Trump's Push to End Penny Production: A Detailed Look at the Pros and Cons

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Background: Why the Penny?

For decades, the humble penny has played a role in our daily transactions. Traditionally, pennies were cherished by children—often used in gumball machines or saved as small treasures. Over time, however, the penny’s cultural and economic significance has diminished. Despite being a familiar part of cash transactions, there’s mounting evidence that its continued production may be more trouble than it’s worth.

The Economic Case Against the Penny

1. High Production Costs:

   • In 2024, the U.S. Mint reports that it costs approximately 3.7 cents to produce a single penny, while the coin is only valued at 1 cent. This negative seigniorage means the government essentially loses money on every penny produced.

   • Recent figures indicate that last year alone, the Mint lost over $85 million manufacturing more than 3 billion pennies.

2. Inertia and Changing Usage Patterns:

   • Despite four separate bills introduced in Congress since 1989 to eliminate the penny, the coin persists primarily due to inertia.

   • As consumers increasingly rely on digital transactions, the practical need for such a low-denomination coin has diminished.

3. Opportunity Cost:

   • Professor Robert Whaples argues that the time and effort spent handling pennies are not worth their nominal value. At an average U.S. wage of nearly $36 per hour, the time it takes to locate and use a penny (often more than a second) may represent a disproportionate cost.

Arguments in Favor of Keeping the Penny

1. Cash Efficiency and Accessibility:

   • Cash transactions remain a preferred method for many, particularly among lower-income individuals and communities who are unbanked or underbanked. For these consumers, the penny represents an inexpensive, secure method of transaction.

2. Transaction Speed Considerations:

   • While some argue that using pennies slows down transactions, proponents note that debit and credit card payments can be even more time-consuming—especially when additional options like rounding up for charity are involved at payment kiosks.

3. Impact on Lower-Income Consumers:

   • Removing the penny might force cash transactions to be rounded to the nearest five cents. Advocates worry this could subtly disadvantage those who rely on cash, potentially causing minor but cumulative financial impacts.

International Comparisons: The Canadian Example

• Canada eliminated its penny several years ago, opting instead to round cash transactions to the nearest 5-cent interval.

• An economic analysis revealed that Canadian consumers ended up paying an extra 3 million Canadian dollars annually at grocery stores due to rounding. While this figure may seem modest on a national scale, it remains a point of contention for those who fear similar outcomes in the U.S.

What Lies Ahead?

• Legislative Action Required:
  For the penny to be phased out completely, Congress must approve the decision. President Trump’s recent directive to Secretary of the Treasury, Scott Bessent, to stop penny production marks an important step—but the transition will be gradual.

• Future Implications:
  Should the penny be eliminated, discussions may soon turn to other low-denomination coins, such as the nickel, which also costs more to produce than its face value.

In Summary

The debate over ending penny production is multifaceted. On one hand, the economic inefficiency of the penny—exacerbated by rising production costs and reduced relevance in modern transactions—presents a compelling case for discontinuation. On the other, concerns about the impact on cash-reliant populations and the potential for unintended rounding effects remind us that even small denominations can have significant social implications.