Market Data
The Trump Administration’s Move to Discontinue the Penny: A Bold Step in Cost-Cutting
In a surprising move, President Trump has announced that he has directed the U.S. Treasury Department to halt the production of new pennies, citing the escalating cost of manufacturing the one-cent coin. In a post on his Truth Social platform, Mr. Trump slammed the practice of minting pennies as wasteful, pointing out that each penny costs the government nearly $0.037 to produce—more than double its face value. "For far too long, the United States has minted pennies which literally cost us more than 2 cents. This is so wasteful!" he wrote. The decision is the latest in a series of swift actions by the Trump administration to implement sweeping changes through executive orders, targeting issues ranging from immigration and gender policies to the renaming of the Gulf of Mexico.
The move to eliminate the penny, however, was not a central plank of Mr. Trump’s campaign. Instead, the idea gained traction after Elon Musk, who heads a task force on government efficiency, highlighted the issue on X last month. Musk’s team brought attention to the financial burden of producing pennies, noting the significant losses incurred by the U.S. Mint. In the 2024 fiscal year, the Mint reported a loss of $85.3 million on the production of nearly 3.2 billion pennies. Each penny now costs $0.037 to make, up from $0.031 the previous year. The nickel, another coin in circulation, also poses a financial challenge, with each $0.05 coin costing approximately $0.14 to produce.
The Economic Argument: Is Eliminating the Penny a Cost-Effective Solution?
Proponents of discontinuing the penny argue that it would lead to significant cost savings for the government. Beyond the immediate financial benefits, they suggest that phasing out the penny could also streamline cash transactions, making checkouts faster and more efficient. Additionally, the U.S. is not alone in considering such a move. Several countries, including Canada, which stopped minting its penny in 2012, have already taken steps to eliminate their lowest-denomination coins. Supporters of this approach point to these examples as evidence that removing the penny could work without causing significant disruption to the economy.
However, critics argue that the practical impact of eliminating the penny might be minimal compared to the symbolic significance of the coin. Pennies have been a staple of American currency for over two centuries, and their removal could have unforeseen consequences. For instance, charities that rely on penny donations might be affected, and businesses would need to adjust their pricing strategies to accommodate a five-cent minimum. Despite these concerns, the Trump administration appears determined to push forward with its cost-cutting agenda, with Mr. Trump declaring, "Let’s rip the waste out of our great nation’s budget, even if it’s a penny at a time."
The Legal and Historical Context: Can the President Unilaterally Eliminate the Penny?
The question of whether President Trump has the authority to unilaterally discontinue the penny is a matter of debate. According to the U.S. Constitution, Congress holds the power to regulate currency, including the metallic composition and design of coins. While the Secretary of the Treasury oversees the U.S. Mint, the process of discontinuing a coin like the penny would likely require Congressional approval. Robert K. Triest, an economics professor at Northeastern University, has suggested that there may be some flexibility, noting that the Secretary of the Treasury might be able to halt the production of new pennies without explicit Congressional action.
Historically, the U.S. has discontinued coins before. The half-cent coin, for example, was phased out in 1857. More recently, members of Congress have introduced various proposals aimed at reducing the role of the penny, ranging from temporary production suspensions to outright elimination. These efforts have yet to gain widespread support, but the financial burden of producing pennies continues to be a topic of discussion. The Congressional Research Service has documented numerous attempts to address the issue, including proposals to round prices to the nearest five cents.
The Broader Agenda: Trump’s Focus on Cutting Costs and Streamlining Government
President Trump’s decision to halt penny production is part of a broader effort by his administration to reduce government spending and streamline operations. Since taking office, Mr. Trump has issued a flurry of executive orders aimed at enacting sweeping changes across various sectors, from immigration and gender policies to environmental regulations. Elon Musk, who has been tasked with leading the administration’s efficiency efforts, has taken a particularly aggressive approach, targeting entire federal agencies and large segments of the federal workforce. The goal, according to Mr. Trump, is to achieve $2 trillion in savings—a lofty ambition that has drawn both praise and criticism.
The focus on cutting costs, however, has not been without controversy. Critics argue that the administration’s approach is overly simplistic and could lead to unintended consequences, such as reduced services or job losses. Supporters, on the other hand, applaud the effort to eliminate what they see as wasteful spending, even if it involves something as small as a penny. As Mr. Trump departed New Orleans after watching the first half of the Super Bowl, he sent a clear message: his administration is committed to trimming the fat, no matter how small the savings may seem.
The Future of the Penny: What Comes Next?
As the Trump administration moves forward with its plan to discontinue the penny, the question on everyone’s mind is: what comes next? If the production of new pennies is halted, the existing supply will eventually dwindle, leading to a gradual phase-out of the coin from circulation. However, the process is unlikely to happen overnight. The U.S. Mint has millions of pennies in reserve, and it could take years for them to be fully depleted. Meanwhile, businesses and consumers will need to adapt to a world without pennies, potentially rounding prices to the nearest five cents or implementing other alternative payment methods.
Whether the Trump administration’s push to eliminate the penny will succeed remains to be seen. While the economic arguments are compelling, the cultural and historical significance of the penny cannot be ignored. For now, the future of the penny hangs in the balance, as the country debates whether it is time to bid farewell to this iconic coin. One thing is certain, however: the Trump administration’s bold move has sparked a national conversation about the role of government, the value of money, and the importance of even the smallest details in our economic system.
