Against Common Cents

T he Department of Government Efficiency, the new cost-cutting advisory body run by Elon Musk, is already signaling what kind of reforms it may propose.

Its first suggestion is a small but valuable one: get rid of the penny. There are 240 billion pennies lying around the United States — nearly one out of every two coins minted in the U.S. has a face value of just one cent. They sit in coin jars in homes, slip between couch cushions, and litter our streets. The relentless creep of inflation has made the penny effectively worthless, and it’s time to stop its proliferation. Every penny now costs 3.7 cents to make and distribute. That’s an increase of more than 20 percent from last year, largely due to the rising cost of metals, including zinc and copper.

All we have to do, in this case, is emulate neighboring Canada, which got rid of its penny for cash transactions over a decade ago. Payments by credit card, mobile phone, or check are still calculated to the cent. But in cash payments, prices are rounded to the nearest nickel, either up or down. That was also how it was done in New Zealand and Australia when they ditched their one-cent coins: As I’ve previously written, despite some public fears, there was no uptick in inflation. An analysis of transactions at convenience stores found that rounding up or down worked out in customers’ favor about as often as it didn’t.

A growing number of observers are concluding that the penny is too picayune to bother with, as I wrote in 2012. After surveying a slew of federal officials, a New York Times story last year concluded: “Few things symbolize our national dysfunction more than the inability to stop minting this worthless currency.” Some experts say eliminating the penny would help store clerks and cashiers. Harvard professor N. Gregory Mankiw, a former chairman of President George W. Bush’s Council of Economic Advisers, told me back in 2012 that doing away with the penny would be the right call.

Every cause has a lobby, however, and so does the lowly cent. A small private Tennessee company called Artazn holds contracts with the Treasury Department to manufacture the zinc “blanks” that the Mint stamps on the penny. “These contracts have earned it more than $1 billion in revenue since 2008 alone,” reports the Times. But its claims in favor of the penny don’t make sense — getting rid of it wouldn’t cause inflation, and charities no longer use pennies as part of their fundraising appeals.

Moreover, if we’re going to get rid of the lowly penny, why not aim higher? The U.S. Mint’s 2024 annual report noted that it spends “about 14 cents to make and distribute each nickel.”

It’s apparently a myth that Congress has to pass a law to put the penny — or even the nickel — out of our misery. Title 31 of the U.S. Code gives the secretary of the treasury the power to issue coins “in amounts the Secretary decides are necessary to meet the needs of the United States.” When it comes to the penny, that amount could be zero, so its issuance could stop any time a treasury secretary wished.

So many people have given up using cash these days. A Federal Reserve Board study found that the share of cash payments fell from 31 percent to 16 percent between 2017 and 2023. If we were to get rid of the penny, and even the nickel, therefore, most people would barely notice.

In this case, it makes sense to strike a blow against common cents.