President Donald Trump has instructed the U.S. Treasury Secretary, Scott Bessent, to cease the production of one-cent coins, commonly known as pennies.
The announcement, made via Trump’s Truth Social account, frames the move as a cost-cutting measure aimed at reducing government expenditure.
“Let’s rip the waste out of our great nation’s budget, even if it’s a penny at a time,” Trump stated in his post, underscoring concerns over the high cost of minting pennies.
The Cost of Minting Pennies
According to the U.S. Mint’s 2024 annual report, the cost to produce and distribute a single penny stands at 3.69 cents, significantly exceeding its face value.
This discrepancy has fueled long-standing debates on whether the penny should be discontinued.
Elon Musk’s unofficial Department of Government Efficiency (Doge) reignited the discussion last month, highlighting the inefficiencies associated with penny production.
Historical Context and Global Comparisons
The debate over the penny is not new. Over the years, several proposals to eliminate the coin have been brought before Congress, but none have succeeded.
Critics argue that the penny is a financial drain and that its elimination would streamline transactions and reduce unnecessary production costs.
Other countries have made similar decisions in the past. Canada eliminated its one-cent coin in 2012 due to its high production cost and declining purchasing power.
Similarly, the United Kingdom has reduced the production of smaller denominations, with no new one-penny coins minted in 2024 due to a sufficient supply in circulation.
Mixed Reactions to Trump’s Decision
Trump’s directive has sparked a range of reactions from economists, businesses, and the general public.
- Supporters of the move argue that eliminating the penny will cut government spending, reduce environmental waste, and improve economic efficiency. They believe that rounding transactions to the nearest five cents, as seen in Canada, would not significantly impact consumers.
- Opponents warn that removing pennies could lead to a gradual increase in prices as businesses round prices upward.
There are concerns that charities, which rely on penny donations, may suffer financial losses. Additionally, some worry that eliminating smaller denominations could disproportionately impact lower-income households that rely more on cash transactions.
Potential Economic Implications
While Trump presents the move as a cost-saving measure, economists warn that it could have unintended consequences:
- Inflationary Effects – Businesses may round prices up, leading to slight but cumulative increases in costs for consumers.
- Impact on Cash Transactions – Those who rely on cash, including low-income individuals and small businesses, may face difficulties adjusting to a rounded pricing system.
- Savings for the Treasury – The U.S. Mint could save millions annually by ceasing penny production, funds that could be redirected to other economic initiatives.
Trump’s decision to discontinue penny production is a bold step in reducing wasteful government spending.
However, whether it is the right decision depends on how businesses and consumers adapt.
While many see this as a necessary economic reform, concerns remain over its potential impact on pricing and cash transactions.
As the policy takes effect, all eyes will be on the market response and whether this move truly benefits the economy in the long run.
