Billionaire Elon Musk and his Department of Government Efficiency (DOGE) have turned their attention to the U.S. penny, highlighting its high production cost as an example of wasteful federal spending. In a Tuesday post on X, DOGE revealed that it costs the U.S. over 3 cents to mint each penny, which holds a face value of just 1 cent.
“The penny costs over 3 cents to make and cost U.S. taxpayers over $179 million in FY2023,” DOGE stated. “The Mint produced over 4.5 billion pennies in FY2023, accounting for 40% of the 11.4 billion coins made for circulation.”
The rising cost of penny production is not new, but it has intensified in recent years. In 2016, the U.S. spent about 1.5 cents per penny, less than half the current cost. With zinc and copper prices surging, the penny’s cost has ballooned, sparking renewed debate about its necessity. Still, the $179 million spent on pennies is a small fraction of DOGE’s broader goal to slash $500 billion in annual federal spending.
The penny debate: Rising costs and potential savings
The U.S. Mint’s 2024 annual report shows that producing and distributing a single penny now costs about 3.7 cents. Pennies are primarily made of zinc, with a copper coating that gives them their iconic appearance. Over the past several years, zinc prices have more than doubled, driving up manufacturing costs.
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While the idea of eliminating the penny has been floated before, it has faced resistance. Former Treasury Secretary Jacob Lew advocated for suspending the penny in 2015, and some economists have called for the coin’s removal from circulation. However, critics warn that ditching the penny could create its own problems. A 2020 blog post by the Federal Reserve Bank of Richmond noted that eliminating the penny would likely lead to rounding transactions to the nearest five cents, which could disproportionately affect consumers making smaller purchases. For example, a single-item purchase could see a noticeable price increase due to rounding.
Other countries, like Canada, have already removed their smallest coins. In 2012, Canada stopped minting its one-cent coin, but a 2018 analysis found that Canadian consumers paid an additional $3.27 million annually at grocery stores due to price rounding. While Canada’s experience offers a cautionary tale, proponents of eliminating the penny argue that counting and handling the coin is an inefficient use of time and resources.
Beyond the penny: Broader goals for government efficiency
DOGE, created by an executive order signed by President Donald Trump, has a broader mission than just penny elimination. Tasked with streamlining federal agencies, cutting wasteful expenditures, and upgrading government IT systems, the organization is aiming for massive savings across various sectors. However, the penny is a symbolic starting point in the broader fight against inefficiency.
Interestingly, the penny isn’t the only coin costing more to produce than it’s worth. The U.S. Mint reported that it spends about 14 cents to mint and distribute a single nickel, making it even more expensive in relative terms. Critics argue that if the government is serious about cutting costs, it should also reevaluate the production of nickels and other coins.
While DOGE co-leader Vivek Ramaswamy recently announced his departure to run for Ohio governor, Musk has reaffirmed his commitment to the organization’s goals. Whether the penny is eliminated or remains in circulation, DOGE’s efforts to tackle inefficiencies could signal broader changes to federal spending in the coming years.
