By Bill Mann, MarketWatch
PORT TOWNSEND, Wash. (MarketWatch) — Prime Minister Stephen Harper’s just-released austerity budget goes beyond mere penny-pinching — it eliminates pennies altogether.
The elimination of the maple-leaf-festooned Canadian penny this summer (“A penny spurned,†read one Canadian headline) was probably the biggest surprise in the new Conservative government Harper budget, and it drew a disproportionate share of the budget’s press coverage. With job-eliminating, balanced-budget-aimed budgets like this new one, that’s probably not the worst idea.
With 19,000 federal employees due to get layoff notices in Harper’s new budget starting this week, plus the eligibility age for Old Age Security (Canada’s retirement insurance) to be raised from 65 to 67 in the future, there was a need for the government to also make a bold, newsmaking move. Eliminating the lowly penny, which one approving newspaper columnist scoffed at as “irritating pocket ballast,†was a smart P.R./media ploy by Harper and Finance Minister Jim Flaherty.
The Ottawa government says it costs 1.6 cents to produce each copper-plated, steel-cored Canadian penny — an American penny costs over two cents each. So, “a penny for your thoughts†could soon become “a nickel for your thoughts†— or even “a loonie for your thoughts†— before too long. It currently costs the Canadian mint C$11 million to manufacture and distribute C$6.9 million worth of pennies each year — its most expensive coin to produce. The current doomed penny, which started out 104 years ago as almost entirely copper, is now 94 percent steel, 1.5 percent nickel, and 4.5 % copper. (If the current penny had a motto, it might well be, “You’ll never get me copper.†)
Eliminating the penny, which will remain legal tender, won’t be included in Harper’s job-trimming plans — workers will be transferred by the Royal Mint (sounds like a British candy) to other jobs, like making all those foreign coins.
The Royal Canadian Mint is urging Canadians to bring their one-centers back to banks to be recycled and melted. The penny will now be rounded up in another way — to a nickel. Or rounded down.
Their demise, Finance Minister Jim Flaherty said last week, was inevitable. The Canadian Senate had hearings on the penny last year, and no defenders of the lowly, nuisance coin even showed up. “It’s a piece of currency that frankly lacks currency,†is the way Flaherty put it, using a line coined by a Canadian senator.
There will probably be some discussion or mild debate about the penny’s demise in Parliament, but it’s a done deal. Harper’s party, after all, controls the House of Commons. In the true Canadian sense, the move to eliminate a lot of cents makes a lot of sense.
The Canadian government has issued a brochure explaining how a penny-free marketplace will work. It gave the example of a C$2.80 sandwich and C$1.50 coffee totaling C$4.86 after tax. It would be rounded DOWN — to C$4.85, the brochure said. (Note: I know what you may be thinking. Yes, Canadians do pay a lot of tax).
