President Trump recently ordered the U.S. Mint to stop producing pennies, for a simple-sounding reason. Each penny, he said, has “literally cost us more than 2 cents.”

He’s right. Since 2006, the government has spent more money minting pennies than those pennies have been worth.

The production costs of coins can be confusing. A nickel is worth half as much as a dime but costs twice as much to mint. A penny, which used to cost less than 1 cent to make, now costs 3.7. In 2011, a quarter was cheaper to make than a nickel; today the two coins cost about the same.

It’s almost impossible to meaningfully lower the costs of coin production. If savings is the top priority, stopping production altogether is the only real option, for the simple reason that production costs are tied to the prices of specific materials (mostly zinc for pennies, mostly copper for nickels). Rhett Jeppson, a former chief executive of the U.S. Mint, said he saw some interesting proposals in his time there, including the idea of making pennies out of plastic, but nothing that could be put into practice.

Since pennies are a clear money-loser, it seems straightforward to think that getting rid of the penny would save taxpayers money. But it’s not that simple.

Here, we explore potential consequences of four choices.

Option 1: Don’t change anything — keep minting the penny

The U.S. Mint loses money on every penny and nickel it mints but is profitable because of its sale of dimes and quarters. The Federal Reserve buys the coins from the Mint at face value and then sells the coins to banks, also at face value. Unlike most government agencies, the U.S. Mint receives no appropriations from Congress.

The money the U.S. Mint has made in excess of costs has declined in recent years, in part because of rising material costs. Since 2020, it has averaged over $300 million a year in profits from minting common coins, though last year’s profits, around $100 million, were lower than usual.

The benefits of the status quo are clear: The Mint is expected to remain profitable in the near future. Taking action on the penny or any other coin, as we’ll see, comes with trade-offs.

Option 2: Stop minting the penny

If the Mint did stop minting pennies, it would save about $85 million a year. Unfortunately, it would then have bigger and more expensive problem: the nickel.

“If you get rid of the penny, it will increase the amount of nickels,” Mr. Jeppson said. “And you lose more on a nickel than you do on a penny.”

Last year the government lost 8.8 cents on each nickel it minted (compared with 2.7 cents per penny). Because many times more pennies are minted than nickels, losses were higher for the penny, but this isn’t always the case. In 2023, for example, the Mint made more nickels than normal and lost $93 million making them compared with $86 million in losses making the penny. The size of the orders for each coin comes from the Federal Reserve, and the orders fluctuate each year, depending on demand.

It’s unclear exactly how high demand would be for nickels in a penny-less world, but it’s likely that it would be higher than today. And, given their expense, it’s possible those costs could eventually swallow up any savings gained by eliminating the penny.

There are other effects to consider, too. Many states have a sales tax that specifies taxes collected must be rounded to the nearest cent, so they would probably have to modify their laws to accommodate cash purchases. Stores would need new rounding policies for purchases made in cash.

But it is possible to eliminate the penny. Canada did it in 2012, and the Defense Department stopped using pennies on its bases in the 1980s when it decided it wasn’t worth the cost of shipping them.

Option 3: Stop minting both the penny and the nickel

Why stop at the penny?

Eliminating the money-losing nickel also seems like a logical idea. One drawback is a practical consideration: It would be harder than you might think to make exact change. It would be easy to get exact change if your bill were $4.90. But do you really want more than a dollar in coins if the bill is $4.85? (If you gave $6, you’d get three quarters and four dimes back. Not fun.)

Alternatively, you could address this problem by rounding all prices to the nearest 10 cents. But this, too, would put pressure on the quarter, making it less useful for making change. Or it could present curious situations, like a price for $5.25 if you have a quarter, but $5.30 if you don’t. At that point, it may be easier to round every price to the nearest 50 cents.

A penny-less and nickel-less world would leave the United States with only two coins in wide circulation: dimes and quarters. That would make the U.S. quite an outlier among its peer countries, which have five (Canada), six (Japan), six (Australia) or eight (the Eurozone) commonly used coins.

Having just two coins could hasten a trend away from physical currency that is already underway. In 2016, a Federal Reserve study estimated that cash was used for 31 percent of all payments. In 2023, the Fed’s estimate for percentage of cash payments declined to 16 percent.

Option 4: No more coins

If recent trends continue, the quarter and dime could cross from money-making to money-losing in the next 10 to 20 years. At that point, there would be a strong case to stop circulating essentially all coins.

Still, even if it stopped making coins for circulation, the U.S. Mint would still return money to the Treasury because of the other coin products in its portfolio. Last year the mint made over $80 million on its numismatic and bullion divisions (think collectible coins and investment level gold). This income, which has held steady over the last decade, is just slightly smaller than the $100 million in profits the circulating coin program returned last year.

Small change and the big picture

Pennies have long been a symbol of government waste (the topic was a subplot of a “West Wing” episode more than 20 years ago). And, while money is money, the overall impact of these choices is measured in millions of dollars — not billions or trillions, the units you are much more likely to encounter when doing math at the scale of the federal budget.

Policy decisions on paper currency are more consequential than those on coins. By monetary value, coins account for just 2 percent of money in circulation. Paper currency is not manufactured by the Mint and its accounting is different, but its printing is still positive for the government. Because there is no interest on these notes, the paper money in circulation provides a benefit to the government similar to an interest-free loan.

But the cash ecosystem also has its drawbacks. The government’s main source of revenue is tax collection, not coin minting. Studies have estimated that over $100 billion of income goes unreported each year because of cash transactions, amounting to tens of billions in lost tax revenue.

If eliminating coins led to even a modest decrease in untraceable transactions, the effects could be far greater than the profits or losses of the U.S. Mint.