Trump's Penny Pledge: A Costly Coin or Cost-Saving Measure?

The Trump administration has sparked a conversation about the future of the penny, with President Trump directing the Treasury to stop minting new pennies, calling the coin "wasteful." This move has raised questions about the economic impact of discontinuing penny production and the potential benefits for consumers and businesses.

According to the U.S. Mint, it costs more than 3 cents to produce a single penny, significantly more than its face value. In 2023, the cost to produce a penny was about 3.7 cents each (Source: U.S. Mint's annual report). This means that for every penny produced, the U.S. Treasury incurs a loss of approximately 2.7 cents (3.7 cents - 1 cent). If penny production is discontinued, the U.S. Treasury could potentially save a significant amount of money. In 2023, the U.S. Mint shipped 4.1 billion pennies for circulation (Source: U.S. Mint). If we assume that the cost to produce each penny remains at 3.7 cents, then the total cost to produce these pennies would be approximately $151.7 billion (4.1 billion pennies * 3.7 cents/penny). If penny production is discontinued, the U.S. Treasury could save this amount annually.

However, it is important to note that the actual savings would depend on the future cost of producing pennies and the number of pennies produced each year. Additionally, any savings from discontinuing penny production would need to be weighed against the potential impacts on consumers, businesses, and the economy as a whole.

If pennies were to be phased out, there could be potential impacts on consumers and businesses. However, these effects can be mitigated through alternative rounding practices or other measures. Here are some potential impacts and ways to address them:

1. Increased Prices for Consumers:
- *Impact:* Without pennies, prices ending in 99 cents would be rounded up to the nearest nickel, potentially increasing consumer costs.
- *Mitigation:* Businesses can adopt a "rounding tax" approach, where prices are rounded to the nearest nickel for cash transactions, but remain at the cent level for electronic transactions. This ensures that consumers are not disproportionately affected by the removal of pennies.
- *Example:* In Canada, after phasing out the penny, merchants started rounding to the nearest five cents for cash transactions, but prices remained set down to the cent for electronic transactions (Whaples, 2023).

2. Disproportionate Impact on Lower-Income Households:
- *Impact:* Lower-income individuals, who rely more on cash transactions, might be disproportionately affected by price increases.
- *Mitigation:* To mitigate this, businesses can adopt a "rounding down" approach for transactions ending in 1 or 6, and "rounding up" for transactions ending in 4 or 9. This ensures that the overall impact on consumers is minimal.
- *Example:* A 2006 study by Robert Whaples found that rounding would have virtually no effect on consumer prices, as some transactions would be rounded up, and others rounded down (Whaples, 2006).

3. Reduced Availability of Spare Change for Charities:
- *Impact:* Charities may receive less spare change if pennies are phased out.
- *Mitigation:* Businesses can encourage customers to donate their spare change to charities by providing donation boxes or rounding up transactions to the nearest dollar and donating the difference.
- *Example:* Some businesses already offer customers the option to round up their transactions to the nearest dollar, with the difference going to a designated charity (e.g., No Kid Hungry, Habitat for Humanity).

4. Increased Efficiency for Businesses:
- *Impact:* Businesses may experience increased efficiency by not having to deal with pennies.
- *Mitigation:* Businesses can invest the savings from not handling pennies into improving customer service, expanding product offerings, or reducing prices for consumers.
- *Example:* In Canada, after phasing out the penny, businesses reported increased efficiency and reduced costs associated with handling coins (Canadian Government, 2013).

By implementing these alternative rounding practices and other measures, the potential impacts on consumers and businesses can be mitigated, making the transition to a penny-free environment more manageable.

In conclusion, the Trump administration's decision to stop minting new pennies has sparked a conversation about the economic impact of discontinuing penny production. While there are potential savings for the U.S. Treasury, it is important to weigh these against the potential impacts on consumers, businesses, and the economy as a whole. By implementing alternative rounding practices and other measures, the potential impacts on consumers and businesses can be mitigated, making the transition to a penny-free environment more manageable.