


A bill attracting attention in the Senate would cap credit card interest rates at 18%. It's not sponsored by Sens. Sherrod Brown (D-OH) or Elizabeth Warren (D-MA), stalwarts of the progressive Left.
Rather, it's being offered by Sen. Josh Hawley (R-MO) in a move that, however well intentioned, makes a mockery of free markets and would perpetuate America's inflation crisis.
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It's easy to see why the Capping Credit Card Interest Rates Act, introduced by Hawley on Sept. 12, could pick up political support. It comes shortly after U.S. consumer credit card debt surpassed $1 trillion, the highest level on record. The average credit card interest rate in America today is 24.45%, according to LendingTree, the highest since it began tracking rates monthly in 2019.
“Americans are being crushed under the weight of record credit card debt — and the biggest banks are just getting richer," Hawley said in a statement. "Capping the maximum credit card interest rate is fair, common sense, and gives the working class a chance.”
But Hawley's proposal actually would cut off the very consumers he intends to protect from lines of stable credit. That's because price controls inevitably lead to shortages. So, should Hawley's proposal get enacted into law, there is likely to be less availability of credit, along with lower credit limits. All of which would affect most directly the "working class" people Hawley said he's advocating for.
Hawley's proposal further conflicts with the Federal Reserve's strategy of driving up interest rates with the goal of reducing inflation. That necessary corrective, while painful for consumers in the short term, will help eventually get the nation back to the central bank's target inflation rate of 2%.
We're still a long way off from that nearly three years into President Joe Biden's administration. The consumer price index and the personal consumption expenditures price index are both on the rise, which is part of the Fed's calculus in its 11 rate hikes over the past year and a half.
Nor is it the first time Hawley, a graduate of Stanford and Yale Law School who clerked for Supreme Court Justice John Roberts, has pushed populist measures about which he should know better. The obvious point is they resonate with Americans less informed about economics because they look helpful in tough times.
In late 2020, Hawley joined defeated President Donald Trump in calling for an increase of $600 COVID-19 relief checks to $2,000. That made Hawley an unlikely ally of socialist Sen. Bernie Sanders (I-VT). The pair, along with then-Senate Minority Leader Schumer (D-NY), now majority leader, tried to force a vote to increase the checks, but the move was blocked by other GOP senators.
Hawley also, early this year, hampered Republican debt ceiling negotiations by taking entitlements, the single greatest impetus of our record-breaking spending projections, off the table. Thanks to profligate spending by Democrats and Republicans such as Hawley, the Fed has been forced to double down on its war on inflation.
Hawley's credit card cap won't do anything to stem the debt and deficits that have grown when both parties controlled Congress at various times, compounded by the Biden administration's big-ticket spending on the Inflation Reduction Act and other budget-busting laws. The federal budget deficit is expected to balloon to about $2 trillion for fiscal 2023, roughly double what it was in the previous fiscal year.
Going after seemingly big, bad credit card companies is an easy populist prescription, but that approach doesn't address why the public needs to borrow so much in the first place just to pay its bills.