By CoinWeek News Staff …..
While Elon Musk’s promised $2 trillion in government spending cuts will probably never materialize, one can’t reduce federal spending by a more realistic amount without counting pennies. According to a January 21 post on X from the Musk-led Department of Government Efficiency–DOGE for short–the venerable penny may find itself in the crosshairs.
It is no secret that the one-cent coin costs the United States Mint more to produce than its face value. The negative seigniorage on the coin amounts to billions of dollars in paper losses for the Treasury, though these are offset by the seigniorage of coins like the dime and quarter. According to DOGE, U.S. taxpayers paid over $179 million in Fiscal Year 2023 for the continued production of the cent, the composition of which was last changed over 40 years ago in 1982 to combat the rising costs of copper.
Advocates for the penny argue that the coin is necessary due to our tax policies and because it is used by millions of Americans – including the roughly 5% of households that are unbanked.
In a 2015 article published on CoinWeek, former Mint Director Philip N. Diehl wrote that the elimination of the penny was “long overdue” and the main reason the penny survives is because most of the coin’s production (outside of stamping the design and bagging it) has been outsourced to private industry.
Eliminating low-denomination coins is not just an issue in America; the elimination of the cent among the leading economic powers has been a touchy subject, as the production of these coins amounts to about 40% of the total output of the world’s leading mints.
Eliminating the Penny Not Far Enough?
But it’s not just whether or not the penny should be eliminated that needs to be considered. Coinage reform in the United States is long overdue.
Of the six circulating coin denominations the Mint produces, only four actually circulate. The Half Dollar has not circulated with regularity since the early 1960s, and the Dollar coin does not circulate because the public prefers the $1 bill. Even as financial transactions happen more frequently via electronic networks, coins still play an important role in the economy, and DOGE and Congress should work together to refresh America’s coins to make them great again.
One suggestion would be to phase out the cent and force consumers and businesses to round transactions to the nearest five cents. Congress should also look at redesigning the half dollar so that it is more practical for use in vending machines and phase out the $1 bill in favor of the dollar coin. Doing this could save the American people real money and preserve American coinage for future generations.
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IMO the Treasury should also increase production of a modernized $2 bill to short-circuit the very real issue of needing multiple dollar coins when making change. Every major country that’s successfully eliminated its $1 bill (or equivalent) also has a widely-used 2-unit denomination. When I’ve visited overseas it’s been rare to receive more than a single $1 / €1 coin in change.
Reinvigorating the $2 bill wouldn’t be a full solution to the $1 bill problem. However it would still cut the BEP’s printing load by about 20%-25% while providing an alternative for those who still want “foldin’ money” in their wallets.
The useless and wasteful cent has continued in production because Congre$$ loves that $weet, $weet campaign ca$h from the zinc refining industry, which runs an efficient lobbying operation on Capitol Hill.
Cancelling the $1 bill in favor of the $1 coin is a bad idea. Who wants to carry over $4.00+ in change if they spend a $5 bill. Australia has large denomination coins $1 and $2 and you end up carrying loads of change around with you. Ditch the penny, keep the $1 dollar bill.