Pennies From Hell

November 1996

EXECUTIVE MEMO

Pennies From Hell

ee a penny, pick it up, all day long you'll have good luck. You won't have much purchasing power, though-today, Benjamin Franklin's favorite coins are one-ninth as valuable as they were when they were introduced 204 years ago. It now costs the U.S. Mint $8 million to $9 million more every year to produce and distribute pennies than the pennies are worth, representatives of the General Accounting Office recently testified before a House banking subcommittee.

Mint director Philip N. Diehl charges that GAO miscalculated the cost of transporting pennies in its review, and that manufacturing pennies is still profitable for the government.

GAO also noted, though, that public support for the penny is decreasing. In a January 1996 University of Maryland poll commissioned by GAO, 35 percent of respondents said the penny should be eliminated, compared to 18 percent of respondents in a 1992 CNN/Time poll. GAO also observed that the circulation rate of the penny is low-34 percent, compared to 88 percent for quarters.

Australia, France, the Netherlands, New Zealand, Spain and England have stopped producing their lowest denomination coins. Since the early 1980s, U.S. commissaries and Army and Air Force Exchange Service facilities in Europe have rounded numbers to the nearest nickel to eliminate the expense of transporting pennies to Europe. Recently, the U.S. Pacific command announced it would also round sales to the nearest nickel.