The United States penny, a staple of American currency since 1793, has long been a symbol of small change, but its relevance in today’s economy is under scrutiny. In February 2025, President Donald Trump announced a directive to halt penny production, citing its high production costs as a wasteful expenditure. This decision, supported by the Department of Government Efficiency (DOGE) led by Elon Musk, has reignited a decades-long debate about the penny’s place in modern commerce. This article written by author, James Dean explores the reasons for discontinuing the USD penny, the costs of its production, its economic worth, consumer usage trends, and the potential impacts of its elimination on future economic activity.
Reasons for Discontinuing the USD Penny
The primary driver for discontinuing the penny is its negative seigniorage—meaning it costs more to produce than its face value. The U.S. Mint, a bureau of the Treasury Department, has faced mounting losses due to the rising costs of raw materials and production. Additionally, the penny’s declining purchasing power, coupled with a shift toward digital and cashless transactions, has rendered it increasingly obsolete. Economists like Robert Whaples and Greg Mankiw argue that the penny no longer facilitates exchange effectively, as it is often discarded, hoarded in jars, or left unspent, creating a cycle of overproduction to replace uncirculated coins. Environmental concerns also play a role, as the mining and processing of zinc and copper for pennies contribute to ecological harm. Finally, public and political sentiment, bolstered by bipartisan support and international precedents like Canada’s penny elimination in 2013, has gained momentum for phasing out the coin.
Collectible Valuable Pennies You May Want to Hold Onto
Collecting valuable pennies is a fascinating hobby for numismatists, as certain USD pennies hold significant value due to their rarity, historical significance, or minting errors. Among the most sought-after are the 1909-S VDB Lincoln Penny, valued at $1,000–$2,000 in good condition due to its low mintage of 484,000 and the designer’s initials (VDB); the 1943 Bronze Lincoln Penny, a rare error coin mistakenly struck in bronze instead of zinc-plated steel, fetching $100,000–$1.7 million; and the 1969-S Doubled Die Obverse, with a prominent doubling of the date and lettering, valued at $25,000–$100,000 in high grades. Other notable pennies include the 1914-D (worth $200–$1,000 due to low production) and the 1955 Doubled Die Obverse ($1,000–$2,000 for its visible doubling error). These coins are prized for their scarcity and condition, with values soaring for well-preserved specimens, making them prime targets for collectors scouring pocket change or auctions.
Costs to Produce a USD Penny
According to the U.S. Mint’s 2023 Annual Report, producing a single penny costs approximately 3.07 cents, with 3 cents attributed to production (materials and labor) and 0.7 cents to administrative and distribution expenses. In 2024, this cost rose to about 3.7 cents per penny due to increased prices of zinc (97.5% of the penny’s composition) and copper (2.5% for plating). In 2023, the Mint produced 4.1 billion pennies, costing taxpayers $127 million, and in 2024, it produced fewer but still incurred $85.3 million in losses. Over two years, these losses totaled roughly $250 million. This financial burden is exacerbated by the fact that pennies are the most produced coin, accounting for about 40% of the 11.4 billion coins minted in 2023, despite their minimal economic utility.
Economic Worth of the Penny
The economic worth of the penny is negligible. Inflation has eroded its purchasing power to the point where it buys less than a quarter did in 1913 (equivalent to about 32 cents today). Pennies are rarely accepted by vending machines, parking meters, or toll booths, and many consumers leave them in “take-a-penny, leave-a-penny” dishes or discard them outright. Economist Greg Mankiw notes, “When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful.” A 2006 study by Robert Whaples found that the final digit of purchase totals is random, meaning rounding to the nearest nickel would have a neutral effect on consumers, with no significant “rounding tax.” The penny’s role as a medium of exchange is further diminished by its tendency to drop out of circulation, with an estimated 240 billion pennies sitting unused in jars or lost, representing $2.4 billion in stagnant currency.
Consumer Usage of the Penny
The use of pennies in transactions has declined sharply as cash payments wane. According to the Federal Reserve, cash was used in 18% of in-person transactions in 2023, down from 26% in 2019 and 33% in 2015. This trend is driven by the rise of credit cards (32% of payments), debit cards, and digital wallets. Only about 7% of U.S. transactions now involve cash, disproportionately affecting low-income and unbanked consumers who rely on physical currency. A 2022 YouGov poll found that 71% of Americans pick up pennies they find, but 39% leave them in change dishes, and 2% admit to throwing them away. The U.S. Mint estimates that two-thirds of pennies produced do not recirculate, creating a “never-ending spiral” of production to replace unspent coins. This low usage underscores the penny’s diminishing role in daily commerce.
Is Eliminating the Penny a Good Decision?
Arguments in Favor of Elimination:
- Cost Savings: Discontinuing the penny could save the U.S. Treasury millions annually—$56 million per year based on 2023 production figures. These savings could be redirected to more pressing needs, such as infrastructure or social programs.
- Transaction Efficiency: The National Association of Convenience Stores reports that handling pennies adds 2 to 2.5 seconds per cash transaction, costing an estimated $730 million annually in lost productivity across the economy. Rounding to the nearest nickel could streamline checkout processes, particularly for convenience stores prioritizing speed.
- Environmental Benefits: Penny production involves mining zinc and copper, which has negative environmental impacts, including soil and water contamination. Reducing coin production could lower carbon emissions and energy consumption, aligning with sustainability goals.
- International Precedent: Canada eliminated its penny in 2013, rounding cash transactions to the nearest five cents without significant inflation or consumer backlash. Australia and New Zealand also phased out low-value coins in the 1990s, demonstrating that economies can adapt.
- Public Support: A 2017 Hart Research Associates poll found 77% of voters support suspending penny production, with bipartisan backing (59% Democrats, 60% Independents, 57% Republicans).
Arguments Against Elimination:
- Impact on Low-Income Consumers: Critics, including the pro-penny group Americans for Common Cents, argue that rounding could disproportionately affect low-income and unbanked individuals who rely on cash. A 2001 study by Raymond Lombra estimated a $600 million annual “rounding tax,” though Whaples’ 2007 study countered that rounding is neutral when sales tax is factored in.
- Increased Nickel Production: Eliminating the penny could increase demand for nickels, which cost 13.78 cents to produce, potentially amplifying Mint losses. Americans for Common Cents warns that nickel production could double, offsetting penny-related savings.
- Charity Concerns: Penny drives have historically supported charities, but many organizations have shifted to digital “round-up” donations, which are more lucrative. The Leukemia & Lymphoma Society noted that credit card round-ups outperform coin collection.
- Sentimental Value: The penny, featuring Abraham Lincoln since 1909, holds cultural significance. A YouGov poll found 34% of Americans would be disappointed and 9% angry if it were discontinued, though 51% support keeping it.
- Pricing Strategies: Retailers often use .99 pricing to create a perception of value. Rounding could disrupt this strategy, though Canada’s experience suggests minimal impact on overall pricing.
Impact on Future Economic Activity
Enhancing Economic Activity:
- Cost Efficiency: The $85–$179 million saved annually from halting penny production could be reallocated to stimulate economic growth, such as funding small business grants or infrastructure projects. For example, the $250 million saved over two years could cover 2.5 times the cost of the Inflation Reduction Act’s alternative fuel program.
- Streamlined Transactions: Faster checkouts could boost retail efficiency, particularly in high-volume sectors like convenience stores. Canada’s penny elimination showed that rounding simplified cash handling without significant consumer cost.
- Environmental Gains: Reduced metal mining could lower environmental costs, aligning with global sustainability trends and potentially attracting eco-conscious investors.
Degrading Economic Activity:
- Potential Inflation: If businesses round up more often, as suggested by a 2017 Canadian study estimating a $2.5 million annual cost to grocery consumers, low-income cash users could face slight price increases, reducing their purchasing power.
- Nickel Production Costs: Increased nickel demand could lead to greater Mint losses, negating savings. In 2023, nickels cost $149 million to produce, and doubling production could exacerbate this deficit.
- Charity Disruptions: While digital donations are growing, some small charities reliant on penny drives may face short-term fundraising challenges, potentially reducing community support programs.
Conclusion
Discontinuing the USD penny is a pragmatic decision driven by its high production costs, negligible economic worth, and declining use in an increasingly cashless economy. The evidence suggests that elimination would yield modest savings, streamline transactions, and reduce environmental impact, with minimal disruption to consumers due to neutral rounding effects, as seen in Canada. However, concerns about low-income consumers, increased nickel costs, and cultural attachment warrant careful consideration. A public education campaign and a phased transition, similar to Canada’s, could mitigate these issues. As the U.S. moves toward a digital economy, the penny’s discontinuation could mark a step toward modernizing currency, potentially paving the way for broader reforms, such as reevaluating the nickel or exploring a digital dollar.
Note this article is based on research and analysis by author, James Dean.