Trump to cease penny production
The Mint operates under the auspices of the Treasury, deriving its authority from Congress, which not only authorizes the production of each coin but also supervises its operations. On Sunday, President Trump announced that he had requested the U.S. Treasury Department to cease the production of new pennies, aligning with his initiative to reduce what he deemed as unnecessary government expenditure. His comments reignited a longstanding discussion regarding the elimination of the lowest denomination of U.S. currency. An examination of the implications for American consumers is warranted.
What is the production cost of a penny?
The production cost for one unit in 2024 was 3.7 cents. This marks an increase from 3.07 cents in 2023, 2.7 cents in 2022, and 2.1 cents in 2021. The production of a penny incurs costs that far exceed its nominal value, leading the U.S. Mint to disclose a loss of approximately $85.3 million last year, attributed to the nearly 3.2 billion pennies manufactured.
What materials constitute pennies?
Currently, the composition primarily consists of zinc, with a minor inclusion of copper. In 2023, a bipartisan coalition in Congress reintroduced legislation aimed at empowering the U.S. Mint to modify the metal composition of coins. The legislation proposed that altering the composition of the coins could yield annual savings in the millions. According to a 2019 report from the Government Accountability Office, the U.S. Mint projected potential savings of around $250 million over a decade by halting the production of pennies.
What are the advantages of eliminating pennies?
Trump is not the inaugural figure to challenge the relevance of the penny. The Mint and the Federal Reserve have suggested a reduction in the production of lower-denomination coins, citing the rising costs associated with their manufacture. As the American populace increasingly embraces electronic payments, the utility of cash has diminished, rendering coins largely obsolete for a significant segment of the population. According to a report by The Wall Street Journal last year, Americans discard as much as $68 million annually in coins. They are forsaken at airports and discarded in coin jars. This month, a survey conducted by the National Association of Convenience Stores revealed that 36% of respondents were in favor of abolishing the penny. The figure increased to 50% following participants’ awareness of the production costs involved.
What are the disadvantages of abolishing pennies?
Concerns have emerged that it may lead to an increase in prices. Joshua Dairen, proprietor of a coffee establishment in downtown Opelika, Alabama, expressed concerns that the removal of pennies might incentivize a greater number of patrons to resort to credit card transactions, or potentially deter them from visiting altogether. Merchants incur fees for credit card processing, which diminishes their profit margins, he noted. Approximately 30% of consumers transact using cash in the form of bills and coins. “When the majority opts for card transactions, the associated costs inevitably shift to consumers,” he remarked.
The complete elimination of pennies would likely result in the rounding up of certain prices. Sergio Briones, a proprietor of a convenience store in Laredo, Texas, expresses concern that this situation may adversely affect his clientele. Approximately 70% of his clientele opts for cash transactions, frequently involving minor purchases like gum or beverages. “Our profit margins are already exceedingly narrow,” he remarked. However, rounding a 96-cent item up to a full dollar constitutes a price increase that his customers find untenable, he noted.
Other prices would be adjusted downward. According to Jeff Lenard of the National Association of Convenience Stores, an industry organization, adjusting prices to the nearest nickel should not impact the amount customers are charged in retail settings. One more consideration against abolishing the penny is that it may lead to an increased reliance on the nickel. The production cost of the five cent coin approached 14 cents last year.
What might a world devoid of pennies resemble?
In 2012, the Canadian government declared the cessation of penny production, citing that the cost of minting each coin had reached 1.6 cents. Canada ceased the distribution of pennies; however, individuals in possession of these coins could still utilize them for transactions, maintaining their nominal value of one cent. With the gradual disappearance of pennies from circulation, cash transactions began to be rounded to the nearest nickel. The Canadian government’s decision to eliminate one-cent coins was informed by the experiences of New Zealand and Australia, which ceased production of such currency in the 1990s without witnessing a rise in inflation.
Can Trump eliminate the penny from circulation?
The Mint operates under the auspices of the U.S. Department of Treasury, with its authority emanating from Congressional mandate. The Mint’s operations and the production of every coin and most medals are subject to congressional authorization and oversight. However, the president might possess the authority to sway the production of currency. “Trump’s action does not purport to definitively abolish the penny, a decision that would undoubtedly rest with Congress,” stated Robert Whaples, an academic at Wake Forest University who has advocated for the cessation of penny production by the Mint. “Instead, it ceases the production of new pennies, with the determination of annual penny output appearing to reside within the purview of the executive branch.”
