GOP Senator Josh Hawley channels his inner AOC with new nanny-state credit card proposal

With Republicans like this, who needs Democrats?

The days where Republicans stood for free markets and limited government are over, at least as far as one Missouri senator is concerned. Senator Josh Hawley just introduced legislation that closely mirrors a plan by far-left Rep. Alexandria Ocasio-Cortez and would have the government dictate citizens’ financial decisions. 

Hawley’s new bill would set a legal cap on the interest rate credit card companies can charge consumers, permitting them to charge 18% annualized and no more. The senator cites mounting credit card debt and describes this proposal as a “fair” and “common-sense” plan intended to give “the working class a chance.”

“We have a long history in this country of statutes, at the state and a federal level, that prevent what we used to call usury – an old-fashioned word for ripping off working people,” Hawley told RealClearPolitics, “and we need to get back to it.”

There are so many problems with this nanny-state proposal that it’s hard to know where to start.

For one, Hawley and his ilk frame this kind of thing as “populist” and sticking up for the everyman, but it’s actually the opposite. They’re actually saying that everyday people are too stupid to decide for themselves what financial agreements are in their best interests, and that the better judgment of government elites, like Hawley, should be superimposed from on high onto their personal finances. That’s simply rank elitism masquerading as “populism.”

“Senator Hawley’s proposal to put crippling price controls on consumers who use credit cards and the banks and credit unions that issue them should not be seen as ‘populist,’” Competitive Enterprise Institute Director of Finance Policy John Berlau told BASEDPolitics. “Rather, the measure is an elitist attempt to substitute Hawley’s judgment of how much debt is appropriate in place of that of consumers weighing options for their families.”

Secondly, like all sweeping government interventions into the economy, federal price controls on interest rates could have serious unintended consequences that actually leave the working class with fewer options for credit—aka, worse off.

“Interest rate caps do not protect vulnerable consumers, they exclude them from the market,” the Cato Institute monetary policy expert Nicholas Anthony told BASEDPolitics. “As my former colleague, Diego Zuluaga, rightly described it, interest rate caps create financial inclusion without finance.” 

“That has been the experience in Arkansas, North Carolina, and Georgia,” he continued. “In fact, similar problems have also occurred in the Caribbean and Latin America where interest rate caps have resulted in a reduction in financial outreach to the poor, women, and people living in rural areas. These experiences should be seen as cautionary tales.”

CEI’s Berlau echoed a similar concern: that by trying to “help” Americans struggling financially who are taking on expensive credit card debt, the federal government would actually just push them to worse options.

“Hawley’s proposal would not make the need for credit disappear,” the financial expert said. “It would instead lead those who desire credit to options they may find less appealing than credit cards, including payday loans, pawn shops, and rent-to-own plans for items such as electronics and appliances. While there is nothing inherently wrong with these options, consumers should have the choice of credit cards if they agree to the interest charges.” 

“The shrinkage in credit that would result from Hawley’s proposal would also likely lead to an increase in dangerous, illegal loan sharking that often results in violence when a borrower doesn’t pay,” Berlau concluded.

So, Hawley’s new plan would embrace AOC-style economics, insert federal micromanagement into Americans’ personal financial decisions, and likely leave the working class folks it’s meant to help worse off, to boot. 

Other than that, great work. 

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