The United States government has officially announced the discontinuation of the penny. This order comes from a broader initiative to reduce government expenditures.
The penny has been an established part of the U.S. currency since its production in 1793. However, over the years since the first production, it has cost more to make the penny than the actual worth of the coin. According to the U.S. Mint, it costs approximately 3.7 cents to produce a single penny. This makes the continued circulation economically confutable.
“Since the year 1900 there has been a rise in inflation by 3,600%. What 30 cents would buy today, a penny could buy in the 1900’s.” – John Scott, UNG economics and finance professor
This decision follows the marketing trends showing a decline in the use of smaller denomination coins. Many customers have shifted to cashless transactions, which leaves the smaller coins that are never used with less value.
President Donald Trump told the Department of Treasury to stop the production of the one cent coin immediately. Although this order went through, existing pennies will remain in circulation and can still be accepted by businesses.
However, the full discontinuation of pennies would likely have to go through Congress, for they are the only ones with the power to change the type of coins produced by the U.S. Mint.
Businesses and financial institutions are predicted to round cash transactions to the nearest five cent increments.
John Scott, a University of North Georgia economics and finance professor, commented on this change, saying, “We make millions of dollars on making coins and putting them into the economy. Government spending is in the trillions, and the penny is only in the millions. Millions are not a part of the bigger budget for the government.”
In 2024, Americans paid $85 million in taxes to produce the penny, and the U.S. Mint lost $85.3 million on the 3.2 billion pennies they produced just last year. As inflation rose, so did the cost of zinc and copper, making the worth-to-use ratio of the coin go down significantly.
“The difference between the cost and value of the coin is called seignorage,” Scott explained. “The seignorage would be negative when it makes the penny. The total goes down by 2.69 cents making the profit negative cents for the coin production.”
This change is expected to create a smoother cash transaction experience and reduce the burden of handling small change for retailers. This transformation’s intent is to reduce unnecessary administrative costs associated with coin production for an overall positive effect.
