The Penny Problem: Why Does the Mint Keep Making a Coin That Costs More Than It's Worth?

From daylight saving time to diversity, equity, and inclusion programs, there are various aspects of the federal government that the Department of Government Efficiency (DOGE) and its head, Elon Musk, have targeted in order to cut spending.

The Department of Government Efficiency (DOGE), headed by Elon Musk, has set its sights on cutting federal spending through various initiatives. One aspect that has come under scrutiny is the continued production of the penny, which costs more to make than its face value.

According to DOGE, the penny incurs a production cost that exceeds three pennies, resulting in a loss of over $179 million in taxpayer funds by 2023. This loss is attributed to the high volume of pennies being minted, with the U.S. Mint reporting that pennies constituted more than half of the circulating coin shipments from the Federal Reserve Bank in 2024.

Despite the increasing shift towards cashless transactions, pennies remain in high demand, especially for providing exact change in cash transactions. Experts highlight the impracticality of eliminating pennies, as it would necessitate rounding up or down purchases to the nearest five cents, potentially impacting those who rely heavily on cash and coins.

Canada faced a similar dilemma and ultimately decided to round cash purchases to the nearest nickel in the early 2010s. However, making changes to U.S. currency is a complex process.

The Constitution grants Congress the authority to regulate the Federal Reserve and oversee monetary matters. According to Ed Moy, the 38th director of the U.S. Mint, obtaining approval for changes in monetary policy is challenging, partly due to the Mint's role in generating revenue.

“Even though you're losing $80 million a year on one single product line, $80 million is a pittance compared to a $4 trillion budget,” Moy explained in a 2022 discussion on the penny. He further noted that losses incurred on the penny are offset by profits from other coins, such as the quarter and dollar coin.

“Every company has a couple loss leaders or products that they're not happy with, but overall, as long as the company is profitable, which the Mint is, you want to change that, but there's no urgency to change that.”

Moy also mentioned the involvement of lobbyists representing industries connected to penny production, such as those involved in zinc manufacturing.

Over the years, Congress has attempted to address the penny issue. In 2020, bipartisan bills were introduced in the House and Senate to grant the Mint the ability to adjust the composition of circulating coins and reduce production costs, as explained by the Federal Reserve Bank of Richmond. However, these bills failed to pass.

Similar bills were introduced in 2023 but faced the same fate.

“It's hard to think of a product, of any kind, in America that is as ubiquitous as the penny and as disposable as the penny,” said Philip Diehl, the 35th director of the U.S. Mint.

One potential solution to the penny problem is to encourage people to actually spend their pennies. According to a 2024 article in The New York Times Magazine, an estimated 240 billion pennies are awaiting use in the U.S. If these pennies aren't being recirculated, the Federal Reserve is forced to order more pennies, many of which will likely remain unspent.

However, officials from the Federal Reserve have cautioned against drastically reducing or eliminating penny production, like Canada did, as it could lead to a “significant flowback of coin from consumers and businesses seeking to turn in their pennies,” according to a 2022 report.

The same report suggests that reducing penny production could save the Mint up to $100 million annually, which is less than 1% of the $2 trillion in cuts that Musk claimed DOGE could achieve in a “best-case outcome.”

It remains to be seen whether DOGE will prioritize the penny in its cost-cutting endeavors. Musk has previously likened the federal government to a “room full of targets” that can be hit to save money.