The government wants every last cent you've got.
by George Selgin
As Congress prepares once again to decide the fate of the penny, with deliberations to take place next week concerning whether to revive the WWII-era practice of striking pennies of steel, so as to at least avoid wasting more than a penny's worth of resources on each penny struck, penny (read: zinc) lobbyists--henceforth "pennysniffs"--have been busy making the case that messing around with the penny, especially by doing away with it but even by altering its metal (read: zinc) content, will hurt American consumers.
Of various bad arguments for keeping the penny--and all of them are bad to some degree--perhaps the worst is the one first promulgated by Zinc Lobby Penn State economics professor Raymond Lombra, and recently repeated by Eric Wen in The New Republic. It is that, if pennies are abolished, retailers will respond by rounding up to the nearest nickel, making everything cost more. Lombra calls it, ominously, a "rounding tax," presumably to win gullible conservatives over to his cause.
I'm tempted to stop typing now, and make this into a pop-econ quiz, the quiz question being: Why would any economist, or even any intelligent journalist, say anything so stupid? No, sorry, that's the second quiz question. The first is, Is this argument consistent with the most elementary principles of economics?..Continue reading at Free Banking...