U.S. Treasury to Phase Out Penny Production for Cost Savings

U.S. Treasury Ends Penny Production Amid Rising Costs

The United States Treasury Department has officially announced plans to discontinue the production of new pennies, marking a significant shift in American currency history. This decision, driven by the rising costs of manufacturing the one-cent coin, is expected to save taxpayers $56 million annually. The announcement follows President Donald Trump’s earlier directive in February, where he criticized the continued production of pennies as wasteful.

Why the Penny is Being Phased Out

Each penny currently costs nearly 4 cents to produce, a figure that has more than doubled over the past decade due to increased material and production costs. The coin, made of 97.5% zinc and 2.5% copper, requires a costly smelting process. Despite its historical significance, the penny has become economically inefficient. According to the U.S. Mint, the government lost $85.3 million on penny production in fiscal year 2024 alone.

The move mirrors decisions made by other countries like Canada, New Zealand, and Australia, which have already eliminated their one-cent coins. The U.S. Mint stated that the final order for penny blanks has been placed, and production will cease once the current inventory is exhausted.

Implications for Consumers and Businesses

While pennies will remain legal tender, their absence from circulation may lead to minor adjustments in cash transactions. Businesses will likely adopt rounding practices, rounding prices to the nearest nickel. However, the growing prevalence of digital payments, which account for over 80% of transactions according to the Federal Reserve Bank of Boston, minimizes the impact of this change.

Convenience stores and other cash-heavy businesses have expressed support for the move, citing potential improvements in transaction efficiency. Jeff Lenard, a spokesman for the National Association of Convenience Stores, noted that even a small reduction in transaction time could benefit both customers and businesses.

Historical Context and Public Reaction

The penny has been a staple of American currency since 1792, with Abraham Lincoln’s portrait gracing the coin for 116 years. Over time, however, its utility has diminished, with many pennies ending up in jars, drawers, or forgotten in pockets. Despite its declining usage, the penny holds sentimental value for some Americans, particularly in charity drives and cultural traditions.

Critics of the phase-out argue that eliminating the penny could increase demand for nickels, which are also costly to produce. Each nickel currently costs about 14 cents to mint, raising concerns about whether the savings from halting penny production will be offset by increased nickel manufacturing.

Legal Authority and Legislative Efforts

Although Congress typically oversees changes to U.S. currency, Treasury Secretary Scott Bessent has the authority to discontinue penny production under existing federal statutes. Legal experts, such as Laurence H. Tribe of Harvard Law School, have confirmed the legality of this decision. However, some lawmakers have introduced bipartisan bills, such as the Make Sense Not Cents Act and the Common Cents Act, to formalize the penny’s retirement through legislation.

The decision has sparked mixed reactions. Advocates for the penny argue that its elimination could lead to unintended economic consequences, while supporters of the phase-out see it as a practical step toward reducing government waste.

The end of penny production marks a historic change in U.S. currency, reflecting both economic realities and shifting consumer behaviors. As the Treasury moves forward with this decision, the debate over its implications will likely continue, highlighting the balance between tradition and progress.

Source: Npr, Abcnews, Wbaltv, Apnews