The US penny has become the latest target of President Donald Trump's efforts to cut waste in the federal government, although the economic impact is probably negligible.
Mr Trump on Sunday directed the Treasury Department to stop minting the one-cent coin, because of rising costs. While he never raised the idea of an end to minting the penny before the announcement, Elon Musk's Department of Government Efficiency (Doge) took aim at the coin last month.
The US President, Mr Musk and Doge have moved at breakneck speed since Mr Trump's inauguration to reduce federal spending by cutting US foreign aid, cancelling diversity, equity and inclusion programmes, slashing federal contracts in government agencies and ending leases for federal buildings.
The penny has been a frequent target for removal from circulation, but had survived every campaign threatening its existence.
Robert Whaples, a professor at Wake Forest University, said the penny's time as an efficient coin to exchange goods and services has gone.
“The penny's not up to the task any more,” Prof Whaples said.
While Congress has the authority to make changes to coinage, he said the President could instruct the Treasury Department to produce more or fewer pennies. But it is unclear if he can demand the department to stop minting pennies altogether.
Mr Trump centred his argument for getting rid of the penny on the rising costs of producing it. The US Mint – a bureau within the Treasury Department – reported losing $85.3 million on the nearly 3.2 billion pennies it produced in the 2024 fiscal year. The current unit cost for the one-cent coin is 3.69 cents, the 19th consecutive fiscal year it remained above face value.
Prof Whaples described a “vicious cycle” in which shops pay out more pennies than they get, which leads to more pennies being made – but because they are worth so little they are usually ignored. Even if pennies cost nothing to make, he said the cost of people's time outweighs the cost of the one-cent coin.
Economic impact
Were the US to eliminate the penny, it would follow Canada and Australia in ditching one-cent coins. Brazil, Estonia, Ireland and the Netherlands have also stopped producing them.
When Canada announced its decision in 2012, it began requiring cash transactions to be rounded to the nearest five cents. The impact was minimal.
“Half the time you get beat by being overcharged two cents or three cents, and sometimes you make up two or three cents. So on average, there's no net effect,” said Jay Zagorsky, a professor at the Questrom School of Business at Boston University.
US consumers are also becoming increasingly less reliant on cash. Only 16 per cent of payments made in 2023 were done with cash, according to the Federal Reserve banks. It was also the first year most consumers used a form of payment other than cash on transactions of $25 or less.
“I think it's marginalised the penny even more,” Prof Whaples said.
