The US president recently announced plans to eliminate the penny, citing rising production costs as the reason. However, this move has sparked controversy and raised questions about its legality.
While eliminating the penny might seem like a practical solution at first glance, it’s not that simple. The process of changing currency requires Congressional approval, which President Trump bypassed by issuing a direct order to the Treasury secretary.
The US Constitution grants Congress the power to coin money, as stated in Article 1, Section 8. However, this phrase is vague, and its interpretation has been subject to debate. To clarify, the Coinage Act of 1792 was passed in 1792, which outlines how the mint operates and what it produces.
In the past, Congress has attempted to eliminate the penny, but without success. In 1989, Arizona Rep. Jim Hayes proposed a bill that would round purchases to the nearest nickel, while Senator John McCain introduced the COINS act in 2017, which aimed to phase out pennies. Both bills failed.
Even if President Trump’s order is challenged in court and deemed legal, eliminating the penny would still cause problems. Pennies would remain legal tender, and people would need them as change. The supply of pennies would decrease, but not their demand.
In theory, Congress could pass legislation to eliminate the penny and require rounding within a month or two, which would be a more cost-effective solution. Letting Congress handle this issue might also help to avoid potential backlash from those who oppose the move.
Source: https://www.pbs.org/newshour/economy/analysis-trump-announced-he-is-getting-rid-of-the-penny-what-are-the-consequences