels, which have three times the loss of creating pennies, erasing most of the savings you get from stopping penny production.

This bill needed amending to something more comprehensive than a shortsighted half-measure. It also makes 'fiscal sense' to get rid of nickels, but you're not doing that, are you?

What's the point of being Game Moderator if few people listen to what I say?

[Marokai Backbeat]

This makes fiscal sense. It costs more to produce a penny than they are actually worth. There's no reason to continue to make pennies.

/sigh

In the short run it makes fiscal sense. In the long run, it is confusing, will tighten the penny supply without any plan on how to deal with prices, and will force the Mint to increase production of nickels, which have three times the loss of creating pennies, erasing most of the savings you get from stopping penny production.

This bill needed amending to something more comprehensive than a shortsighted half-measure. It also makes 'fiscal sense' to get rid of nickels, but you're not doing that, are you?

What's the point of being Game Moderator if few people listen to what I say?

Uh, pennies will still be circulated so the problems you forecast wont occur until down the road. Besides, shouldn't the mint decide what composition to use for coins. It doesn't make sense that legislators would have to determine what specific alloy is used. That's something I'd consider an executive power.

Coin production isn't exactly something that's out of the hands of the Mint either but it doesn't seem to be stopping you.

"The problems that will occur will happen later, so why the hell not?" is not a good rationale, however. If you admit this is flawed, but the problems don't happen until "down the road" why the hell are you passing this? If something is flawed, you don't pass it!