The idea of eliminating the penny has been a topic of debate for years, with many arguing that it costs more to produce than it’s worth. Former President Donald Trump recently added fuel to the fire by claiming that the U.S. Mint should stop producing pennies, which he says cost more than one cent to make. But is this the right move? Let’s break down the situation, including the potential benefits and problems of getting rid of the penny.

Why Eliminate the Penny?

Trump made a bold statement on his Truth Social platform, saying, “For far too long, the United States has minted penny which literally cost us more than 2 cents.” While he was close, the reality is that pennies actually cost more than 3 cents to produce. With production costs rising, many believe it’s a waste of taxpayer money to keep making them.

The U.S. Mint reported that each penny costs 3.7 cents to produce. This includes 3 cents for production and an additional 0.7 cents for distribution and administrative costs. Considering that the penny is the lowest denomination in circulation, it’s not surprising that it has been a target for elimination.

The Nickel Dilemma

While scrapping the penny might sound like an easy solution, there’s a significant downside to consider. If the penny is eliminated, people would likely need more nickels for small transactions. However, producing nickels is even more costly than producing pennies.

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Each nickel costs 13.8 cents to produce, including 11 cents for manufacturing and 2.8 cents for distribution. That’s more than three times the cost of making a penny! As a result, if the U.S. Mint were to stop producing pennies, it could end up making more nickels, which could further increase costs.

In 2024, the Mint made 3.2 billion pennies, but it produced only 202 million nickels—an 86% drop from previous years. If the Mint needed to produce millions more nickels to replace pennies, the savings from eliminating pennies would likely be wiped out.

Impact on Consumers and Retailers

The National Association of Convenience Stores (NACS) has supported the idea of eliminating pennies, arguing that it could speed up transactions, even if only by a few seconds. For retailers, especially those focused on quick service, eliminating pennies could improve efficiency.

Without pennies, cash transactions could be rounded to the nearest nickel, simplifying the process. This could lead to faster transactions, which benefits both businesses and customers. However, this might also result in increased use of nickels, which might not solve the problem of rising production costs.

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Lessons from Other Countries

The U.S. wouldn’t be the first country to stop making pennies. In 2012, Canada ceased minting pennies, and by 2013, they were no longer used in everyday transactions. While the U.S. Treasury could order a halt to penny production, getting rid of the pennies already in circulation would require an act of Congress. This process would involve buying back the pennies, which could be more expensive than anticipated, as seen in Canada’s experience.

The Bottom Line

While eliminating the penny might seem like an easy way to cut costs, the reality is much more complicated. Removing the penny could lead to an increase in nickel production, which is far more expensive to produce. Although some groups argue that getting rid of pennies would speed up transactions and make life simpler for retailers, the financial costs of switching could outweigh the benefits.

Ultimately, the decision to eliminate the penny involves balancing the potential for savings against the risks of higher production costs and the disruption to daily transactions. For now, the penny remains a fixture of the U.S. economy, but the debate continues.