A Farewell to an American Icon: The Penny

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1:52It's July 4th, Independence Day in the U.S. And to mark the holiday, we're taking a look at a financial staple that's as fundamental to the story of America as apple pie, Betsy Ross, and good old-fashioned capitalism. The penny. Penny collectors beware.

2:12Steven Dennis:The U.S. Mint is killing the penny. The penny has been around basically since the start of the republic. We were minting cents even before the Constitution was ratified. Bloomberg reporter Stephen Dennis has been following the one-cent coin with interest since he first started covering Congress about 20 years ago. It really does feel like this time around, the penny is actually going to disappear. In May, the Treasury Department made its final order of penny blanks, the unmarked metal discs that get minted with Lincoln's head to become a unit of currency. And after it mints that final batch, the Treasury is going to stop making new pennies.

2:55The move came after President Donald Trump ordered his administration to ditch them during this year's Super Bowl. Second quarter in a 10-0 game, Patrick Mahomes trying to make a play.

3:06Steven Dennis:And we had something to talk about in my household over the chips and salsa. Republicans and Democrats don't agree on much. But across the aisle, there's been a general consensus that the economics of making the cent don't make sense. Because these days, it costs more to produce a penny than the worth of the coin itself. One of the things that you see chronically in government is it's very hard to get rid of things that don't work so that we can then invest in the things that do. That's President Obama in a 2013 interview. And the penny ends up being, I think, a good metaphor for some of the larger problems that we've got.

3:49And here's President Trump in February. Thank you. The penny is gone. The penny is gone. Is the neighbor next? So how did we get here? And what does it mean that those little Abraham Lincolns in your basement coin jar will soon be a collector's item?

4:12I'm Sarah Holder, and this is The Big Take from Bloomberg News. Today on the show, we pay tribute to the humble penny. We look at its history, its symbolism, and what phasing it out could mean for the U.S. economy.

4:29When's the last time you used a penny? Really, think about it. Was it to make a wish in a fountain? Capitalize on some sidewalk good luck? Add to your growing coin collection?

4:42Steven Dennis:I don't recall the last time I've used a penny other than getting it off the floor and putting it in a jar. And I think that's true of a lot of people. Bloomberg's Stephen Dennis is something of a penny enthusiast. And even he acknowledges that very few of us are still using pennies for their intended purpose of buying stuff. In the last year or so, I think I've seen two or three people in the U.S. Senate cafeteria where I eat most days use pennies. And both of them were U.S. senators near the age of 80. Elder statesmen in Congress holding on to a relic of the past years after society has moved on.

5:24There's some irony there, for sure. But a few centuries ago, pennies weren't just wedged in the corner of people's wallets. They were everywhere.

5:33Steven Dennis:In 1793, the first penny as we've come to know it was minted by the U.S. Mint. And, you know, back then, a penny was a lot of money. In the early 20th century, you could send a letter for two pennies. In the 50s, a few pennies could buy you a newspaper. In the 60s, a penny could buy you a candy or a gumball. They were worth something. Older people especially grew up on the idea of a penny saved as a penny earned and never waste a penny. But we've dealt with so much inflation and it's now at the point where you can't buy anything with a penny. And it's not just the value of a penny that's gone down.

6:14The cost of making pennies has also gone up.

6:18Steven Dennis:For the last 20 years or so, it's cost more than a penny to make a penny. A penny right now costs about 3.7 cents for each one. That's in part because of the costs for a penny's ingredients. Today, copper and zinc. Over the years, there have been efforts to change the penny's shape or its metallic composition to bring down those costs. But copper especially is just getting more expensive because it's used in renewable energy projects and electric vehicle production. There are other overhead costs attributed to making the penny, too, like staffing the U.S. mints and keeping the electricity running.

6:59So for the U.S. Treasury, making pennies just doesn't pencil out. The department reported losing$85.3 million last year on penny production alone.

7:11Steven Dennis:Sort of a poster child for inefficiency, and it's arguably America's least useful product. Critics of penny production say it's especially inefficient because the individual coins often don't make their way back into the economy. Here's what I mean. Businesses are required to give customers exact change when they buy something in cash. But many customers don't actually use those pennies to buy anything after that. So businesses have to keep restocking those rolls of coins to make exact change, which means the Treasury has to keep minting more pennies. Stephen says that vicious penny supply-demand cycle helps explain why the Treasury Department has been minting billions of the increasingly unpopular coins every year, and why politicians have wanted to stop minting them altogether.

8:05Steven Dennis:It's lost its utility, frankly, a long time ago, to the point where even in 2001, the West Wing had part of an episode where they talked about trying to get rid of the penny and ran into resistance on Capitol Hill. He wants to abolish the penny? He doesn't want to abolish it as much as he wants to give his boss a reason why we can't. For a long time, Washington's real-life efforts to abolish the penny ran into fierce opposition, too. The first efforts to go after the penny date to, like, the 80s and 90s, when Arizona lawmakers were trying to get rid of the penny. And one of the things they wanted to replace it with was dollar coins.

8:47Steven Dennis:and dollar coins use a lot of copper and copper is mined in Arizona. So you had sort of like these regional interests in Congress fighting each other. And so one of the ideas was, well, if there were fewer pennies taking up space in your pockets, people might be more willing to use dollar coins and have the weight of the dollar coins in their pockets. That would lead to more copper being mind in Arizona, more jobs in Arizona. And so you could see how that would all have sort of coin versus coin politics. Coin versus coin politics. The dollar coin advocates facing off against the penny lobby. It's called Americans for Common Sense, where sense is spelled C-E-N-T-S.

9:35Steven Dennis:And it's funded primarily by the company Artisan, which makes billions of penny blanks every year out of zinc, primarily, in Tennessee. Big Penny, as Stephen calls it, has been fighting efforts to phase out the penny for decades. And it's not the only one. You've got Tennessee lawmakers trying to protect jobs. You also have mint workers in Denver and Philadelphia who want to keep their job. There are also Abraham Lincoln enthusiasts and everyday nostalgics who don't want to lose the penny, who think finding one is good luck, or who like getting them pressed as a memento at a museum, or who remember putting them in their piggy banks as kids.

10:23In other words, there were always people who'd be angry at lawmakers who took on the penny.

10:28Steven Dennis:You know, there's a phrase in Washington of, is the juice worth the squeeze? And for many lawmakers, the amount of money you could save on pennies, maybe$50 to$100 million a year, depending on the year, is not worth the pain of having people angry at you. All this helped the pennies stay alive for all these years. But cost-cutting in Washington won in the end. So what changed? The ball got rolling when Joni Ernst of Iowa, she is the chair of the Senate Doge Caucus, and she sent Elon Musk and his team a list of things that she thinks could be cut. Now, she didn't say, let's get rid of the penny, but she did say it's ridiculous that it costs now more than three pennies to make one.

11:19About two weeks before the Super Bowl, the official Doge account posted on X, highlighting those costs.

11:26Steven Dennis:And basically hinted that the penny should disappear. Then came game day, when Trump posted on Truth Social calling for an end to penny production. And that's all it took. In May, the Treasury placed its final order for penny blinks and said they'll run out in early 2026. So what does it mean for the average American that pennies are heading out of production? That's after the break.

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15:00Bloomberg's Stephen Dennis says the loss of the penny is mostly symbolic. But he says we could see businesses make some shifts.

15:08Steven Dennis:For the 84 % and rising percentage of transactions that are now digital, you wouldn't see any change. for the increasingly vanishingly small percentage of transactions that are done in cash, it would probably be rounded to the nearest nickel. Other countries like Canada have already gotten rid of their penny. An economist at the Atlanta Fed don't expect to see any significant inflationary consequences when the penny goes away in the U.S. But Stephen says, when you think about it, many of the transactions that do come down to a penny are more of a branding exercise than anything else. You know, I think a lot of retailers will go to 10.95 instead of rounding up to 11 because of that psychology.

15:52Steven Dennis:You know, you're trying to spur more sales. And if it has a 10 in front of it instead of 11, there's something in our brains that says lower, cheaper, better. To those that argue that getting rid of the penny sends the wrong message on inflation, that it says that our money is worth less. The thing is, is our money is worth less. And I think people know that, which is why they're not using pennies. So everyday Americans shouldn't worry that the penny's death spells higher costs. But will the change actually save the government any money? Maybe. The Treasury has predicted that stopping penny production will save the U.S.

16:31$56 million a year in costs. But there are some scenarios in which this move could cause added trouble and expense.

16:40Steven Dennis:John McCain, the late senator, tried to pause pennies for 10 years. We're not going to mint them for 10 years, he said, during the first Trump administration. And the research arm for Congress did a study. They asked the U.S. Mint, OK, well, what would happen if we if we just stopped minting pennies? And the mint was like, we would have a big problem. 240 billion pennies or so are sitting in people's basements. And if people thought that the penny was going away and they decided to return those 200 billion pennies to the government under fear that they wouldn't be able to cash them in in the future, the government would have to house all of these pennies and they don't have the storage facilities to handle that huge tsunami of coinage.

17:31Steven Dennis:and that could actually cost them a huge amount of money to get those storage facilities up and running for all these pennies. But Stephen says the idea that Americans are suddenly going to collect their pennies and return them to the government feels far-fetched. I don't think there's going to be some kind of like panic where everybody's like, I've got to get the coins in by such and such a date. And I had a little short conversation with Scott Besson in the hallway this year when I kind of pressed him. I'm like, so when are you going to actually get rid of the penny? You know, months had gone by.

18:06Steven Dennis:And he's like, we're working on it. And he also clarified, you know, we're not getting rid of it. We're just not going to make any more. And so it'll still be legal tender if you have those coins for a long time to come. You could still take them to a bank and they will presumably accept them. But it is possible that a lot of retailers will stop accepting them. And as cash transactions become rarer, the end of penny production raises questions about the value of other coins. Nickels, after all, cost about 14 cents to make. That's almost three times more than they're worth. And even without the penny, the U.S.

18:45Mint will keep paying for many of the same facilities, which come with their own costs.

18:50Steven Dennis:Those administrative expenses, a lot of them will stick around. You still have the buildings. You're going to still have overhead. You're just going to have a factory that's not running at full tilt anymore. And so the penny people believe that the cost of a nickel could go up to as much as 25 cents each. And so there's a good argument to get rid of nickels as well. But that's not what the nickel people want. For now, nickels are safe. and don't get too sentimental about the penny. If history offers any guide, it's possible that once the little guys are truly gone, we won't really miss them. This was before your time, but America used to have a half penny.

19:32It was discontinued in 1857.

19:35Steven Dennis:It cost more than half a penny. To make the half penny, we got rid of the half penny. Sound familiar?