No More Pennies???
February 10, 2025 6:16pm
President Trump announced last night that the United States Mint would halt the production of pennies. On his Truth Social account, he cited cost-saving as the reason for his order: "For far too long the United States has minted pennies which literally cost us more than 2 cents. This is so wasteful! I have instructed my Secretary of the US Treasury to stop producing new pennies. Let's rip the waste out of our great nations budget, even if it's a penny at a time."
The President is correct that it costs more than a penny to make a penny. According to the U.S. Mint's 2024 Annual Report, each penny costs 3.69 cents to produce. The Mint produced 3.17 billion pennies last year. At a production cost 3.69 cents per penny, we spent $116.9 million minting pennies with a total face value of $31.7 million. So, at first glance, it would appear that ceasing production of pennies would save taxpayers $85.2 million.
But ironically, ceasing production of pennies might actually end up costing the government more money than it saves. If pennies are eliminated, the use of nickels will likely increase. Well, it costs 13.78 cents to produce a nickel. So while we lose 2.69 cents on every penny we mint, we lose 8.78 cents on every nickel we mint.
This is a good example of why policy requires more than just a superficial, knee-jerk reaction to facts. Thoughtful analysis is required. To be clear, I'm not saying we should continue minting pennies. Canada stopped minting pennies in 2012. Our neighbors to the north simply round most cash transactions to the nearest nickel. Electronic payments are still made "to the penny." And Canada gets along just fine that way. It should be noted that pennies are still legal tender in Canada, and some people do still use pennies. But acceptance of pennies is not required by law.
Are there valid arguments for eliminating pennies in the United States besides production costs? Yes. Because of inflation, the penny’s purchasing power has eroded over the years. What can you buy for a penny today? When I was a kid, gumball machines would dispense a gumball for a penny. Not anymore. In the 19th Century, many tabloid newspapers were known as the "penny press" because they could be purchased for - you guessed it - a penny.
As the value of a dollar - and thus the value of 1/100th of a dollar - decreases, the usefulness of the penny declines. From 1793 through 1857, the U.S. Mint produced a half-cent coin. But a half-cent could purchase a piece of candy back then. We struck two-cent pieces from 1864 until 1873, but the usefulness of that denomination faded with inflation. So ceasing production of certain coins is not unprecedented.
Should we eliminate the one-cent piece today? It can be argued either way. I'll give you a penny for your thoughts.