Thursday, December 6, 2012
Buddy, spare a dime?
In the sea of $16.3 trillion of debt that grows by another $3.5 billion each day ($1.3 trillion each year) – Congress has an innovative solution: do away with the $1 bill. Of course this issue isn’t really related to the debt – but I found it amusing with all of the fervor of the supposed fiscal cliff (that I earlier wrote is really a bump in the road ) there was actually a Congressional sub-committee that once again wants to replace the dollar with a coin. They can’t seem to figure out how to balance the books - but let's focus on paper money and whether to dump the penny.
Retire the Penny is a website sponsored by citizens who want to abolish the one cent piece. The most obvious justification is that it costs 2.4 cents to produce each penny. Each year it costs $120 million to produce currency that is worth $50 million. Nickels are even worse – at a cost of more than 11 cents per.
The Mint provided the sub-committee with a promise that they will be making suggestions to address the cost basis, including moving to multi-plated steel as the material to make future coins from. That would save $200 million per year – chump change in a $3.796 trillion budget, but still. They’ve been studying the issue for 18 months.
It is important to have currency that doesn’t cost more to make than it’s worth. It’s also time to let the penny retire, just as the half-penny retired in 1857 and other denominations before that. As monetary value changes with time so must the paper and coins that represent the value. Replacing the paper dollar with coin hasn’t been effective in the various attempts so far, mostly because people are left with a choice of what they’ve been familiar with their entire lives, and something different. Electronic payment is rapidly taking over – the elimination of the paper dollar will become a non- issue.
A far better use of Congress’s time would be looking at the $1.327 trillion in annual deficit spending. None of the hysteria and hand wringing today is about balancing the books: having the US spend what it brings in. The hoopla about “the cliff” would change the $1.327 trillion annual shortfall down to about $1.2 trillion for the upcoming fiscal year. A big amount no question – but not as big as the amount accruing. Despite the rhetoric, that doesn’t even consider the $16.3 accumulated debt.
Continuing to focus on the smaller issues – not that the U.S. seems incapable of fiscal responsibility (by either party) means that the country is heading for a fiscal avalanche. Maybe not next year or the year after – but as any of us who have ever borrowed money or used a credit card knows: the bill always comes due. And the bill will come when it’ll be too late to have our hand out asking if anybody can spare a dime (which costs just $0.04 to make.)