By Joshua Pegram
President Trump has recently announced that he has directed the US Mint to stop minting pennies citing production costs as wasteful spending. This is an idea that has been considered by the government for a long time. The reason for this is simple: pennies cost the government far more to produce than they are monetarily worth. In the year 2024, the cost of materials, production, and distribution for pennies was 3.7 cents per coin. For comparison, it costs about 15 cents to make a quarter and only 3.2 cents to make a one dollar bill. The difference between the production cost and the value of a coin is seigniorage, and with pennies costing nearly four times their value to mint, they have a negative seigniorage.
Pennies are rarely used nowadays, with electronic payment methods more popular than ever, and they have far less buying power than they did when they were originally put into circulation, raising questions about what need modern society actually has for pennies. The number of pennies produced per year has been decreasing since 2021, and 2024 has been the lowest year for penny production since 2009.
Removing pennies from circulation would mean that the prices of commodities would be rounded up or down to the nearest five cents. Some critics of removing the penny believe that prices being rounded up to the nearest nickel would negatively affect lower income individuals, however many economists argue that prices being rounded down is just as likely as them being rounded up, and price rounding due to the penny’s removal would not actually have a significant negative effect on the consumer.
If this change happens, the United States would not be the first country to stop minting its lowest currency denomination. Canada, Australia, New Zealand, and several European nations have all phased out their lowest denomination coin. In Canada, when pennies stopped being produced, all prices were rounded to the nearest five Canadian cents.
Should the Mint cease penny production, then it would likely increase the production of nickels to make up for it. The problem is, nickels also have a negative seigniorage. While pennies cost nearly 14 cents per coin to mint. An increase in nickel production in the place of pennies would actually lead to an increase in spending on coin production. However, even though the amount of money being spent per coin would increase, the ratio of the value of the coins being produced to the production costs would also increase. Pennies cost 3.7 cents for every cent produced. However, because nickels are worth five cents each, they only cost 2.8 cents for every cent produced. In other words, making a penny costs 370% of its monetary value, while making a nickel only costs 276% of its monetary value. Despite the high production cost, making nickels instead of pennies is a more effective use of funds due to the fact that they put more money into the economy after they are minted.
When asked to comment, Atkins HS history teacher Weston Clayton stated, “In my opinion, I don’t really think it’s reasonable to keep making money when the value of producing it outweighs what it’s worth.” According to Clayton, when it comes to these things, we need to ask ourselves, “Do we need these lower denominations anymore?” and for the penny, the answer is no. The United States has stopped procuring lower denominations in the past as well, such as the half cent coin, which stopped being minted in 1857 when it became less valuable because of inflation. “Due to inflation over the years it’s not really worth it [to continue minting the penny],” Clayton claimed. If we follow these same rules of inflation, “We should have phased out the nickel and probably even the dime by now,” stated Clayton.
There is debate on whether or not the office of the president actually has the authority to stop penny production. It is Congress’s job to oversee the Mint and authorize currency, so they might need to approve Trump’s plan for it to take effect. Some legal experts, however, say that the Treasury Secretary has the authority to enforce this mandate, and would likely enforce this mandate on Trump’s request. How and when this plan would take effect is yet to be seen.
Even if the Mint permanently stops production of pennies, this does not mean all pennies will become worthless. Existing pennies will stay in circulation and will remain legal tender. Like all coins, pennies stay in circulation until they are damaged or worn and corroded, then are removed from circulation by the Federal Reserve and melted down for their materials. Even after most pennies would be removed, they would still be accepted as legal tender, like the $1000 bill which stopped being produced in 1945 but still has its legal monetary value. Although the government could resume production of pennies in the future if it wanted to, pennies will surely be missed for their unique appearance. Although it will be sad to see the penny go, economically, stopping its production just makes cents.
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