Elon Musk's DOGE has a new cost-cutting target: the U.S. penny

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Billionaire Elon Musk's Department of Government Efficiency is now focusing on reducing federal spending, targeting the United States penny.

The U.S. spends around three cents to produce each penny, which is worth only one cent in value.

It costs more than 3 cents to make a single penny and as a result, U.S. taxpayers paid over $179 million for them in the 2023 fiscal year," DOGE wrote. "The Mint produced over 4.5 billion pennies in 2023, making up about 40% of the 11.4 billion coins circulated that year.

Lithium-ion batteries can now be produced for 61% less than their original manufacturing cost.

Despite the significant costs of $179 million associated with DOGE, its overall mission to reduce federal spending is a drop in the bucket. The commission is tasked by President Donald Trump to suggest measures to "slash excessive regulations, cut wasteful expenditures and reorganize federal agencies." Musk has stated that DOGE plans to aim to trim $500 billion in annual federal spending.

On social media on January 20, he stated that he would be stepping back from the effort to run for Ohio governor.

Establishing an agency called DOGE, which will be located within the executive branch of the government, to "maximize governmental efficiency and productivity" by upgrading the government's IT systems.

The penny's rising cost

It costs roughly 3.7 cents to produce and deliver one penny.

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Dropping the penny from circulation might lead to rounding of transactions up or down to the nearest 5-cent amount, which could have potential negative financial consequences for the Federal Reserve Bank of Richmond, as stated in a 2020 blog post.

The post pointed out that when it comes to a single item or a small-value purchase, even a slight change in rounding up or down can make a substantial difference in the final price.

Consumers in Canada were estimated to have paid approximately $3.27 million more in dollars at grocery stores annually because of prices being rounded upward after the change.

On the other hand, using pennies may come with additional, difficult-to-measure expenses that could suggest eliminating them would be beneficial. Counting pennies for change can be time-consuming, and as the old saying goes, 'time is money.'

The DOGE could look to target bigger goals than the lowly penny, since it's not the only coin in the US that costs more to make than its face value. The 2024 annual report from the US Mint states that it spends around 14 cents to produce and distribute each nickel.