First, Elon Musk said he wanted the U.S. to stop minting pennies, and now President Donald Trump has ordered it to be so.
The idea does make practical sense. But would it make a dent in the nation’s yearly budget deficit?
As of fiscal 2024, the U.S. pays 2.72 cents to make each penny, according to the Mint. The counterargument used to be that a single penny would circulate many times through the economy, generating far more than its cost in purchasing power. But today, it’s likely most of them end up in a jar somewhere, waiting for a rainy day.
The penny may be a cultural icon engrained in everyday speech (“a penny for your thoughts,” “pennies from heaven”) but the times are changing, and few people use change.
A survey by Federal Reserve Financial Services found that only 16% of financial transactions in 2023 were done with cash of any denomination.
Not much savings
But the total savings from nixing pennies? About $179 million, according to Musk. That’s a small dent in the overall problem.
He could go after nickels (cost to mint: 10.41 cents), as well, or dimes and quarters, for that matter. The problem is, we can’t nickel and dime, or even penny, our way out of a looming fiscal crisis that has pushed the national debt to more than $36 trillion.
Gutting USAID has grabbed a lot of headlines, much of it through disinformation and the spread of internet lies (no, the agency didn’t pay Politico for good press). But USAID amounted to a mere 0.7% of the federal budget.
Righting the ship has to do with more than erasing the deficit. The nation has to begin paying down the principle on the total debt, as well.
Tackling big programs
The not-so-secret fact is that we can’t do this without reforming the mammoth programs, especially Social Security and Medicare, and the military. Neither political party wants to do that.
Social Security costs about $1.5 trillion annually, and its trustees say it will need reforms by the mid-2030s. Otherwise, it cannot continue to pay full benefits. Medicare uses $865 billion yearly, and the military has an $850 billion budget. Interest on the national debt — an amount difficult to control — is $881 billion, according to the Washington Post.
The road to any serious effort to curtail government spending has to go right down the main street of these programs and expenses, and at a time when the world is getting dangerous and Americans are getting old.
The Concord Coalition is a bipartisan group dedicated to debt reduction. Its executive director, Robert Bixby, recently told The Christian Science Monitor, “People throw up their hands because of the size of the federal government, and the debt frustrates people. There’s a sentiment that we need a disruptor.
“But even a disruptor can’t change the math.”
And these are programs a disruptor can’t fix with a sledgehammer. Firing people and offering buyouts won’t work when millions of senior citizens, who tend to vote, are waiting for benefits or medical procedures.
Fixing Social Security
Fortunately, when it comes to saving Social Security, serious plans exist. Social Security’s chief actuary wrote a letter last month detailing the impacts of 17 ideas. Chief among these would be to increase the wage limit on Social Security taxes from its current level of $161,000 to about $300,000. Anything above that would be exempt. Some have suggested removing the cap altogether.
Other ideas would be to increase the retirement age and to gradually do away with spousal benefits, reasoning that more women are in the workforce than ever before.
Perhaps instead of removing taxes on Social Security benefits, the nation should make sure every penny of them goes toward the program.
These are not likely to be universally popular ideas. They would take negotiating and hard work, but that’s what people elect members of Congress to do. Or, at least it should be.
Utah’s new senator, John Curtis, told the Deseret News he would volunteer to be the “tip of the spear” on Social Security reform, recognizing most lawmakers don’t want to talk about it. The state’s senior senator, Mike Lee, has talked about indexing retirement to life expectancy and allowing people to invest Social Security contributions in private accounts.
With Musk wielding a sledgehammer and grabbing headlines, now may be the time for these men to charge ahead with serious negotiations in the halls of Congress.
Once the big programs are tamed, the pennies will seem easy.