Waste Watch: DOGE looks to pinch some pennies

Are pennies on the chopping block? It costs more than three cents to make the one-cent penny, and The Department of Government Efficiency (DOGE) has a bold idea: it may be time to coin a new era by eliminating the penny.

With inflation on the rise and the cost of production being more than three times the face value of the penny, DOGE looks to the beloved coin as a possible target in its hunt to slash government waste.

The penny costs over 3 cents to make and cost US taxpayers over $179 million in FY2023.

The Mint produced over 4.5 billion pennies in FY2023, around 40% of the 11.4 billion coins for circulation produced.

Penny (or 3 cents!) for your thoughts.

Sources:https://t.co/Y5LlrpyA62…

— Department of Government Efficiency (@DOGE) January 22, 2025

Others have also expressed their frustrations with the steep cost of minting coins in the US In a recent letter to DOGE, and its lead Elon Musk, Sen. Joni Ernst, R-IA, highlighted one of Washington’s largest expenses.

According to the US Treasury, the unit cost for both pennies and nickels remained above face value for the 18th consecutive fiscal year, with pennies costing around 3.07 cents to produce and nickels more than 11. The cost of supplies, materials, and overall production of the US coin has increased significantly since 2020. The average price of the primary metals in each coin (copper, nickel, and zinc) have increased each year, according to the Mint’s Biennial Report to Congress.

Through his influence, Musk has reignited the conversation about the relevance of the penny, and many are considering the pros and cons of its elimination. Those in favor of eliminating the penny argue it’s obsolete nature.

“Pennies don’t seem to be used in many transactions, they often just pile up in jars or in dresser drawers,” said Dr. Andy Taylor, professor of Political Science at NC State University.

Economists, policymakers, and financial experts have been debating the practicality of the penny for years. Dr. Robert Whaples, Professor of Economics at Wake Forest University, believes the elimination of the penny is “long overdue.” 

“The fundamental issue is this: pennies go in people’s pockets, and they don’t make their way back to stores,” said Whaples. “Then the stores run out of change and rely on the Mint to make more.”

Those who argue in favor of the penny worry about the broader economic impacts of its possible elimination. Many believe that eradicating the penny will result in prices being rounded upward to the nearest nickel.

“With many prices ending in 9’s, consumers worry that this would result in an item that is labeled as costing $1.99, for example, actually costing $2.04,” Whaples added.

Whaples conducted research on the possible effect that the elimination of the penny would have on consumers by collecting data of cash register totals across a multi-state convenience store chain. His conclusions were that the final digit of cash register totals are almost completely random due to multiple purchases and taxes. His research on convenience store prices showed that rounding to the nearest nickel had little to no effect on consumers – in fact, more cash totals were rounded down, rather than up, by a very small percentage.

Additionally, Whaples found that, not only would eliminating the penny barely affect prices of goods and store profits, but it will also save time in completing transactions.

“Handling pennies uses our time, which is worth about one cent every two seconds at the average American wage,” said Whaples. His research found that this may be worth about $730 million per year.

The US Mint has forged research and development of alternative metals, aiming to find “seamless” replacements – i.e. metals resulting in no recognizable difference to the public and limited negative impact on others involved in the process. In 2020, the Mint conducted research on five potential metal alternatives. One of these alternatives, known as the 80/20 Cupronickel, is ready for implementation pending congressional authority.

Legislation introduced in both the 116th and 117th Congress would grant this kind of authority to the Department of the Treasury. The 80/20 cupronickel is a more lean version of the existing 75/25 cupronickel alloy. This alternative metal would be seamless and would result in monumental savings (by an estimate of approximately $12 million per year) if used on the five-cent, ten-cent, and quarter dollar coins. One variation of C99750T-M – another alternative metal proposed by the US Mint – is estimated to save around $50 million per year if used on the five-cent, ten-cent, and quarter dollar coins.

Ernst proclaims in her letter that these hefty costs “make no cents,” especially when the US Mint has recommended Congress to approve their use of the 80/20 cupronickel. Additionally, the full production of the alternative C99750T-M would be ready as early as 2027 if approved by Congress.

The US Mint has requested a budget of $5.7 billion for FY 2025. If these alternative metals are approved by Congress, production cost savings could be significant. This seigniorage – the profit the Mint makes by selling coins at a price higher than their production cost – could be transferred back to the US Treasury’s General Fund.

Canada already eliminated the penny, stopping distribution of them in 2012 and directing that they could still be used in transactions indefinitely. The Canadian government also directed that purchases be rounded to the nearest five-cent increment when a penny was not available.

According to the Government Accounting Office, Congress would likely also have to act on the rounding of cash transactions.

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