No More Canadian Pennies…Lincoln Could Be Next!

Canada dropped the use of its penny yesterday. And some economists believe the US should be following its neighbor’s example.

The U.S. Mint spent 2 cents to produce and ship each of the 5.8 billion pennies sent to banks last year.

Businesses say rounding to the nearest nickel would save time for both their cashiers and their customers. But they’re reluctant to push for a change that could spark a backlash. That’s exactly what happened last summer when Mexican food chain Chipotle started rounding at some of its high volume stores.

Probably the cent’s biggest lobbyist is Americans for Common Cents, a trade group supported by Jarden which has a subsidiary which makes the zinc and copper blanks turned into pennies by the Mint. The group commissioned a poll last year showing that two-thirds of Americans want to keep the penny. It often cites a study by Penn State economics professor Raymond Lombra that estimates that consumers would end up paying a “rounding tax” of $2 billion to $4 billion over the course of two years if the penny is eliminated.

But Robert Whaples, an economics professor at Wake Forest, has done his own study looking at thousands of convenience store purchases. That study shows consumers as a group would break even if stores rounded to the nearest nickel. He said so many pennies fall out of circulation each year because consumers don’t see them as valuable, raising both the costs to the Mint as well as the economy as a whole.

“The main argument against the penny is that it wastes our time,” he said. “We’re clearly losing money on the penny.”

Read more at CNN.