Can this really happen? And if so, can it work?
The penny, worth one cent, costs approximately 3.7 cents to mint. It’s estimated that there are approximately 240 billion pennies floating around out there ($2.4 billion dollars!), many of them in change jars, on your car floorboards, swimming around in the bottom of your purse, or buried in your couch cushions – in other words, not being put back into circulation. But retailers and other money handlers still make change and need pennies to do so – so they need to “buy” more pennies from their banks, which in turn need to obtain more pennies from the Mint. The U.S. Mint lost more than $85 million making pennies in 2024 – 3.7 cents at a time.
Aside from cost, many view use of penny coins at best as simply not worth it and at worst as counterproductive waste. In 2024, the average hourly private sector wage was $35.87 – so it takes less than one second to earn a penny and as a result, people don’t tend to value their pennies. On the flip side (no pun intended), it takes two extra seconds to process a transaction involving pennies, which economists estimate adds up to anywhere from $300 million to $1 billion annually in wasted time. You can’t use a penny in a vending machine or toll booth, and many transactions don’t utilize cash at all. Finally, did you know that that pennies are currently mostly made of zinc? Zinc mining can have toxic environmental effects and has significant health effects if ingested (think babies and pets).
Trump’s social media post is not the first attempt to eliminate U.S. pennies. Multiple bills have been introduced in Congress for this purpose. Canada, Australia, and New Zealand, among others, have eliminated their penny coins, apparently to no ill effect. Coin elimination has precedent in the U.S. too, with the half-cent coin being eliminated in 1857.
Why keep the penny? Beyond nostalgia, most economists and business professors agree elimination of the coin makes sense. Some consumer advocates have cautioned that the move could increase prices, but research and experiences of other countries don’t seem to bear this out. In Canada, cash transaction are now rounded to the nearest five cents – up or down – and this rounding has been found to result in a close-to-neutral effect on consumer cash transactions. Given the extra time involved in a cash transaction involving pennies, some argue that elimination of the penny will actually benefit lower-income Americans, who deal disproportionately in cash transactions.
In light of the advantages that may be gained by its elimination, the penny may find it has finally run out of luck. Questions remain, however, as to how this will be accomplished and as always, the legality of the process. The U.S. Constitution gives Congress the sole authority to “coin money,” a power that was clarified by the Coinage Act passed way back in 1792 and signed by President George Washington. Certainly, Congress can amend the Coinage Act, and has done so in the past to eliminate the half-penny and change some of the materials from which coins are minted. Whether a simple social media post or other (perhaps more precise) executive action, raises Constitutional questions. And will we simply stop minting the coin, or actively attempt to take it out of circulation? Canada worked to collect its pennies, ultimately bringing in around $42 million by melting down and extracting the value of the coins’ metals.
So, as we seem to be saying more and more these days, we’ll see...but always watch for unintended consequences. Some economists have cautioned that elimination of the penny will increase the need for and use of nickels—and it costs 13.78 cents to make the five-cent coin...!
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