Credit has been a part of our lives almost since the beginning. After all, it has always been very difficult to afford large items—be it a home or an automobile—without credit. At the same time, every American also has unexpected expenses: the transmission in their trusty automobile gives out. The furnace doesn’t provide heat.
These examples show how critical credit is for every individual. That is to say nothing of those who own small businesses such as a restaurant or repair shop, which often cannot borrow through the same channels as large, brand-name companies.
Given the importance of credit, the move by Sen. Josh Hawley to support an 18% cap on credit card interest is perplexing. Now, it’s understandable during this time of unprecedented interest rate hikes, that many Americans might be sympathetic to rate caps. But let’s look further: an interest rate is nothing more than a price to use money. The higher rates provide security for the lender, allowing it to take a greater risk than it might otherwise be able to do. That means millions of Americans can borrow to repair that transmission or fix the furnace, whereas otherwise they would be out of luck.
This isn’t a theoretical conversation. Rather, it is the difference between keeping a job that requires a car or losing that job and putting a family in financial peril. Sen. Hawley’s unwillingness to accept this reality is reminiscent of the similar arguments put forth by some on the far left, like Bernie Sanders, AOC, and his fellow Missourian, Cori Bush.
The mention of these socialist sentinels brings to mind an even greater problem with losing access to credit: a greater dependence upon governmental entities. In a world where many Americans lack the savings for an unexpected $300 emergency, credit is the sole remaining bulwark before these individuals become wards of the state. While this dependency does not have the same stigma as it did 10 or 20 years ago, it still has the same problems including a prolonged inability to build wealth and exercise true independence. On the other side of this dependency are the taxpayers, who are forced to “mitigate” a situation that would not exist if it were not for interest rate caps.
Until now, I have only discussed the direct impact on those consumers who would be denied credit because of this legislation. But this would hit every American because credit card companies would ultimately get around it by substantially increasing costs to businesses for using their credit card payment systems. The simple truth is that politicians can't legislate away prices. Translated, someone pays when politicians mess with markets.
Populist policies are in fashion right now, but every policy has consequences. In this case, the consequences would hurt the people Sen. Hawley wants to help. It is also why policies like this typically originate from Squad Members in the House and a so-called “democratic socialist” in the Senate.
If Sen. Hawley’s intent was to start a conversation about credit card debt, that would be a conversation worth having, and one in which I would cheerfully partake.
The truth is Americans need reliable access to credit, and we need conservative solutions that help, not hurt, Americans by helping them achieve financial independence and decrease their financial burden. A credit card rate cap policy would be a sucker punch to blue-collar workers already squeezed by “Bidenomics.” Sen. Hawley should withdraw this legislation.
