Elon Musk has become infamous for the drastic cost-cutting (and sometimes regret) at his companies in recent years. Now at the helm of the Department of Government Efficiency, a commission to slash $500 billion in federal spending created by President Donald Trump, Musk has set his gaze on the humblest member of our currency: the penny.
Why is DOGE suddenly picking on the penny? DOGE revealed it was targeting the penny in a recent post on X. The commission has been using the social media platform, also owned by Musk, to call out what it considers to be unreasonable spending by the government. In this case, what irked DOGE was obvious: The penny cost a lot more to make than it’s actually worth.
“The penny costs over 3 cents to make and cost US taxpayers over $179 million in FY2023,” DOGE said. “The Mint produced over 4.5 billion pennies in FY2023, around 40% of the 11.4 billion coins for circulation produced.”
People have been talking about getting rid of the penny for a long time. While it may come as a surprise, DOGE isn’t alone in its desire to get rid of the penny. People in and outside of government have been talking about axing the currency for decades.
“Americans revere the penny, as it encapsulates a history lesson – Lincoln brought freedom to so many – and a civics lesson all in one,” Robert Whaples, an economics professor at Wake Forest University, wrote in an op-ed for CNN in 2012. “But increasingly, Americans have stopped using the penny, as we turn toward electronic payments and away from cash. Sadly, inevitably, like so many other beautiful, venerated historical objects, it appears that the penny now belongs in a museum.”
Most recently, the penny debate sprang up during the covid-19 pandemic in mid-2020. At that time, the U.S. was facing a nationwide shortage of coins because people were staying at home and avoiding using physical cash. This kept coins from recirculating back into the system and forced the U.S. Mint to increase its coin production.
Pros of getting rid of the penny. At a glance, the pros of getting rid of the penny are obvious. It would save taxpayers at least $179 million per year, which is what the U.S. Mint spent to produce and distribute pennies in fiscal year 2023.
Others say abolishing the penny could save something even more precious: time. Jeff Lenard, the vice president of strategic industry initiatives at the National Association of Convenience Stores, told CNN in an interview that 52 million in-cash transactions occur at convenience stores on a daily basis.
“If we save every one of these customers 2 seconds, that’s 104 million seconds or 1,203 days,” Lenard said. “And that doesn’t factor in time compounding — saving 2 seconds for the other people waiting in line before they get to pay. That’s some serious productivity.”
Cons of getting rid of the penny. Of course, not everyone is a penny hater. Penny advocates argue that abolishing the penny would effectively be a one cent tax on the public because many products include 99 cents in the price (for example: $4.99).
Others argue that the change could hurt businesses, which would have to modify their pricing policies, and poor consumers. Low-income consumers are more likely to use cash to pay for goods. Notably, experts have dismissed the concern that retiring the penny could harm consumers, stating that some prices would round up and others would round down—evening everything out.
Hey, Canada got rid of the penny. There are other countries, including Britain and Australia, that have successfully retired their one cent currencies. If you want a closer example, all you need to do is look at our neighbor to the north: Canada.
Canada withdrew pennies from circulation in 2012. That year, the Canadian government called the coin a “burden to the economy” and said withdrawing it would save it 11 million Canadian dollars per year.
“Given its declining purchasing value, some Canadians consider the penny more of a nuisance than a useful coin,” the government wrote. “We often store them in jars, throw them away in water fountains, or refuse them as change.”
In phasing out the penny, Canada asked retailers to round the price to the nearest five-cent increment.
Watch out, nickel. Given how the penny debate has stretched for decades, what’s different now? Two words: Elon Musk. The billionaire has a track record of getting things done that no one thought possible, though it’s important to note Musk has experience running private companies, not government.
At the end of the day, retiring the penny won’t be up to Musk, but rather up to Congress. We’ll have to wait and see whether Musk and Trump can convince them to get on board.
And should DOGE succeed in its effort to destroy the penny, there’s only one thing left to say: Watch out, nickel. While a single penny cost 3.69 cents to produce, a nickel was far more expensive: 13.78 cents.
Images | Adam Nir
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