Penny coins are on their way out in the United States. Donald Trump, along with Lisa McClain, Robert Garcia, Cynthia Lummis, and Kristen Gillibrand, are finalizing the Common Penny Act. This proposal is also supported by the Financial Services Committee. It also encourages the US Treasury Department and the United States Mint to gradually reduce their production in order to encourage monetary rounding in cash transactions. Although this would be an improvement for the US economy, opinions vary, as John Rose of Greene County, Tennessee, has stated that it will have an impact on the economic sector and also on the labor sector. Read on to learn more.
End of penny production
The Trump administration, together with a group of Republican lawmakers in Congress, is pushing for a measure that could mark the end of penny production in the United States. This decision, which seeks to modernize the country’s monetary policy, has both economic and social implications that could transform the way cash transactions are conducted in the country.
What is the “Common Cents Act”?
On July 23, the House Financial Services Committee approved the bill known as the “Common Penny Act.” This law formalizes an order issued by Donald Trump in February 2024, instructing the Treasury Department to cease production of pennies and round cash transactions to the nearest five cents.
The bill was introduced by Representative Lisa McClain (Republican from Michigan), Representative Robert Garcia (Democrat from California), Senator Cynthia Lummis (Republican from Wyoming), and Senator Kirsten Gillibrand (Democrat from New York), with the aim of improving efficiency and reducing the costs associated with manufacturing this coin.
According to McClain, the initiative aims to improve fiscal responsibility and modernize monetary policy, stating that taxpayers should no longer finance the production of a currency that generates losses. According to the US Mint’s annual report, the cost of manufacturing a penny is 3.69 cents, making this coin an unnecessary expense for the economy.
When will penny production be suspended?
Although there is no exact date for the definitive suspension of penny production, the Treasury Department has already placed its last order for penny blanks in May 2024. According to a spokesperson for the Department, the Mint will continue to manufacture pennies while inventory is available. Production is expected to be phased out gradually by early 2026, although it is still unclear when the current stock will be depleted.
How will it affect the US economy and employment?
The decision to end the production of pennies could have significant consequences for the US economy and employment. The state of Tennessee, home to the only domestic manufacturer of penny blanks, has expressed concern about the impact of the measure. Kevin Morrison, mayor of Greene County, Tennessee, warned that this decision could cost hundreds of jobs related to the production of blanks, the flat metal discs that eventually become coins.
Financial Services Committee meeting: initial doubts about the bill
At a meeting of the Financial Services Committee, Tennessee Republican Representative John Rose initially expressed doubts about the bill, arguing that eliminating pennies without an adequate transition plan could have negative effects on the economy. However, after receiving assurances that his concerns would be addressed, Rose changed his position and decided to vote in favor of the bill.
Implications for cash transactions
One of the most debated aspects of this reform is how it will affect cash transactions. With the implementation of rounding, purchases that include cents will be adjusted to the nearest five cents. However, some critics fear that this adjustment will be confusing for certain segments of the population and that businesses will have to update their payment systems, which could generate additional costs.