Last week, President Donald Trump kicked off a national debate when he said he wants to cap credit card interest rates. Such price controls will likely hurt the poor as high-risk credit will be shot off.  But you can support that idea or oppose it â the Republican Party is divided over it â but Trumpâs clear intent is to help working Americans with lowering their interest rates. Now sponsors of the previous failed credit card agenda are trying to push their corporate welfare bills alongside Trumpâs proposed price controls in a way that will raise, not lower, interest rates. When it comes to price controls, two bads donât make a good.
In particular, Kansas Republican Sen. Roger Marshall is trying to free ride on Trumpâs message to push a completely different big business and donor agenda, all while Illinois Democratic Sen. Dick Durbin, one of Trumpâs most reliable Senate adversaries, watches approvingly from the sidelines as his dead legislation gets oxygen again.
Within days of Trumpâs comments, Marshall rushed to the cameras promising legislation to deliver the 10 percent interest-rate cap the president wants.
But itâs a little more than convenient that he is using this news hook as fodder to pass another disastrous piece of legislation that he has tried â and failed â to pass for years along with Durbin. And he seems to be confusing conservative leaders in the process.
That bill is the Credit Card Competition Act. Versions of this legislation have been floating around Washington for years. Each time it has come up, Congress has declined to move it forward because of its main focus being helping donors and not consumers.
So now Marshall is trying to revive it using a different tactic. Instead of debating the bill openly. which has never worked in the past, heâs attempting to quietly attach it as an amendment to a massive, must-pass spending package â the kind of bill Congress must approve to keep the government running. This must be stopped.
This Marshall amendment is not focused on helping struggling families pay their credit card bills. It will indeed have the opposite effect of raising their fees and interest on their cards. Its aim is to help enrich companies like Walmart, Target, and Amazon by reducing fees they pay to the cards. This reduction will necessarily mean card companies have to make it up somewhere else, namely on you the card holder.
If Swamp creatures in D.C. successfully force financial institutions to incur more operating expenses as a favor to the incredibly wealthy but incredibly cheap big box stores, the financial institutions wonât choose to eat the cost. Like any good business, they will find other ways to recover it partly through higher, not lower, rates. In addition, if this Marshall plan moves forward, you can expect to see higher new fees, fewer rewards, smaller credit lines available to you, or all of the above.
You wonât see a line item that says, âgovernment policy surcharge,â but youâll certainly feel it every month when your credit card statement arrives.
While no one cares about helping banks or credit card companies, no company should have to suffer the consequences of a corporate welfare push for the Walmarts and Targets of the world â especially when the brunt of the costs will raise rates on cards.
Naturally, Marshall and Durbin have received hefty campaign contributions from the very corporate interests who would benefit from this policy being enacted, and history already indicates just how disastrous the results will be.
More than a decade ago, Durbin pushed a similar mandate on debit cards through the infamous Dodd-Frank bill, promising it would lower prices for consumers. What actually happened was the opposite. Welcome to the policy effects of price controls.
Studies show that consumers saw fee hikes, watched their free checking accounts disappear, and had their debit card reward programs gutted or eliminated outright. While consumers were promised that retailers would pass the cost savings onto their customers, multiple studies later found that this did not occur, leaving consumers worse off. An analysis from the Richmond Federal Reserve even uncovered that over 21 percent of retailers chose to increaseprices following this legislationâs passage.
Consumers didnât win. Big retailers did. Marshallâs credit card plan follows the exact same playbook.
And the damage doesnât stop there. The Marshall amendment also hands enormous power to the worst actors in American politics by turning enforcement over to courts and state attorneys general. That means partisan prosecutors who have spent years weaponizing the legal system, would be the arbiters of whatâs fair and whatâs not. Turning the power to activist judges dictating our nationâs economic and consumer protection policies will be a collateral damage adding to the rate hikes of the legislation.
Like Trumpâs interest rate cap idea or not, I tend not to, itâs clear that the president is trying to address a real problem facing working Americans. Marshall is using that message as cover to ram through a bill that has the opposite rate hike effect but greatly benefits his donors. Republicans should recognize this maneuver for what it is and stop it before it achieves the opposite intent of Trumpâs agenda.
Tomas J. Philipson is an economist at the University of Chicago and served as a member and acting chairman of President Trumpâs Council of Economic Advisers from 2017 to 2020.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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