Business Insider - Here's why #ElonMusk wants to get rid of the #penny. #money
Elon Musk's Department of Government Efficiency criticized the cost of producing pennies, which exceeds their face value. According to a 2023 report, pennies cost more than 3 cents each to produce, totaling $86 million in taxpayer expenses, with pennies and nickels together costing $179 million. The high cost is largely due to the materials used, primarily zinc, which has increased in price. The department suggests that reform is needed, but any changes would require congressional action or a decision by the Treasury Secretary. This discussion aligns with Musk's broader goal of reducing government inefficiencies, although recent executive actions have scaled back these ambitions to focus on upgrading federal IT systems.
Key Points:
- Pennies cost over 3 cents each to produce, totaling $86 million in taxpayer expenses.
- The combined cost of producing pennies and nickels is $179 million.
- Pennies are made of 98% zinc, which has increased in price, raising production costs.
- Reforming penny production requires congressional action or Treasury Secretary intervention.
- Elon Musk's broader goal is to reduce government inefficiencies, though recent efforts focus on IT upgrades.
Details:
1. 🔍 Government Efficiency Initiative
- Elon Musk's involvement in government efficiency targets small-value currency.
- Focus on eliminating the US penny as a cost-saving measure.
- The initiative could save the government millions annually in minting costs.
- Eliminating the penny is part of a broader strategy to streamline operations and reduce waste.
- Similar initiatives have been successfully implemented in other countries, providing a precedent.
- The move is expected to simplify transactions and reduce time spent on small change.
2. 💰 The True Cost of Making Pennies
2.1. Cost Analysis of Penny Production
2.2. Economic and Taxpayer Impact
3. 📊 Taxpayer Impact & Material Changes
- In fiscal year 2023, producing pennies cost taxpayers $86 million, highlighting a significant financial burden.
- The combined cost of producing both pennies and nickels reached $179 million, indicating a substantial taxpayer expense.
- Material costs, particularly due to fluctuations in metal prices, are a significant factor in the high production cost of pennies.
- Originally, pennies were made of copper, but material changes have been implemented over time to manage costs.
- The continued high costs suggest potential for policy review on the necessity of these coins.
4. 📈 Rising Production Costs
- The composition of the Penny has been nearly 98% zinc since 1982, making its cost sensitive to zinc price fluctuations.
- Recent trends indicate that zinc is not as affordable as it has been in the past, contributing to higher production costs.
- The unit cost of producing a Penny has risen by 12.9%, as highlighted by the mint's report, impacting overall production efficiency and budget allocations.
- The increase in zinc prices can be attributed to global supply chain disruptions and rising demand in various industrial sectors.
- These cost increases may result in higher operational expenses for the mint and could potentially affect consumer prices if passed on.
5. ⚖️ Legislative Hurdles in Penny Elimination
- Eliminating or changing the composition of the penny requires Congressional action, making it a complex legislative issue.
- There is a theory suggesting that the Treasury Secretary might have the authority to implement changes to the penny's composition or status without needing Congressional approval, though this remains a subject of debate.
- The process involves significant legislative hurdles, including gaining majority approval in both the House of Representatives and the Senate.
- Potential implications of Congressional action include economic and political considerations, which can influence the decision-making process.
- Challenges in reaching a consensus highlight the intricate nature of legislative changes related to currency.