Economist who evangelizes value of using cash says it might be time to retire the penny

(TNND) — President Donald Trump said his order to stop the production of pennies is meant to address waste in the federal government, "even if it's a penny at a time."

Trump made the declaration via social media last weekend after his Department of Government Efficiency cost-cutting task force raised similar questions about the value of producing pennies.

“For far too long the United States has minted pennies which literally cost us more than 2 cents,” Trump said via Truth Social on Sunday. “This is so wasteful! I have instructed my Secretary of the US Treasury to stop producing new pennies. Let's rip the waste out of our great nations budget, even if it's a penny at a time.”

Each penny actually costs 3.69 cents to make, according to the U.S. Mint.

And the government lost $85 million on pennies last year.

The cost to produce nickels also exceeds their face value. The mint said each nickel costs 13.78 cents to make.

The government lost about $18 million on nickels last year.

There’s been no official word from the White House, Treasury or Mint about Trump’s plan to stop making pennies.

But it may be time to say goodbye to pennies.

Even an economist who has championed the value of using cash, and the need for pennies, said it may finally be time to get rid of the lowly coin.

“Pennies’ days are ... numbered, primarily because inflation has gone up so much in the past few years,” said Jay Zagorsky, a professor with the Questrom School of Business at Boston University. “The penny is pretty much worthless.”

Zagorsky has a book coming out this spring that advocates for the use of cash, saying it’s good for individuals and society.

Credit cards and other forms of electronic payments cost the consumer more in transaction fees, he said.

Cash offers more privacy.

Cash is useful for people who can’t qualify for credit cards.

Zagorsky said cash works even if there’s a computer hack, power outage or natural disaster.

“I'm a pretty big advocate for cash. Yes, I understand that the need for the penny has disappeared, and it's OK to retire it. But if we're going to retire it, let's do it the way Congress, or at least the Constitution, suggests. That Congress passes a bill,” Zagorsky said.

Congress was given the constitutional right to coin money, not the executive branch.

When the U.S. got rid of the half penny in 1857, Congress passed a bill.

“By saying let's stop making the penny, you're getting rid of the supply,” Zagorsky said. “But there's no getting rid of the demand.”

Trump can’t unilaterally stop the penny from being legal tender.

Zagorsky said if Trump wants to stop minting pennies, he should work with Congress to pass a law that would officially remove the penny as legal tender and would include rules that merchants would use to round cash payments to the nearest nickel.

Zagorsky said the penny’s popularity has been falling, and that’s naturally taking it out of society.

He said over 13 billion pennies were minted in 1994.

Last year, just over 3 billion pennies were minted.

Trump has also moved in recent days to end the use of paper straws and to reverse former President Joe Biden’s appliance efficiency standards.

Peter Loge, the director of the School of Media and Public Affairs at George Washington University, said “the show” is the common theme in all those actions from Trump.

“Trump can unilaterally say I'm getting rid of wasteful things, certainly with the penny,” Loge said. “The penny has its fans. It's expensive. Pennies have a lobbyist in D.C., who's also the lobbyist for the zinc industry, which is what pennies are largely made out of. The straws and the appliances have clear policy impacts. But also, they're a way of demonstrating to the American people, ‘I'm standing up to those liberal Democratic insiders who think they know better than you do.’ It will have policy implications, certainly. Especially appliance standards will have serious policy implications. But the policy implications matter less than the symbolism.”

But what will happen to prices at the store if the penny goes away?

Zagorsky said not much should happen.

Electronic transactions, such as credit card charges, would still be denominated in pennies, he said.

And he thinks rounding up or rounding down should even out for cash users.

Even though the government also loses money on making nickels, Zagorsky doesn’t want to see those also go away.

“From a psychological point of view, the more types of coins we start pulling out of existence, the harder it is for people to see the value of cash,” he said.