No one wants one. People will walk past a penny lying on the street, a real-life demonstration of just how worthless it is for most of us. For many, it’s also a perfect example of governmental inefficiency since it’s widely known that the cost to produce each one is higher than the actual value of the penny itself. It is estimated that the U.S. government loses 2.7 cents on every penny it mints. If they stopped making them, it would save about $85 million a year. Sounds great.
Unfortunately, there are some side effects. If we all stopped using pennies, cash transactions would be rounded to the nearest five and usage of the nickel would probably increase. That’s the bad news, since the government actually loses 8.8 cents on every nickel it produces. If there were no pennies, the increased demand could lose the government well over $100 million, canceling out any savings from eliminating the penny.
If you eliminated both the penny and the nickel, that could work but then you’d only really have two coins in wide circulation—dimes and quarters … and based on inflation both of those are likely to be money losers within the next 10 years too. So maybe we should just stop using coins or move more quickly to digital currency, but even that requires a societal change that typically takes generations to happen.
So what should we do here? In response to President Trump declaring the US would stop producing pennies, The NY Times laid out all the options presented above and ultimately came to this conclusion—”studies have estimated that over $100 billion of income goes unreported each year because of cash transactions, amounting to tens of billions in lost tax revenue. If eliminating coins led to even a modest decrease in untraceable transactions, the effects could be far greater than the profits or losses of the U.S. Mint.”
