What pennies taught me about the problem of private interest in government

Metallic

I long for the days where it seemed like we fully funded the federal government to do its job or serving its people and keeping private interests in check. I think so much good could come from another set of New Deal projects, where we were able to fund infrastructure and other public benefits.

Alas, we now have largely narrative that status that the government is wasteful and needs to be starved of funds. (By the way, this makes no sense.)

And nowhere is this more apparent, seemingly, with the lowly U.S. one-cent coin, or the penny.

Penny

Take a penny, leave a penny

The penny is the smallest unit of coin produced in the US. It is primarily made of zinc (with a little bit of copper coating to give it the distinctive copper look).

The U.S. Mint produced 9.3 billion pennies in 2015, with similar orders of magnitude in previous years. That’s a lot of coins.

You may be wondering why we go to all that trouble. After all, pennies aren’t exactly a valuable commodity anymore. In fact, with inflation being what it is, what does a penny give you, aside from the rather pointless ability to make exact change down to a hundredth of a cent?

There has been a movement to end production of the penny in the U.S. for sometime. Some of the arguments are as follows:

  • A penny costs more than a penny to manufacture.
  • Pennies are not practical to use, as evidenced by the fact that automated machines (vending, parking meters) don’t accept them.
  • It wastes lots of time (and therefore money) to deal in such small amounts.
Cost to make a penny
Cost to make a penny, via coincollectingenterprises.com

(I’ll note that the argument about the penny costing more than a penny to make is one that I don’t think holds much water. After all, it’s not just the intrinsic value of the coin that matters, but also the value of being able to use and reuse it. And I don’t foresee people melting down coins anytime soon.)

Many countries, such as our dear neighbor to the north, have stopped minting one cent coins. I’ve been to Canada since then, and I failed to see any material difference in how I got by. They just round cash transactions to the nearest nickel, up or down, which makes no difference in price over the long term. (For proof of this, see math.)

Even our president has weighed in on the argument, stating “Anytime we’re spending money on something people don’t actually use, that’s an example of things we should probably change.” though at the same time, noting, “The penny is an example of something that I need legislation for. And, frankly, given all of the big issues that we have to deal with day-in/day-out, a lot of times it just doesn’t — you know, we’re not able to get to it.

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So the elimination of the penny is, by all accounts, small change. And one could argue that this is a prime example of how government inaction wastes our hard-earned taxpayer money.

But maybe not.

A penny grows in Tenneesee

For those who have never minted coins before (what?), the coin needs to be created as a “blank” first, before it can be stamped with the indentations of our founding fathers.

The U.S. sources all the metals required for all of our coins, and creates the blanks in-house.

That is, except for the penny.

For reasons that I can’t seem to determine, since 1998 the U.S. has outsourced the making of penny blanks to a Tennessee company called Jarden Zinc Products.

With 9 billion pennies, that’s a lot of zinc. You can imagine that it’s contract that they’d be loath to give up without a fight.

You’d be right. To this end, there is a group called Americans for Common Cents whose avowed aim is to keep the penny in production. But despite the seemingly grassroots name, this group receives funding from (surprise) Jarden Zinc Products, and in fact is run by the main lobbyist representing the zinc industry.

And between 2006 and 2014, this group spent $1.5 million on lobbying for the penny.

And it’s worked too. There have been bills written to eliminate the penny (most recently in 2006), but they never passed.

One too many cheers for inefficiency

And this is the crux of the whole problem. We have a product that we don’t need, that most people don’t find useful, but we are continuing to spend millions of dollars on it because there is a private interest that has spent lots of money lobbying for its own interest. A business is artificially creating and sustaining itself, long after there is a need for it.

I’m not saying that things would certainly be different if the government owned the production of pennies. After all, they own production of nickels, and there’s not much point in them either. But at least there is no one lobbying for the nickel. (In some ways, I wouldn’t be surprised if the nickel gets eliminated before the penny.)

If you haven’t got a half penny

Here’s a fun little factoid to close this one out: The U.S. used to produce half-cent coins. They were phased out in 1857. But get this, in today’s money, the half-cent at the time of its phase-out, had the purchasing power of more than a dime.

But no one was lobbying for the half-penny.

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One Comment

  1. mpinard

    Ha! I like the half-penny factoid!

Comments are closed.