The Instigator
zander
Pro (for)
Losing
0 Points
The Contender
GaryBacon
Con (against)
Winning
28 Points

Convert the penny!!!

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Voting Style: Open Point System: 7 Point
Started: 5/7/2008 Category: Politics
Updated: 9 years ago Status: Voting Period
Viewed: 1,803 times Debate No: 3944
Debate Rounds (3)
Comments (6)
Votes (8)

 

zander

Pro

The United States Government should stop produce current Jefferson nickels and replace them by making Lincoln pennies worth 5 cents and cease a $.01 piece of currency.

Currently, it costs the government 1.3 cents to make a penny and over 7 cents to make a nickel.

Seignoirage allows the government to profit off of minting currency, but only when the coin costs less to produce than its value. For instance, the $20 bill costs about 4 cents to make.

Due to the negative seignoirage value, the creation of nickels and pennies adds to the federal deficit by a considerable amount. We produced over 7 billion pennies and 1 billion nickels, COSTING the government and taxpayers over $150 million.

By stopping the production of Jefferson nickels and substituting them with Lincoln pennies, the cost of the new Lincoln nickels drops 6 cents and halts the production of approximately 6 billion coins, greatly reducing cost.

I'm happy to address further concerns in the next round.
GaryBacon

Con

The proposal to eliminate the penny has been a major issue ever since its cost of production exceeded its value. You claim that it currently costs 1.3 cents to make a penny. The numbers I've seen were a bit lower, stating that it costs around 1.23 cents.

Nevertheless, it cannot be denied that the penny's cost of production does indeed exceed its value. The negative seignoirage value does cost the government money in terms of producing the penny.

However, the economy is not solely, nor even mainly based on the cost of producing legal tender. The economic consequences of eliminating the penny would be disastrous, and in comparison to the possible and probable effects on the economy, the loss of $150 million in production is a minor one.

The elimination of the penny would consequently make the lowest possible unit of currency 5 cents. This would lead to an adverse effect on consumers. When a purchase is made and the sales tax added, the final number would not be rounded up to the penny, but rather the nickel. This leads to a negative effect on consumers. This "rounding tax" as many economists call it, would lead to a cost of approximately $3 billion over the course of five years according to some numbers.

This is much higher than the $750 million lost to producing a coin with a negative seignoirage value for a time span of five years. The penny must be retained for the good of the overall economy. The cost of production is minor compared to the consequences.
Debate Round No. 1
zander

Pro

So, we agree making the penny costs the government money. Your only objection is the rounding tax argument.

But, the rounding tax is a myth. Robert Whalpes, an economist at Wake Forest, studied almost a half a million transactions and found that the number of times consumers would lose change, is equal to the amount of times they would gain change.

We can see this logically as well. When I buy something, there is an equal chance that it comes out to any random amount of change. So, over the course of multiple transactions, the gains and losses even out.

So, without the rounding tax, there are no plausible issues with converting the penny. We don't have the $3 billion cost to consumers, but we do lose the $150 million per year cost of manufacturing our nuisance coins.
GaryBacon

Con

This is actually the response I expected. I am familiar with Robert Whaples' point of view, and I even read his article entitled "Why keeping the penny no longer makes sense." But despite the viewpoints of Robert Whaples, Greg Mankiw, and a few others, the economy truly would suffer due to the elimination of the penny.

In Whaples' article, he claims to have obtained data on "nearly 200,000 transactions" and states "the number of times consumers' bills would be rounded upward is almost exactly equal to the number of times that they would be rounded downward." These words of "nearly" and "almost" accompanied by a complete lack of data make his view flaky at best.

In reality, the rounding tax is not a myth. On the surface Whaples' claim may seem to hold water. But upon a deeper analysis we can find out why it is untrue.

Currently we still have the penny, but even now due to the sales tax percentages, costs are being rounded up or down to the penny. Here's the problem: whenever a customer purchases an item that would end in a half a penny after tax, that item gets rounded up to the penny.

One half lies exactly between being rounded up or down. Yet it gets rounded up every time. This may seem trivial, but such trivial percentages have allowed businesses like casinos to rake in a large portion of money.

The mention of casinos may seem out of place, but the same principle with rounding pennies in convenience stores applies. The house (or the store in this case) has a small advantage since there are slightly more totals that will be rounded up rather than down. This effect insures that the stores come out on top. The effect is cumulative, just as most of the economists have claimed.

Furthermore, when looking at the sales tax percentages we can see that this number of one half comes out even more often than expected from a random set of numbers. The tax percentages tend to end in eighths, quarters, or halves. This gives an even larger advantage, and studies done with common cash purchases has shown that somewhere between 60% and 93% of transactions would be rounded up.

While the rounding tax and the devastation of the economy should be enough to dissuade others from eliminating the penny, it is not the only reason to save the penny.

The people that have proposed this notion claim that prices would still be the same when it comes to payments by check, credit card, or debit card. Only cash paying customers would apparently suffer since there would be no more pennies.

This means that the one cent unit of currency would still exist on paper. There would just be no tangible one cent pieces. Our current system uses the same units of currency on paper or in the form of tangible cash. So eliminating the penny would move one step closer to eliminating tangible currency.

This may seem like nothing, but it can open up a huge can of worms. Once people become used to the idea of currency that only exists electronically, further steps in the same direction can be made. When every purchase by every person is made electronically, the items that each individual buys will be able to be tracked. This is not a good thing. The current president has already violated privacy rights by viewing all of the books that people read and check out of a library. Further rights can be violated when the government can track every purchase by every person.

I saw that you are in favor of George W. Bush, but you should still acknowledge that privacy would be violated if every individual's transactions can be traced. Since you stated that you are also in favor of flag burning, I think you may understand the philosophical necessity of freedom and rights.

On your profile it also states that you are against a flat tax. I am as well, because it would damage the lower class. Similarly, the rounding tax (which is NOT a myth, despite Robert Whaples' claim) would also adversely affect the lower class since they are the ones more likely to make purchases with cash rather than credit cards or checks.

So the two reasons to save the penny are that the economy would suffer overall, and the movement towards an elimination of tangible currency is a step in the wrong direction.
Debate Round No. 2
zander

Pro

zander forfeited this round.
GaryBacon

Con

For those interested, Professor Raymond Lombra from Pennsylvania State University published an analysis on the economic effects of eliminating the penny.

The article is entitled "Eliminating the penny from the U.S. coinage system: An economic analysis."

This article was published in the Eastern Economic Journal, 2001, vol. 27, pages 433-442.

Here is a link to the article for those that wish to read it:
http://findarticles.com...

In this article he shows that the rounding tax is not a myth, contrary to what my opponent has claimed. He furthermore demonstrates that it would be an economic disaster.

And unlike the article by Robert Whaples, this one appears in a peer-reviewed journal. In almost any field, a peer-reviewed article is given much more credence than an article that is not peer-reviewed.

Furthermore, he describes the methods and provides data. This is something that is conspicuously absent from Whaples' article.

The penny must be kept!
Debate Round No. 3
6 comments have been posted on this debate. Showing 1 through 6 records.
Posted by liberalconservative 9 years ago
liberalconservative
though i must agree that keeping the current penny is a small drain on our economy, i have to agree that with out a penny amercans would lose faith in there money and the market would fluxuate, this is why we should begin makin steel pennies. steel pennies would cost $0.0053 each to manufacture(i know this price because i live in the steel town ofGary,IN), no more would we be seeing money go down the drain and the market may still fluxuate some but not as much as if we would kill the penny. Americans may be agered that we lost thecopper but we did not lose the logo. I must add the an issue neithr of you spoke of, losing the penny altogether would make currency exchange nearly impossible leadingto a crash in companies basein America yet running in other countries.
Posted by Paradigm_Lost 9 years ago
Paradigm_Lost
Most European countries have rid themselves of the lower denominations by simply rounding up or down. 4 cents or lower, you round down to the next whole number, 5 cents or higher, you round up to the nearest whole number.

While I agree with PRO that it is more economical to get rid of the penny, CON has nonetheless won the argument. I therefore voted CON.
Posted by Kleptin 9 years ago
Kleptin
What do you mean "felt the need"? It's common to have a debate over the same thing a few times over. It's also healthy for honing your argument.

I do have a question though. All those pennies I've saved up, does that mean they instantly go up five times in value?

Because that would be awesome XD
Posted by gahbage 9 years ago
gahbage
I'm just wondering why you felt the need to redo this debate.
Posted by zander 9 years ago
zander
Its the exact same debate. I literally copy and pasted my opening argument. Is that a bad thing?
Posted by gahbage 9 years ago
gahbage
This is basically the same debate you just had with me.
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