Our U.S. government is faced with many large, complex problems that don't have easy answers. Many of our problems involve decisions, or a series of decisions to be made by Congress and the President that require a trade off between long and short-term effects. In order to properly make that type of decision, some sort of model has to be made to determine if the overall benefit of a decision is worth the cost. As a result, there are very few simple "right or wrong," "black or white" decisions. Politicians love to use sound bites and emotional appeals to justify their decisions, even if the decision-making models clearly indicate their position is not in the best interest of the company.
Rarely are decisions easy and simple. However even when ALL evidence points to an obvious decision, our Congress seems to still be unable to make a good decision. A perfect example is the U.S. penny.
According to Wikipedia, between 2011 and now it has cost between 1.67 cents and 2.41 cents to manufacture and distribute a penny depending on the market fluctuations of the raw materials. So, each year the Government loses money producing the coins. In 2013, the Government lost $55,000,000. Nickles also cost almost twice as much to manufacture as their face value. The decision to eliminate the penny seems to be a "no brainer" -- no models decision models, and no emotional attachment to that decision. Pennys are a nuisance, and most consumers hate using them. There have been multiple proposals brought up in Congress starting in 1990 to eliminate them, but the bills have never been approved. The President has stated his support to eliminate the penny. There is a belief that elimination of the penny could be a slight contributor to inflation. However the Federal Reserve is trying hard to create just a small, controlled amount of inflation to help the economy. So we would have to assume that the Fed would also be in favor of doing it.
What is stopping us? There is one company, Jarden Zinc Products who is apparently the sole US source for the penny blanks. Jarden has paid lobbyists who continually work to keep the penny. Presumably the lobbyists and Jarden provide some sort of benefit to a sufficient number of congressional representatives that bills to eliminate the penny are unable to pass. Many other countries have eliminated their equivalent lowest currency, but the US has not.
I think the US should plan to phase out the penny now, and eliminate the nickle a year or so after that. Meanwhile, we should get the dollar coin into more circulation by phasing out the paper one dollar bill, and start production of a five and ten dollar coin. So many of our transactions are now done electronically that it almost seems that we are on a trend that could eventually eliminate the use of actual physical currency.
Rarely are decisions easy and simple. However even when ALL evidence points to an obvious decision, our Congress seems to still be unable to make a good decision. A perfect example is the U.S. penny.
According to Wikipedia, between 2011 and now it has cost between 1.67 cents and 2.41 cents to manufacture and distribute a penny depending on the market fluctuations of the raw materials. So, each year the Government loses money producing the coins. In 2013, the Government lost $55,000,000. Nickles also cost almost twice as much to manufacture as their face value. The decision to eliminate the penny seems to be a "no brainer" -- no models decision models, and no emotional attachment to that decision. Pennys are a nuisance, and most consumers hate using them. There have been multiple proposals brought up in Congress starting in 1990 to eliminate them, but the bills have never been approved. The President has stated his support to eliminate the penny. There is a belief that elimination of the penny could be a slight contributor to inflation. However the Federal Reserve is trying hard to create just a small, controlled amount of inflation to help the economy. So we would have to assume that the Fed would also be in favor of doing it.
What is stopping us? There is one company, Jarden Zinc Products who is apparently the sole US source for the penny blanks. Jarden has paid lobbyists who continually work to keep the penny. Presumably the lobbyists and Jarden provide some sort of benefit to a sufficient number of congressional representatives that bills to eliminate the penny are unable to pass. Many other countries have eliminated their equivalent lowest currency, but the US has not.
I think the US should plan to phase out the penny now, and eliminate the nickle a year or so after that. Meanwhile, we should get the dollar coin into more circulation by phasing out the paper one dollar bill, and start production of a five and ten dollar coin. So many of our transactions are now done electronically that it almost seems that we are on a trend that could eventually eliminate the use of actual physical currency.
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