Why DOGE Should Leave the Penny Alone
It’s been reported that Elon Musk’s Department of Government Efficiency (DOGE) is looking at changing money forever. Musk’s plan? Kill the penny.
Killing the penny is a popular idea, and it sounds like a no-brainer when you look at some of the details. After all, when was the last time you actually used a penny? For most people, it’s rare. Hardly anyone carries change anymore. It seems like pennies don’t have much upside.
The downside of pennies also seems clear. According to the US Mint, producing one penny costs 2.72¢. In other words, the government loses money when it mints pennies. According to The Hill, 3.23 billion pennies were minted in 2024. Since 1.72¢ is lost per penny minted, that comes to a $56 million loss minting pennies.
This seems like low-hanging fruit for a money-saving organization like DOGE. However, I think getting rid of the penny would be a mistake.
Why would I defend the penny? Because I don’t want the government to get rid of cash.
The last time the government stopped minting a coin was the half-penny in 1857. The US government and its officials aren’t used to halting production of coins, and the American public isn’t used to it either.
If our politicians and bureaucrats start taking coins out of circulation, they’ll build up knowledge and experience about the process. Economists call investment knowledge and skills that help improve future productivity in doing a task human capital.
I don’t want bureaucrats building human capital in removing coins from circulation because this same knowledge and experience could be used to remove cash more generally.
After all, many of the arguments against the penny could apply to the nickel or dime. When was the last time you really needed a dime? And if you’re removing those, it may be time to consider doing away with change in general.
You can see how this process could continue. Note, I’m not claiming that once you stop minting pennies, a cashless society becomes inevitable. It just becomes cheaper to go cashless once we build the capital necessary to do away with particular forms of cash. Some slopes are slippery.
Some argue that a cashless society is inevitable and that it would be a good thing. You can already see society moving in that direction. In some cities, there are already restaurants that don’t accept cash payments. What percentage of your weekly transactions use cash?
But why would a cashless society be a problem? The biggest issue is that it would be easier for Uncle Sam to invade our privacy.
In a cashless world, every financial transaction you make is tied to your name. Any government agency with an ill-gotten warrant could scrutinize every payment you’ve made or received.
The bigger fear is that the government may someday “replace” cash in the form of government digital cash. The Trump administration has come out against Central Bank Digital Currencies (CBDCs), but there’s no telling how future administrations will feel about it. In that case, the warrant point will be moot. The government will simply have access to every transaction you make outside of farmer’s market bartering.
Ultimately, I’m not opposed to the idea of trying to minimize waste in minting pennies, either by slowing down production or making the underlying chemical formula even cheaper (something that has already happened in 1982). However, I prefer we hold off on taking “useless” forms of cash out of our system. There’s no shortage of experts who think we could do without cash as a whole, and making it more difficult for them is more important than making the mint slightly more economical.
Long live the penny.
This piece originally was published by the Foundation for Economic Education.