Finance
Politics
In a move that echoes past efforts by various figures, including former Obama Treasury Secretary Jack Lew and comedian John Oliver, President Donald Trump has directed the Treasury to consider eliminating the penny, citing decades of financial losses. Each penny costs about 3.7 cents to produce, resulting in significant annual losses for the U.S. Mint. However, the real financial burden lies with the nickel, which costs a whopping 13 cents to make, leading to an eight-cent loss per coin.
The Penny Problem
The U.S. has been losing money on pennies for nearly two decades. Despite this, the country continues to mint them, unlike many peer nations. Canada phased out its penny in 2012, while Australia and New Zealand stopped producing theirs in the early 1990s. The cost of producing a penny has risen significantly due to inflation and the cost of materials, particularly zinc, which has been used in pennies since the early 1980s to combat rising copper prices.
In 2023 and 2022, the U.S. lost over $85 million on pennies alone, with similar losses in previous years. The mint also incurred significant losses on nickels, which, like pennies, cost more to produce than their face value. However, the nickel's higher production cost makes it a more substantial financial burden.
The Nickel Conundrum
While eliminating the penny might seem like a straightforward solution, it overlooks the nickel's more substantial financial impact. Each nickel costs about 13 cents to produce, making it the more wasteful coin. The proposal to eliminate pennies could inadvertently increase demand for nickels, as consumers might rely more heavily on them for small transactions.
According to Americans for Common Cents, a pro-penny group funded by zinc manufacturer Artazn, eliminating pennies could lead to a surge in nickel production. This could offset any savings from stopping penny production, as even a modest increase in nickel production could wipe out the cost benefits of eliminating pennies.
Public Opinion and Economic Impact
Public opinion on eliminating coins is mixed. A 2022 poll showed that a majority of Americans support eliminating the penny, but there is less enthusiasm for getting rid of the nickel. Only about one-third of respondents favored eliminating the five-cent piece.
Economically, the elimination of pennies could have broader implications. Robert Whaples, a professor of economics at Wake Forest University, argues that even if pennies were free, they would still waste time. With the average American wage at $30 per hour, the time spent handling pennies in transactions is costly. Moreover, two-thirds of minted pennies do not circulate, accumulating in coin jars and other places, which forces the mint to continue producing more to meet demand.
Conclusion
While Trump's proposal to eliminate the penny might seem like a cost-saving measure, it overlooks the more significant financial drain posed by nickels. As the U.S. considers its coinage policies, it must address the broader economic and practical implications of eliminating any denomination, especially when alternatives like the nickel are more costly to produce.
Source:
Irina Ivanova, Fortune https://fortune.com/2025/02/11/trump-penny-production-us-mint-nickels
Image Credit: Tetra Images—AP Photo