Eliminating the penny leads to a fresh issue: abundance of nickels
"Listen, bud, Trump's rant about the pennies was on point, but he could've gone harder on the cost. It's not just 2 cents, it's over 3 cents per penny! But wait, there's a catch. Eliminating the penny might lead to an increase in nickel production, and that could be costlier.
American for Common Cents, a pro-penny group, argued that doing away with pennies would mean more nickels in circulation, amplifying the financial burden. They mentioned that each penny costs 3.7 cents to make, including production and distribution costs, while each nickel clocks in at 13.8 cents.
During the last fiscal year, the Mint cut nickel production by 86% to save money, but they minted over 5.4 billion pennies. Eliminating pennies would require making more nickels, possibly up to 2.5 million a year, according to Mark Weller of Americans for Common Cents. This could wipe out the savings and even cost more in the long run.
However, there's a case for getting rid of pennies. The National Association of Convenience Stores agrees that it could speed up transactions. Without the penny, cash transactions would be rounded to the nearest nickel. But to completely stop using pennies already in circulation would require an act of Congress, and buying back the pennies turned out to be expensive in Canada.
In Canada, they stopped minting pennies in 2012 and stopped using them in 2013. Yet, few places accept pennies today. Many are stashed away, fallen on the ground, or left behind in coin trays. Greg Mankiw, an economics professor, said a monetary unit that's left behind for the next customer is too small to be useful."
[1] Source: U.S. Mint 2024 annual report.
The ongoing debate about eliminating the penny in the U.S. involves discussions about the potential increase in nickel production, as noted by Americans for Common Cents. This could lead to increased costs, as each nickel costs more than a penny to produce.
Additionally, the Mint's decision to reduce nickel production by 86% last year shows their efforts to save money, yet the potential need to produce more nickels if pennies are eliminated could wipe out these savings.
