President Donald Trump said he directed the U.S. Treasury Department to stop manufacturing pennies, citing rising costs.
“For far too long the United States has minted pennies which literally cost us more than 2 cents,” the president said in a Feb. 9 post on Truth Social, announcing the new policy. “This is so wasteful!”
It is true. In its 2024 annual report, the U.S. Mint said it spent $0.0369 to produce one penny, making its production cost more than three times its value. (The nickel is also more expensive to mint relative to its value, costing $0.1378 per piece.)
But, while it could save the government money, will phasing out one-cent coins — multiple billions of which are in circulation — boost prices for Americans?
It’s unlikely, two economists told McClatchy News.
Little impact on prices
“The policy is unlikely to have any negative impact on businesses or consumers,” Robert Whaples, an economics professor at Wake Forest University, told McClatchy News.
There are several factors to consider.
For one, cashless payments — made by a growing share of Americans —would not be affected at all, Whaples said.
In a 2022 Gallup poll, 73% of respondents said they made less than half of their purchases using cash, while 47% said the same when asked about their 2017 payments.
Secondly, when it comes to transactions conducted with bills and coins, prices will not always be rounded up.
“For cash transactions we would begin rounding to the nearest nickel,” Whaples said. “$1.99 is rounded to $2 and $2.01 is also rounded to $2.”
“Because the last digit of our cash-register totals is completely random,” he added — citing a paper he wrote in 2007 — “there will be as much rounding down as rounding up. Customers would not lose, on average.”
Oz Shy, a senior policy adviser and economist at the Federal Reserve Bank of Atlanta, echoed this sentiment.
He told McClatchy News that, in a paper published in 2023, his computations led to “the conclusion that eliminating the penny will not have meaningful inflationary consequences.”
Further, the U.S. would not be sailing into uncharted waters by scrapping the penny as it has been done before.
“Canada and European countries have eliminated their one-cent coins without problems,” Whaples said.
Canada stopped minting pennies in 2012, and 10 years later, a Canadian Mint retrospective found the removal campaign had been “successful.”
Eliminating the penny from U.S. circulation could even have some benefits for consumers and businesses, economists said.
Shy’s paper found that removing the one-cent coin would “reduce the burden of dealing with small change.” Similarly, Whaples’ paper concluded that going penniless “will save time for customers and clerks, which may be worth about $730 million per year.”
With all that said, it’s unclear whether Trump has the authority to unilaterally stop the production of pennies, given that Congress is tasked with authorizing “every coin” that is produced, according to the U.S. Mint.
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