Instructed by President Donald Trump, the US Treasury was urged to cease penny production due to burgeoning costs—each penny now demanding 3.7 cents, a reality that’s prompting reevaluations of coinage economics in the United States.
The cost associated with producing pennies and nickels in the United States has been exceeding their face value for the 19th consecutive year, according to the US Mint. This ongoing discrepancy has compelled the US Treasury to reduce production of these coins progressively over recent years. As of 2024, the cost to manufacture a penny has climbed to 3.7 cents, while a nickel is even more costly.
The primary factors contributing to the increased costs are the rising prices of copper and zinc. These metals are essential components in coin production, and their price hikes have consequently affected all levels of minting, with the quarter, for instance, experiencing a 26% increase in production costs from the previous year, and the penny a 20% increase.
The former President highlighted these soaring costs in a recent statement, noting the financial inefficiency of continuing to mint pennies. He pointed out that the production and distribution costs ‘literally cost us more than 2 cents,’ emphasizing the need for a policy change. Experts warn, however, that eliminating the penny could lead to increased reliance on nickels, potentially amplifying the financial strain due to their even higher production costs.
While the idea of removing the penny from circulation is not new, its impact on the financial dynamics of the US Treasury needs careful consideration. Replacing the gap left by the penny with more nickels could further aggravate the losses as the cost of producing a nickel far exceeds its worth.
The economic validity of continuing penny production is under scrutiny, as the cost continues to dwarf the face value. Balancing the metal market fluctuations with currency production remains a challenging task for the US Treasury. As decisions loom on whether to eliminate the penny, the potential consequences on nickel production pose additional challenges.
