There is something almost charmingly anachronistic about the specter of politicians—left and right—rushing to interpose the heavy hand of government between consenting adults engaging in voluntary financial transactions. One would think that after centuries of evidence proving that government interference in the market distorts rather than corrects, we would have learned our lesson. And yet, here we are again, with Senators Bernie Sanders and Josh Hawley, along with former President Trump, joining forces in their quixotic crusade to cap credit card interest rates at a seemingly arbitrary 10 percent. The mere fact that these figures—ordinarily as ideologically aligned as oil and water—can unite in such a misguided endeavor should, in itself, serve as an ominous warning.
One is tempted to ask: why stop at 10 percent? If the goal is to ease the financial burden of those who carry credit card debt, why not mandate a cap of 5 percent? Or better yet, declare interest illegal altogether? But of course, those who make such proposals do not truly operate under the dictates of economic logic; they operate under the dictates of political opportunism. To them, there is no apparent connection between risk and reward, no understanding of the fundamental mechanisms that govern credit markets. It is simply a matter of conjuring a figure that sounds agreeable and basking in the approbation of those who mistake economic illiteracy for moral virtue.
The fundamental problem with such a policy is glaring: a 10 percent cap does not alter the fundamental nature of creditworthiness, nor does it suddenly render all borrowers equally reliable. It merely forces lenders to accommodate the riskiest borrowers under artificially constrained conditions. And how will they compensate for this imposed restraint? By raising interest rates on those with better credit. By reducing credit availability. By introducing fees and ancillary charges that obscure the true cost of borrowing. In short, this policy will not so much eliminate the problem of high interest rates as it will contort the credit market into a form less transparent and ultimately more harmful to the consumer.
It requires little imagination to predict that the immediate consequence of such an artificial constraint will be a contraction in the availability of credit. Banks, quite sensibly, will not lend money to those whose credit histories suggest a propensity to default unless they are able to price their risk accordingly. At present, those with higher credit scores are rewarded with lower interest rates precisely because they have demonstrated reliability in repayment. Those who have failed to meet obligations are charged higher rates, not out of some Dickensian malevolence on the part of banks, but because, statistically, they are more likely to default. By capping rates, the government is not eliminating risk—it is merely redistributing it, forcing lenders to raise rates for responsible borrowers in order to subsidize those with poor credit histories. This is, in essence, the forced socialization of credit markets.
But even beyond the mere economic folly of this endeavor lies a broader, more troubling trend: the continued erosion of personal responsibility. A nation that removes the consequences of bad financial decisions is a nation that trains its citizens to be perpetually dependent on the state to shield them from reality. If one finds credit card rates too high, one has a perfectly viable solution: do not use a credit card. There are alternatives, ranging from debit cards to secured credit cards to simple cash transactions. But the solution, in the minds of many, is not to exercise discipline, but to appeal to the state to rectify what they perceive as an unfair situation. This is a remarkable form of infantilization—a denial of agency, a declaration that individuals are incapable of making rational decisions for themselves and must be shielded from the consequences of their own actions by benevolent bureaucrats.
There is, of course, an argument to be made for ensuring that only those who demonstrate a modicum of financial responsibility are granted access to credit. Perhaps, rather than imposing a rate cap, we might entertain the notion of a minimum credit score requirement to obtain a credit card. This, at least, would align with the principle that credit is a privilege, not a right, and that those who seek to utilize it must first prove themselves worthy of it. But even this proposition is a deviation from the ethos of free enterprise, for it is not the role of government to dictate who may or may not receive a financial product. That determination belongs to the marketplace, where lenders and borrowers, under the natural laws of supply and demand, negotiate terms suitable to both parties.
Ultimately, the policy of capping interest rates is a microcosm of a broader malaise: the relentless push towards government intervention in the affairs of free individuals. It is a manifestation of the belief that the state, rather than the individual, is the proper arbiter of financial decisions. This is an impulse that must be resisted at every turn, for once the government assumes the authority to dictate the terms of voluntary economic transactions, there is no natural stopping point. Today, it is credit card interest rates; tomorrow, it is bank fees, mortgage rates, and investment returns. Before long, the entire edifice of free-market capitalism is reduced to an elaborate facade beneath which the state exerts unchecked control.
A free people must be entrusted with the responsibility of managing their own affairs. Credit, like all financial instruments, is a tool—neither good nor evil in itself, but beneficial or detrimental depending on how it is used. To the prudent, it is a means of convenience and financial leverage; to the reckless, a path to ruin. But in either case, it is a matter for individuals to navigate, not a domain for the government to intrude upon with the blunt force of artificial mandates.
The solution to high interest rates is not government interference; it is financial literacy, personal responsibility, and the preservation of a market that rewards prudence and discourages recklessness. If we abandon these principles, we abandon not only economic liberty but the very ethos upon which this nation was founded.