the staff of the Ridgewood blog
Ridgewood NJ, for years, economists and government officials have debated whether to eliminate the penny, citing its high production cost and minimal economic impact. Over the weekend, President Donald Trump made it official, ordering the U.S. Treasury to stop minting new pennies.
“For far too long, the United States has minted pennies that literally cost us more than two cents. This is so wasteful!” Trump wrote on Truth Social.
Why Is the Penny Being Phased Out?
The U.S. Mint spends approximately $192 million per year producing pennies—4% of its budget. However, pennies make up just 0.006% of the money in circulation, making them an inefficient expense.
Economists have long argued that the cost of producing a penny exceeds its actual value. David Gulley, an economics professor at Bentley University, explained that the Mint must continuously replace lost pennies, many of which end up under couch cushions rather than in circulation.
How Will Eliminating the Penny Affect Prices?
Without the penny, businesses will have to round transactions to the nearest five cents when handling cash payments.
- Fast food combo meals priced at $6.99? Gone.
- Items priced at $4.97? Expect them to round up or down.
David Smith, an economist at Pepperdine University, noted that price rounding could cause slight inflation, as businesses may round up more often than down. However, studies show the overall impact on inflation will be minimal.
Canada’s Example: A Smooth Transition
Canada eliminated its penny in 2013, rounding total transactions instead of individual item prices. A 2017 study found that this shift cost consumers about $3.27 million per year, but it only added about $157 per grocery store in extra revenue, showing little impact on consumers.
Who Will Feel the Impact the Most?
While most Americans rely on debit, credit, or digital payments, a declining percentage of the population still uses cash.
- In 2015, cash was used for 33% of transactions.
- Today, it’s less than 20% and dropping.
Those without bank accounts or access to digital payment options will be the most affected, as they’ll lose the ability to make exact change.
“The individuals paying for this benefit will be those who use cash exclusively,” said Ajay Patel, a finance professor at Wake Forest University.
Will Pennies Become Valuable?
Since Trump’s order only halts production rather than banning the use of pennies, they’ll remain in circulation for years.
“Pennies will become more scarce over time and eventually increase in value,” said Gates Little, CEO of Southern Bank.
Some Americans are already saving their pennies, hoping they might increase in worth—especially older coins like wheat pennies, discontinued in 1958.
What’s Next? The Nickel May Be in Trouble
While the penny’s days are numbered, some economists warn that the nickel is next.
“It takes three cents to make a penny, but 11 cents to make a nickel,” said Nate Throckmorton, an economist at William & Mary.
Could the nickel be the next coin to disappear? If production costs remain high, the answer could be yes.
Final Thoughts: A Penny-Free Future?
With Trump and Elon Musk’s Department of Government Efficiency (DOGE) pushing cost-cutting measures, the penny’s elimination is just one step toward streamlining U.S. currency.
While some Americans joke about how they’ll give their two cents, others recognize the financial and environmental benefits of retiring the coin.
A penny for your thoughts?
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