Stop Making Cents: The End of the Penny

0:08So Oyan, I wonder if you could just say a few words about the dearly departed today. yeah Penny was small but mighty she inspired so many she touched so many she traveled so far I mean at one point she was in Mars but she's also found her way into our homes between our couch cushions you know two of her gave us permission to share our thoughts so she's really been with us many of us for our whole lives you know or generations even it's a it's a loss indeed how do you think the penny will be remembered maybe in our piggy banks or in the pockets of those jeans that we forgot to you know wash maybe in a washer or dryer somewhere, abandoned, a little dusted.

1:16Some fountains that have never been cleaned. At the bottom of some fountains. My colleague Oyen Adedoyan covers personal finance, and we're reminiscing on the penny because the Treasury has announced that after decades of debate, it's going to stop minting the one-cent coin, reminding us of that old adage, Change is constant, even for, well, change. Oyen, what is this story really about to you? The story is, interestingly, about the simple debate of practicality over sentimentality. The penny has gone from a symbol of freedom in some cases, frugality and hard work, to a sign of America's wastefulness.

2:05The penny is kind of like that baby blanket that you had as a kid that maybe, you know, a grandparent or someone got for you. And it's followed you around for decades. And now we're at the point where we're saying goodbye. Time to let it go. Exactly.

2:26Welcome to The Journal, our show about money, business and power. I'm Jessica Mendoza. It's Monday, June 2nd.

2:41Coming up on the show, saying goodbye to the penny.

3:00The penny has been around for over 200 years. It's almost as old as the United States itself. The penny was born out of the Coinage Act of 1792. And that act established the Philadelphia Mint, which is where pennies were made. And a little over a year after that, 11 ,000 pennies rolled their way into circulation. And they looked a lot different than what they look like today. They were a little bit larger. And they had a woman on the front. She's supposed to represent Lady Liberty. She had this windblown hair. And it was kind of the country's way of establishing itself from Great Britain. And it was pretty significant that we didn't have like a monarch or a leader on the penny at the time, you know, contrary to Great Britain.

3:51Right. What else could you do to sort of solidify your status as a nation than to say, like, hey, King George, we don't need your face on our coinage anymore. We have our own thing going. Yeah. And then, of course, in 1909, Abraham Lincoln started to appear on the penny. And I feel like that's the penny that we all know and love today. And, I mean, for a lot of people who love the penny, and I've had the pleasure of speaking with a lot of those people recently, they see it as this symbol of American history. For most of its history, the penny was made almost entirely of copper. But then, copper got more expensive.

4:32So in the 1980s, in an effort to cut production costs, the U.S. mint switched to zinc, which is cheaper, and then coated those pennies in copper. Regardless, the costs of making the penny kept rising. 2006 was really a turning point for the penny. 2006 was the first year that the Mint realized that the penny was costing more than it was worth to make. So the cost of the penny had officially surpassed one cent by that point. And especially in recent years, the cost of making a penny, you know, the materials that go into making it, that zinc, is rising. Last year, there was a 20 % rise in making the penny.

5:16These days, the government spends almost four cents to make just one penny. And last year, the Mint lost$85 million on the pennies that it produced. And all of this for a coin that, like, as we were saying earlier, winds up in places that aren't transactional at all, like fountains and jean pockets, right? Jess, I couldn't believe in the idea that people were just throwing away coins, but I actually went to a waste management facility for a story where they were trying to recycle the thrown away and damaged coins that ended up in their plant. And so they had this whole operation where they were literally finding coins, many of them pennies, in the dirt and in the trash and washing them and drying them and returning them to circulation.

6:08It turns out Americans throw away about$68 million worth of coins a year. Wow. And one can only imagine how much of those are pennies.

6:22All that waste hasn't gone unnoticed. For years, the government has acknowledged the penny problem. The Obama administration, for one, was exploring ways to make the penny cheaper and do some kind of investigation and research into what different materials could do that without changing too much about the penny, including its weight and the way that it looked. It's one of those things where I think people get attached emotionally to the way things have been. In 2013, President Obama was asked about getting rid of the penny during a live stream on YouTube. — But the penny is an example of something that I need legislation for.

7:01And frankly, given all the big issues that we have to deal with day in, day out, a lot of times it just doesn't — you know, we're not able to get to it. — The penny lived on. And then President Trump returned to office and said he wanted to cut what he considers waste in the government. In February, Trump took aim at the penny on social media. President Trump posting on Truth Social saying he's directing the Treasury to stop minting new pennies. Citing the cost of producing the one cent coin. He says for far too long, the United States has minted pennies, which literally cost us more than two cents.

7:40This is so wasteful. Can Trump by himself kill the penny? That was the conversation following his social media post, right? Right. Like, does the president have the power to kill the penny? Can he actually do this? And according to professors who study this and have written books on this, Congress is the only one with the authority to actually abolish a coin. Right. Like rid a coin from circulation. But the president and the Department of Treasury can stop production of a coin if they deem it necessary. And that seems to be what's happening now. The plan to phase out the penny has been put in motion.

8:26The Mint has placed its last order of blanks, those metal discs that coins are pressed onto. And those will be the last pennies put into circulation. You'll still be able to use the pennies you have. They're still considered legal tender. Changing that is up to Congress. But ultimately, the penny is on its way out. It's all out of luck. It seems like with that supply and the remaining supply of pennies that they have left to put in circulation, they're estimating that they're going to officially run out of pennies by early next year.

9:02But there are still folks out there who haven't given up on the penny. The other side of the coin is after the break.

9:20Do you carry change with you all the time? I do. How much do you have on you right now? Okay, give me a second as I go into my pocket.

9:34Well, I have a quarter and a dime and two pennies. There you go.

9:42My name is Mark Weller. I'm executive director of Americans for Common Sense. And that's sense, right? As in C-E-N-T-S? Exactly. Americans for Common Sense is spelled C-E-N-T-S. Americans for Common Sense is a lobbying group that supports keeping the penny. It's partly backed by a company that works with the U.S. Mint to make pennies. And Mark Weller is an advocate for all cash. He says cash is king. It can't be hacked. It's useful during natural disasters. And also, millions of Americans don't have access to credit cards or bank accounts. When it comes to the penny, Mark says there's all kinds of sentimental reasons people want to keep it alive.

10:27We have a lot of support from coin collectors, and many of those started collecting pennies when they were younger. There's certainly a nostalgia people remember when they were younger of saving pennies and other coins and making a purchase through the saving and what that symbolizes for thrift and the ability of being patient. So I think those all play into the nostalgia and the support for the penny. But ultimately, this is really an economic issue. Mark says getting rid of the penny would mean that cash transactions will have to be rounded to the nearest five cents. If we can agree on one thing, it's that businesses have an incentive to maximize profits.

11:11There's no incentive to round down. They're going to round up in most instances, unless there is legislation that directs a rounding scheme on how that should work. But many grocery stores, many convenience stores work on very small margins. And those pennies really do add up and it makes a difference. So the rounding is a big, big problem and consumers lose in that scenario. If prices across the country are forcibly rounded up, even by just a few cents, Mark says that could be inflationary. The Treasury disputes that idea, saying in a statement that prices won't rise because they're just as likely to be rounded down in transactions.

11:52Another point Mark made is that if businesses and consumers are relying more on five-cent coins, that means the mint would have to ramp up production of nickels. And it's even more expensive to make a nickel than it is to make a penny. The nickel now costs 14 cents. So we're going to be losing 9 cents on every nickel that we make. And we've seen from other countries that have done away with their low denomination coins, more recently with Australia, with Switzerland, that their next denomination coin, their nickel, production went up. So you're not actually going to save money. What if we just get rid of the nickel too?

12:31too. Wouldn't that then save the government money? Because it is, it seems like objectively, the country is losing money on making pennies and nickels. Well, I would hope that wouldn't be the next step. Really, I think there's a concern about rounding to the nickel. I would submit that some have said, let's do away with the penny and the nickel. But if you start talking about rounding to a dime, I think you're going to have some significant economic effects and inflation. If you have a transaction, you know, at 15 cents and you don't have a nickel and you don't have a penny, it kind of gets you into a slippery slope of rounding to just very, very high numbers.

13:14I asked my colleague Oyen Adedoyan what the practical implications of losing the penny could be for businesses and consumers. So according to the Treasury, businesses eventually, once we run out of the pennies in circulation, will have to round up or down the nearest nickel. Now, this could have sales tax implications. So they are encouraging state and local governments to work with their local businesses to maybe draft some guidelines so that, you know, everything is smooth. I'm thinking, does this mean that we won't be able to buy anything for$19.99 anymore? Is this the end of the 1999, 9.99?

13:53That's the question, right? Like the 99 cent sale. I mean, like will 99 cent stores have to change their names to like 95 cent stores? Or dollar. You kind of have to go one way or the other. Exactly. Like this has some pretty big implications for the way that we view sales, right? I think there's some kind of psychology in seeing something ending with 99 cents over like a round number, right? Right. It's kind of a wait and see period for when pennies actually get out of circulation and how people and businesses respond to this change.

14:31So Oyen, you know, I think you're at this point the Wall Street Journal's penny whisperer. You've covered this for longer than I think most people expect to cover a coin. Why do people care so much about the penny? I mean, it's worth, literally worth very little. Yeah, one of the things that drew me to the penny beat, right, was just the fact that I'm a member of Gen Z. And I have a lot of peers who look at physical money, like cash and coins, as quote unquote fake money. Right? It's not real. A lot of our transactions today happen online or with a tap or with a swipe or even through our phones.

15:11So we have much less interaction with cash and coins than maybe our parents did or definitely our grandparents. Or even millennials. Or even, yeah, or even millennials. I mean, the pandemic was a huge culture shift when it came to spending cash because people were afraid to catch anything from a cash exchange with someone. So we are in this post-pandemic era where physical cash is kind of becoming more of a novelty for most consumers than something that's essential. And it's really calling into question what the future of our physical coin and cash economy is going to be. To me, this move to kind of end the penny is the first battle towards a potential cashless future.

16:02Thank you.

16:32Thanks for listening. See you tomorrow.