Saving the taxpayer by stopping the penny

What No One Says About Ending the Penny

Not to worry, intrepid readers! I've decided to dive into the weeds and figure out if the government is wasting money by making money*

What seems to have been completely lost in discussions of ending the manufacture of the penny (and the nickel, which is an even bigger money-loser) is...all the other coins the Mint produces every year.

Image of uncirculated coin set from
U.S. Mint website https://www.usmint.gov/uncirculated-coin-set-2024-24RJ.html

The cost to create money has been documented in various places online. Here's an article from NBC10 Philadelphia [archived version here], a more authoritative source than some of the blogs with this information (though those blogs are usually quite well-done).

• The penny costs almost 4 cents apiece to mint and distribute.
• The nickel costs almost 14 cents apiece to mint and distribute.

Obviously, both of these coins are unprofitable to produce, at their current size and composition. According to 2024 mintage figures listed in that NBC article, mintage of the penny lost $85.2 million for the federal government last year. Mintage of the nickel led to an additional $17.7 million loss for Uncle Sam.

Before you roll your eyes or guffaw about rampant government waste, think for a moment about why this situation has been allowed to persist for so long (aside from the usual bureaucratic indifference):

• The dime costs less than 6 cents to mint and distribute, for a seigniorage profit of $35.6 million for the federal government in 2024.
• The quarter costs less than 15 cents to mint and distribute. The government made $165.1 million from the quarters they shipped in 2024.
• The half-dollar costs just about 34 cents to mint and distribute. The federal government made a paltry seigniorage of $8.3 million on the half-dollar in 2024.
  

The dollar coins weren't listed in the NBC article, and I'm too lazy to look that up right now.

But also consider that the Mint makes special sets and bullion coins, which they sell to collectors. Given the prices they charge, I can guarantee that those are also profitable operations. Consider the simple uncirculated coin set pictured above: face value of $1.91; price for the set is $33.25. I seriously doubt the packaging costs 30 dollars.

And are coins the only form of currency?

Of course not. Most of what we use today, assuming we don't just slide or tap a piece of plastic, are paper bills, the production costs of which NBC wisely chose to include in their article.

Technically, bills are printed by the Bureau of Engraving and Printing, which is a division of the Treasury. Not the same department as the U.S. Mint, which is responsible for the coins. But both are divisions of the U.S. Treasury, so the federal government is ultimately responsible for all production of U.S. currency.

Consider:

• The $1 note costs a mere 3.2 cents, or $0.032, to print.
  
  In FY 2023, the BEP produced almost 2.4 billion one-dollar bills: source is the annual production report of the BEP [archived version here]. The seigniorage profit for the government, on one-dollar notes alone, is a whopping $2.32 billion!
  
  And how much did the government lose on the penny again?...
  
  If you think that's a large profit, you might want to sit down before reading the rest:
  
  
• The $5 costs 5.3 cents. 2023 production: 881,520,000. Profit: $4.36 billion
• The $10 note costs 5.5 cents. 2023 production: 480,000,000. Profit: over $4.77 billion
• The ubiquitous $20 costs only 6 cents apiece. 2023 production: 261,936,000. Profit: over $5.22 billion
• The $50 costs 5.6 cents. 2023 production: 267,840,000. Profit: $13.377 billion
• The granddaddy of Federal Reserve Notes, the $100 bill, has more security features than the rest. It costs 9.4 cents to produce. 2023 production: 1,326,976,000. Profit: over $132.57 billion
  

Based on the figures referenced above, we can calculate a simple profit/loss statement for the government's total currency-production operations, including both coins and bills.

Coins: +$106,100,000. That's right, despite losing over $100 million on the penny and nickel combined, the grand total is still a positive $100 million! Guess that's why they make so many quarters every year.

Even if they kept minting pennies, the U.S. Mint would not be in imminent danger of losing money, unless the prices of copper, nickel and zinc suddenly skyrocket. Like would happen if a new tariff on copper went into effect. Oops...

Bills: +$162,627,745,168

That's a large number, so allow me to simplify: $162.6 billion 

Nope, no losses here. Not even close. The smallest seigniorage on paper currency is over 2 billion dollars, easily dwarfing any losses on coinage.

Grand Total**: rounded for simplicity, +$162.7 billion

Guess the losses on the penny and nickel are only a drop in the bucket. The vast majority of the government's $162.7 billion profit - about 81.5% of it - comes from the $100 bill. Hence the heavy emphasis on anti-counterfeiting features.

A word about that weird term I used, "seigniorage." What is that?

One of the longest-standing traditions in the world is that the ruler of a country makes a profit by creating and authorizing currency. How did you think kings got so wealthy? In the ancient world, of course, there was no paper money, so they used coins ever since the medium of exchange was first invented.

The oldest coins are thought to have originated in Lydia (a region mostly enclosed in the nation of Turkey today), as lumps of 'electrum,' which is a naturally-occurring mix of gold and silver. Since electrum varies - one lump might be mostly gold, while another lump of similar dimensions might be mostly silver - it took some time to determine how to refine and standardize these lumps into what are truly recognizable as coinage.

Thus, with some study of ancient coinage, the true nature of inflation is revealed: leaders often melted down old coins, diluted the precious metal content, and then re-issued the coins at the same nominal value. They had to change the designs, so the rulers would know which coins were more valuable and which had been diluted.

Therefore, once the populace caught on, the number of coins needed to buy something increased. In precious-metal terms, the prices remained the same. But, since each coin contained less silver/gold/whatever, more coins were needed to get an equivalent amount of silver.

Voilà: inflation.

* = this should read "wasting money by manufacturing currency." But the pun was too juicy to resist.

** = yes, I know that the figures for the coins are 2024 while the figures for the bills are 2023. This is a blog post, not an academic paper or a commissioned report, so I don't really care. If you don't like it, please contact me and I'll be sure to give you a full refund of your purchase price for this report 😂