President Donald Trump has announced a directive to the U.S. Treasury Department to cease the production of pennies, citing the financial inefficiency of their manufacture.
"For far too long the United States has minted pennies which literally cost us more than 2 cents," Trump declared in a February 9 post on Truth Social, labeling the practice as "wasteful."
The U.S. Mint's 2024 annual report corroborates Trump's assertion, revealing that the cost to produce a single penny stands at $0.0369, more than triple its face value. Similarly, the nickel's production cost exceeds its worth, with each coin costing $0.1378 to mint.
As reported by American Military News, this move by Trump aims to curb unnecessary government expenditure. However, questions arise about whether the elimination of the penny, of which billions are in circulation, might lead to increased prices for American consumers.
Economists suggest that the impact on prices would be negligible. Robert Whaples, an economics professor at Wake Forest University, told McClatchy News, "The policy is unlikely to have any negative impact on businesses or consumers."
He noted that the growing prevalence of cashless transactions, which remain unaffected by the absence of pennies, plays a significant role. A 2022 Gallup poll indicated that 73% of respondents used cash for less than half of their purchases, a trend that has been increasing since 2017.
For transactions involving physical currency, Whaples explained that prices would be rounded to the nearest nickel. "For cash transactions we would begin rounding to the nearest nickel," he said. "Because the last digit of our cash-register totals is completely random, there will be as much rounding down as rounding up. Customers would not lose, on average."
This sentiment is echoed by Oz Shy, a senior policy adviser and economist at the Federal Reserve Bank of Atlanta, who concluded in a 2023 paper that eliminating the penny would not lead to significant inflationary effects.
The United States would not be pioneering this approach, as other nations have successfully phased out their one-cent coins. "Canada and European countries have eliminated their one-cent coins without problems," Whaples pointed out. Canada, for instance, ceased penny production in 2012, and a decade later, a Canadian Mint retrospective deemed the initiative "successful."
Beyond potential cost savings, the removal of the penny could offer additional advantages. Shy's research suggests that doing away with the one-cent coin would "reduce the burden of dealing with small change," while Whaples' analysis estimates that the time saved for customers and clerks could be valued at approximately $730 million annually.
Despite these potential benefits, it remains uncertain whether President Trump possesses the authority to unilaterally halt penny production, as Congress is responsible for authorizing the minting of all U.S. coins, according to the U.S. Mint. This legislative requirement raises questions about the feasibility of implementing Trump's directive without congressional approval.
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