Since the Canadian government has proposed the elimination of their one-cent coin from production and putting in measures to remove them from circulation, proponents of a similar policy in the United States have been pointing northward and the past to support their position. When they point to the past, the target is the Half-Cent, established as part of the Coinage Act of 1792 and eliminated by the Coinage Act of 1857.

The common argument is that if the United States could eliminate an unpopular low-denomination coin in the 19th century, why can’t we do this in the 21st century?

In order to understand why that question is a non-sequitor, you have to look back at the history of the half-cent.

After the passage of the Constitution by the constitutional convention, Alexander Hamilton wrote extensively for both the Federalist Papers and spoke in many venues how the a strong, centrally managed currency would improve commerce between the new states and promote the nation as a whole in foreign trade. While this view was shared by others, how to implement a new currency system became controversial.

On January 28, 1791, Hamilton submitted the Secretary of the Treasury Report, “On the Establishment of a Mint” to the House of Representatives. Hamilton tied the value of the basic unit to the Spanish Milled Dollar (8 reales) and called the basic unit a “dollar.” In that report, Hamilton proposed a simple system of currency that included a ten and one dollar gold coins, one and one-tenth dollar silver coins, and one-hundredth and two-hundredth copper coins. Hamilton surmised that using smaller denominations would standardize production around a few coins that could be produced in sufficient numbers to supply commerce.

While mostly in agreement with Hamilton’s report, Thomas Jefferson had another idea. Jefferson thought it would be better to tie subsidiary coins tied to the actual usage of the 8 reales coin. At the time, rather than worry about subsidiary coinage, people would cut the coin into pieces. A milled dollar cut in half was a half-dollar. That half-dollar cut in half was a quarter-dollar and the quarter-dollar cut in half was called a bit.

The bit was the basic unit of commerce since prices were based on the bit. Of course this was not a perfect solution. It was difficult to cut the quarter-dollars in half with great consistency which created problems when the bit was too small, called a short bit. Sometimes, short bits were supplemented with English pennies that were allowed to circulate in the colonies.

As an aside, this is where the nickname “two bits” for a quarter came from.

Jefferson felt that in order to convert the people from bit economy to a decimal economy, the half-cent was necessary to have 12½ cents be used instead of a bit without causing problems during conversion from allowing foreign currency to circulate as legal tender until the new Mint can produce enough coinage for commerce.

Much against Hamilton’s wishes, congress agreed and made the half-cent along with the eagle, half-eagle, quarter eagle, silver (not gold) dollar, half-dollar, quarter-dollar, disme (later renamed dime), cent, and half-cent. After the bill was passed and signed by President George Washington on April 2, 1792, Washington decided to put the new Bureau of the Mint under the jurisdiction of Secretary of State Thomas Jefferson to ensure that the currency system would be implemented since Secretary of the Treasury Alexander Hamilton objected to these provisions of the law.

As the new Mint ramped up production, there were other issues with U.S. coinage that overshadowed any perceived controversy that the half-cent would have received. Over the next 60 years, laws were passed to change the composition of coins, ratio of gold-to-silver, and even the problem with melting that caused the suspension of producing the silver dollar in 1804.

The half-cent would come into focus in the 1850s when the cost to produce the United State’s copper coins was nearly double their face value. In 1856, the Mint produced the first of the small cents, the Flying Eagle small cent, and produced 700 samples to convince congress to change to the small cent. As part of the discussion was the elimination of foreign currency from circulation making the U.S. Mint the sole supplier of coins.

There is no record of outcry from the public on the elimination of the half-cent. Its elimination came four years after the Coinage Act of 1853 that created the one-dollar and double eagle gold coins in response to the discovery of gold in North Carolina, Georgia, and California. The gold rush caused a prosperity and inflation that not only made the half-cent irrelevant but not something on the public’s mint. In that light, the Mint and congress felt that it just outlived its usefulness and would not be necessary with the elimination of foreign currency from circulation.

More controversy was generated in 1857 over the demonetizing foreign coins in the United States than the elimination of the half-cent. While the half-cent continued to circulate, it was estimated that one-third of the coins being circulated were foreign, primarily reales from Mexico. Redemption programs did not go smoothly, but in the end foreign coins were taken out of the market and the American people adapted and it could be said we prospered.

Comparing the elimination of the half-cent in 1857 with the trying to eliminate the one-cent coin today is like saying one baseball player is better than another because he hits a lot of home runs. Just like there is more to consider than hitting home runs in baseball, there is more to the discussion than pointing to an event that happened 155 years ago without considering entire picture.

Pin It on Pinterest

%d bloggers like this: