American families relying on credit cards to pay for necessities such as groceries and gasoline could see their access to those funds cut off if a misbegotten Washington idea advances in the days ahead.
The bill, introduced by Sens. Bernie Sanders (I-VT) and Josh Hawley (R-MO), would allow the federal government to impose price controls on credit cards, capping their annual percentage rates at 10%. The senators subsequently filed their bill as an amendment to the Guiding and Establishing National Innovation for U.S. Stablecoins Act. This is a disaster for working-class Americans. Families that use credit cards to pay for everyday items will see their available funds dry up. The evidence is clear that this will disproportionately hurt working families by reducing access to financial services.
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Indeed, this tired idea has been tried before, and the evidence is clear: it does not work. A price control on credit card rates has already limited credit card access in Illinois. One study co-written by a senior research fellow at Consumers’ Research pointed out how subprime borrowers lost significant access to credit.
In Oregon, restricting access to credit also made households worse off. One paper shows that a cap on interest rates in Oregon restricts “access to consumer credit” and “hinders productive investment.” Oregon households experienced “an adverse change in financial condition” after implementing a rate cap.
It should be no surprise that government-mandated price controls fail to achieve their intended aims in practice, since they make no sense in theory. The tactic yields an “inefficient allocation of goods and services.” A diverse array of commentators, including Vivek Ramaswamy, the Hoover Institution, and the International Center for Law and Economics, agree that price controls are a flawed policy.
Senate Republicans underlined that conclusion in a 2022 study. That report, from Republicans on the Joint Economic Committee, found that “[i]nstead of sustainably lowering prices, price ceilings cause shortages, reduce product quality, and can make longer-term inflation worse.” In the case of credit cards, a price cap on interest rates would result in a shortage of available credit to consumers.
President Jimmy Carter also tried to impose credit controls amid high inflation. In 1980, he enacted restrictions on credit that Congress subsequently rejected because they proved to be an utter failure. Only 10 days after some of the controls went into effect, the Carter “Administration saw the first sign of recession: an increase in unemployment benefit applications.” The last thing President Donald Trump needs is a policy enacted into law that would harm the economy and drive the United States into a recession.
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Blue states and politicians have implemented price controls and have seen the policy’s detriments firsthand. Applying this policy at the federal level would significantly worsen Americans’ financial situation.
As the Senate deliberates over the GENIUS Act, lawmakers must avoid attaching unnecessary government power grabs. A federally mandated credit card interest rate cap is a failed policy, usually promoted by blue states and liberal politicians, that must be rejected. Taking away working Americans’ credit access is not worth the political and economic risk.
Gordon Gray is the executive director of Pinpoint Policy Institute.