Guest Columnist - John Ropa
Most of the economic pundits complain that the consumer is not spending enough to pull the country out of its recession. TARP, Quantitative Easing, federal spending programs are all actions that have been tried with mixed results. I have a better idea.
The government should declare that pennies and nickels are now worth ten cents each. We can't buy anything with a penny and I have to stretch to be able to find something available for a nickel. This declaration should be done on short notice to avoid hoarding and manipulation.
Based on the average life of a penny, there are approximately $28 billion worth of pennies in existence (if increased to $.10 each) and a lesser, but still significant value in nickels. The profits should be identified as non-taxable income. This program should be in force for two years, after which pennies and nickels would no longer be legal tender.
The first thing that would happen is that retailers would have to hire more people to change all their prices to multiples of 10. No more $2.99 per gallon of gas at the service stations. While that is happening, banks and currency exchanges would need to hire people to count coins. (Banks and currency exchanges would be allowed to charge one percent of the gross to convert to coinage currency). And, most banks and retailers would realize increased profits based on their inventory of coins.
There would be a surge in consumer spending, particularly among lower-income groups, which would result in increased state and local taxes. The demand for coin counting would result in additional requirements for coin counter machines, perhaps requiring increased hiring among those manufacturers.
There would be increased efficiency for those retail customers who wait, sometimes patiently, while a patron in the front of the line searches a pocket or purse for a penny. There would be a significant savings to the government because there would be no further need to mint pennies or nickels, which is currently a losing proposition.
Worth mentioning is that there would very likely be an increase in the use of one dollar coins, saving the government and taxpayer printing costs. Finally, unlike any of the other current stimulus programs, there would be no cost to the taxpayer and it would take a chunk out of the deficit.