Trump’s Penny-Pinching: Will Scrapping the Coin Save Cents or Cost Dollars?

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In a move echoing past debates over monetary efficiency, former President Donald Trump has once again set his sights on the humble penny, directing the Treasury Department to cease its production.

Trump announced the decision on Truth Social. He believes this measure will help eliminate waste from the national budget, reigniting a long-standing debate about the economic and practical value of the one-cent coin.

The High Cost of Low Denominations

Trump isn’t the first to question the penny’s worth. The core argument for abolishing the penny lies in its “negative seigniorage,” meaning it costs more to produce than its face value.

In 2024, the U.S. Mint reported that it cost 3.69 cents to mint a penny, resulting in a loss of $85 million on the nearly 12 billion pennies produced in fiscal year 2024.

The Department of Government Efficiency (DOGE) also highlighted these expenses, tweeting that it cost over 3 cents to produce a penny.

Conversely, the Mint also lost nearly $18 million making nickels, which would become the lowest-denominated coin if Trump has his way. Unit costs for the 5¢ piece were higher than the penny’s, increasing by 19% to 13.78¢.

Arguments for Keeping the Penny

Despite the production costs, support for the penny remains. One group, representing zinc producers, coin manufacturers, and collectors, has criticized Trump’s penny proposal as “fundamentally flawed,” suggesting it could exacerbate losses for the Mint by necessitating increased nickel production.

They argue that the focus should be on reassessing how the Mint allocates its costs and reducing nickel production expenses.

• Impact on Prices: Supporters worry that eliminating the penny could lead to prices rounding up to the nearest five cents, potentially costing consumers more. However, research suggests that rounding would have virtually no effect, with consumers potentially gaining a tiny amount.
• Impact on Lower Income Individuals: Concerns have been raised that eliminating the penny would hurt the poor. However, given that rounding is neutral at the transaction level, those who disproportionately deal in cash transactions would be helped more by the elimination of the penny.
• Charitable Fundraising: There are also concerns about the impact on penny drives, which are a fundraising method utilized by charities and schools.

Broader Economic and Environmental Implications

Beyond the immediate costs and benefits, abolishing the penny could have broader implications.

• Efficiency: Advocates believe it could enable the U.S. Mint to concentrate on higher-denomination coins.
• Modernization: Many contend that pennies are becoming obsolete in an era dominated by credit cards and electronic payments, with approximately 86% of transactions in the U.S. being cashless in 2024.
• Environment: Penny production contributes to carbon emissions and pollution from mining essential materials like zinc and copper.

Legal and Historical Context

It remains unclear whether the president—through the Treasury—has the authority to unilaterally end circulation of the penny.

The U.S. Constitution gives Congress the exclusive power to “coin money” and determine values, but the Treasury Secretary may be able to halt new minting until legislative action is taken.

Trump’s efforts echo past attempts by his predecessors and other politicians to do away with the penny, but to no avail.

Former President Barack Obama questioned the coin’s function in 2013, and others filed bills in 2017 to suspend output for 10 years.

Other nations, such as Canada, have already discontinued their one-cent coins.

Conclusion

Trump’s renewed push to scrap the penny has opened up a complex debate with valid arguments on both sides.

While the cost of production is a clear disadvantage, concerns about potential price increases and the impact on vulnerable populations need careful consideration.

As the discussion unfolds, it’s clear that the fate of the penny is about more than just cents and sensibility.

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