Trump’s Plan to Stop Making Pennies: A Costly Proposal with Hidden Consequences
Introduction to the Debate Over Pennies and Their Production Costs
President Donald Trump recently announced his decision to halt the production of pennies in the United States, citing the argument that these coins cost more to produce than their face value. In a post on his Truth Social platform, Trump expressed frustration over what he described as a wasteful practice, stating, “For far too long the United States has minted pennies which literally cost us more than 2 cents. This is so wasteful! Let’s rip the waste out of our great nation’s budget, even if it’s a penny at a time.” While Trump’s assertion about the costliness of pennies is not entirely inaccurate—each penny costs 3.7 cents to produce, including production, administrative, and distribution costs—his plan to eliminate the penny presents a more complex financial picture than he acknowledges. The proposal to stop making pennies has sparked a broader debate about the economics of U.S. currency and the potential unintended consequences of such a decision.
The Problem with Trump’s Plan: Higher Costs from Nickel Production
One significant flaw in Trump’s argument is that phasing out the penny would likely lead to increased production of nickels, which are even more costly to produce. Each nickel costs 13.8 cents to make, significantly more than the 3.7 cents per penny. According to data from the U.S. Mint, the production costs for nickels have been rising steadily, partly due to the higher cost of raw materials—nickels are made of 75% copper and 25% nickel, both of which have seen price increases in recent years. In contrast, pennies, which are copper-plated zinc, have relatively stable production costs. This disparity in production costs means that eliminating the penny could end up being more expensive for the U.S. Treasury than keeping it in circulation. As Mark Weller, executive director of Americans for Common Cents, noted, “Without the penny, the volume of nickels in circulation would have to rise to fill the gap in small-value transactions. Far from saving money, eliminating the penny shifts and amplifies the financial burden.”
Rising Costs of Nickel Production and the Impact on the U.S. Mint
The financial implications of Trump’s plan become even clearer when examining the U.S. Mint’s recent production trends. In the most recent fiscal year, the Mint produced 3.2 billion pennies, compared to just 202 million nickels—a reduction of 86% from the 1.4 billion nickels minted annually in the previous two years. This significant decrease in nickel production was an effort to minimize losses, as the Mint loses more money on nickels than on pennies. If the Mint were to increase nickel production to compensate for the absence of pennies, the financial losses could escalate rapidly. For example, if the Mint were to produce just 850,000 additional nickels in 2025 to meet retailer demand, it would wipe out any potential savings from eliminating the penny. If nickel production were to return to previous levels of 1.4 billion annually, the cost difference could amount to $78 million more than the cost of producing the pennies that would no longer be made. Weller estimates that the Mint would likely need to produce 2 million to 2.5 million additional nickels annually if the penny is phased out permanently, based on trends observed in other countries that have eliminated their lowest-denomination coins.
The Case for Eliminating Pennies and the Broader Economic Arguments
Despite the potential financial challenges, there are valid arguments for eliminating the penny. One of the primary reasons cited by proponents is the inefficiency of maintaining such a low-value coin. For instance, the National Association of Convenience Stores has previously supported the idea of discontinuing the penny, arguing that it could speed up cash transactions by a few seconds per customer. Jeff Lenard, a spokesman for the group, explained, “Convenience stores sell a lot of products, but what they really sell is speed of service.” While Lenard couldn’t confirm whether nickel usage would increase, he did suggest that without the penny, cash transactions would be rounded to the nearest nickel, which could streamline the payment process. Additionally, the U.S. would not be the first country to eliminate its lowest-denomination coin. Canada, for example, stopped minting its penny in 2012 and phased it out of circulation entirely by 2013. These examples suggest that eliminating the penny is a viable option, even if it requires some adjustment to how people handle small transactions.
Lessons from Canada: The Challenges of Phasing Out the Penny
However, as Canada’s experience demonstrates, eliminating the penny is not without its challenges. While the Canadian government stopped minting the penny in 2012, it allowed existing pennies to remain in circulation until 2013, when they were officially withdrawn. The process of phasing out the penny proved more complicated and costly than anticipated, particularly because the government had to invest in public education campaigns to inform citizens about the change. Additionally, the government faced the task of collecting and recycling the billions of pennies already in circulation, which required significant resources. Mark Weller of Americans for Common Cents pointed out that the U.S. would face a similar challenge if it were to stop using the penny. While Trump could theoretically order the Treasury to stop producing new pennies, completely eliminating the penny from circulation would require an act of Congress. Furthermore, the federal government would need to implement a plan to collect and recycle the existing pennies in circulation, which could be a costly and logistically complex endeavor.
The Penny’s Declining Utility and Its Place in Modern Society
Another critical factor in the debate over the penny is its declining practical utility in modern society. While pennies were once essential for making exact change in cash transactions, their usefulness has diminished as more people rely on digital payments and credit cards. Many businesses have already stopped accepting pennies, and those that do often provide “leave-a-penny, take-a-penny” trays for customers to manage their own change. This shift away from cash transactions has led some to argue that the penny has outlived its usefulness. As Harvard economist Gregory Mankiw noted, “When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful.” This sentiment is reflected in the fact that many pennies are no longer in active circulation. Instead, they are hoarded in jars or lost, contributing to the inefficiency of maintaining such a low-value coin. Despite these arguments, however, the penny still holds cultural and historical significance for many Americans, making its elimination a contentious issue.
In conclusion, while President Trump’s proposal to stop making pennies is based on a valid concern about production costs, the plan is more complex and less beneficial than it initially appears. The shift to producing more nickels could lead to even greater financial losses for the U.S. Treasury, and the process of phasing out the penny entirely would require significant legislative and logistical efforts. As the debate over the penny’s future continues, it remains to be seen whether the potential benefits of eliminating the coin will outweigh the practical challenges and cultural attachment that continue to define its place in American society.