2/12/2026 Hodgepodge: Interest on Debt, Who Pays for Trump's Tariffs, and National Guard Costs

This has been quite a busy week for me personally. I wanted to make sure that I got in two entries in this week, so I want to give a grab bag of some of the ongoings within the wonderful world of public policy. I hope to return to providing more in-depth analyses next week. 

Interest on U.S. Debt. Earlier this week, the Congressional Budget Office (CBO) released its Budget and Economic Outlook for the next ten years. This report has some eye-popping findings, such as the debt-to-GDP ratio is expected to hit over 120 percent in the next decade. For context, all that wartime spending for World War II only got the debt-to-GDP ratio to 106 percent. This is not the sort of record that the U.S. should want to break. Because of that profligate spending, the U.S. is paying off more interest on debt than ever. According to this report (p. 82), the U.S. government is projected to spend a whopping $16.2 trillion (yes, that is trillion with a "t") on interest between 2027 and and 2036.

Who pays for Trump's tariffs? Trump and Vance were under the belief that other countries were going to pay for Trump's tariffs, that Trump's tariffs are without cost or consequence. It turns out that is false. When I reported on this topic about three weeks ago, I covered a report by the Kiel Institute that says that the U.S. as the importing country pays 96 percent of the costs of the tariffs. What was not clear from this Kiel Institute report is whether the businesses paid or if it was the consumers. 

This is where the Budget and Economic Outlook comes into play. According to the CBO (p. 30), 95 percent of the tariffs were paid by raising consumer prices on U.S. consumers. This means that businesses have by and large passed on the costs to the everyday American. This lines up with a recent Tax Foundation estimate that Trump's tariffs are a tax of $1,000 in 2025 and $1,300 in 2026 for the average household. 

National Guard. In response to the rampant crime in Washington, DC, President Trump deployed troops to reduce crime in DC. Irrespective of the debate about whether this is effective, we now know how much this cost. The CBO recently released a report on how much all Trump's deployment of the National Guard to all cities cost, which was $496 million from August to December 2025. For DC alone, that was an amount of $223 million. Regardless of what you have to say about the crime rates, there has to be a more cost-friendly route to bring crime down without having to resort to using the National Guard. Perhaps another conversation for another time. 

Plastic Surgeons Draw a Line in the Sand on Youth Gender Surgery...with a Scalpel

Over the past several years, the growing number of medical interventions aimed at treating pediatric gender dysphoria has made its way towards the center of public policy debates. The theme of children's welfare has come up in debates on banning video games, subsidizing school lunches, universal preschool, same-sex adoption, and Drag Queen Story Hour. This is hardly the first time that "Think of the children" has been used as a rallying cry to advance a cause. The Supreme Court's decision in Skremetti v. United States last year was a reminder that we do not have to take the word of activists at face value. Last week, the American Society of Plastic Surgeons (ASPS) released a statement saying that youth gender surgery is not evidence-based. This statement exposes another crack in the framework that assumes that youth gender surgery is a safe practice and settled science. 

Why This Statement Is Surprising

At face value, you would not think that ASPS would sign such a statement. If anything, you would assume that ASPS would be in favor of more youth gender surgery because they have a financial interest in performing more elective procedures. They would be the last medical association that you would expect to be against it, and here we are. And maybe that is the significance of this statement. 

Plastic surgeons are sensitive to malpractice exposure. About 1,000 of these procedures are done annually, which is small considering the revenue they make from breast augmentation, face lifts, or liposuction. The procedure revenue from gender surgery is dwarfed by the liability risk. Plastic surgery is already in a delicate place with regard to reputation. Plastic surgery is seen as elective, cosmetic, or sometimes exploitative. Performing irreversible procedures on minors that lack an evidence base is a recipe for legal disaster and would only create reputational risk. 

The Evidence and the Risk

This statement brings another concern to light: the plastic surgeons are the ones who are charged to treat patients who might deal with long-term side effects. In its statement, ASPS highlights the irreversible bodily changes, including loss of fertility and altered sexual function, as well as typical surgical risks like infection and the need for revisions. Then there are the mental health and developmental outcomes that are poorly understood. ASPS highlights the Cass Review or systematic reviews from European countries that have been carrying out these procedures for longer than the U.S. In addition, they add a systematic review by the ASPS and the 2025 HHS report to the evidence base. 

When the people doing the surgery say that "the evidence is not there," it is insight that would be gained from lived clinical experience. Plastic surgeons profit from the surgery, tend to have a strong belief in bodily autonomy, and routinely defend elective procedures. If they are recommending that individuals under 19 do not undergo the procedure, perhaps there is a very good reason for that recommendation. 

Adults versus Adolescents

There are a number of things that I think are not good life decisions, whether that is having children before getting married, entering a polygamous marriage, smoking cigarettes, eating fast food every day, or not exercising. I also believe that as long as they are not harming anyone else, adults should be allowed to make whatever decisions about their lives, regardless of what I or anyone else thinks about the decision. This issue is not about adults making a decision to undergo these surgeries with informed consent nor is this about whether transgender individuals should be treated with dignity (for the record, they should, just like everyone else). 

We are talking about adolescents here, and the ASPS statement underscores an obvious point. Adolescents do not have the understanding (mens rea), maturity, or capacity to make such a decision. When a procedure is irreversible, the evidence base is against doing the procedure, and the patient is still in a developmental stage in their lives such as adolescence, this stance is both prudent and necessary. 

The Ideological House of Cards

This ASPS statement is not simply a victory for evidence-based science or maybe a chance that people can trust that the medical field will value evidence and safety over ideology. It is another example of how gender ideology is teetering like a house of cards. The MTF transgender athlete debate exposes contradictions between self-identity and biological reality. Gallup polling shows that more adults are in favor of transgender individuals playing on sports teams that correspond with their biological sex (currently at 69 percent). More adults are uncomfortable with pronoun usage, with discomfort increasing from 48 percent of adults in 2021 to 54 percent of adults in 2025. 

Meanwhile, acceptance of someone undergoing these procedures has declined from 46 percent in 2021 to 40 percent in 2025. Pew Research polling data from 2025 shows that 49 percent of Americans believe transgender individuals should use the bathroom corresponding to their biological sex, as well as 47 percent of adults who believe teachers should not teach students about gender identity. Add the medical risks and irreversible consequences for minors highlighted by ASPS, and it's clear as day that when ideology trumps evidence, this house of cards is not merely wobbly; it is poised to collapse. At the rate that it is going, it is simply a matter of when and how hard of a fall it will be. 

Trump's Tariffs Are Helping Push U.S. Allies into China's Arms and Undermining National Security

Last week, British Prime Minister Keir Starmer visited Chinese President Xi Jinping. This is the first time a British PM visited since 2018. The purpose of this visit was to reset Sino-British relations. One of the topics of discussion at this visit was trade. If this were an isolated incident, that would be one thing. But other Western nations are initiating trade talks with China. Last month, Canada struck a new trade deal with China. Finland, Ireland, and Germany are also re-engaging with China. There are multiple reasons for other Western countries to re-engage with China, whether it is economic development, access to a large consumer market, investment flows, or shifting geopolitics. 

Unpredictable U.S. Foreign Policy Adds Fuel

Those shifting geopolitics are particularly notable. In the last month alone, the Trump administration has captured Nicolás Maduro and threatened allies with tariffs in order to chase his dream of annexing Greenland, the latter of which is categorically unwise. Trump's foreign policy unpredictability creates incentives to hedge against an increasingly unreliable ally, which is hardly unsurprising seeing more Western countries gravitate towards China. One major factor that I would like to cover today is Trump's tariff policy and how that is becoming a turnoff for the US' allies. I will caveat by saying tariffs alone do not explain why other countries are re-engaging with China, but it is a major element that is part of the broader drive towards a pivot, as this analysis from the Chatham House details. 

Trade Diversion: Another Form of Tariffs Backfiring

The sad part is that this pivot is wholly predictable. I have talked about trade retaliation before here at Libertarian Jew. There is direct retaliation, which is when a country responds to tariffs by implementing their own tariffs in response. Then there is indirect retaliation, such as trade diversion. Trade diversion is what happens when tariffs or other trade barriers cause countries to shift imports and exports away from the most efficient or preferred trading partner toward alternative countries simply to avoid higher costs. Under trade diversion, the trade does not disappear but rather gets rerouted. 

Historical Evidence of Trade Diversion

Trade diversion has played out in history more than once. During the 1930s with Smoot-Hawley, a National Bureau of Economic Research (NBER) paper shows how U.S. exports to retaliating countries fell by 28-33 percent, and trade diversion also occurred. Another NBER paper discovered trade diversion as a result of US agricultural tariffs from 1990 to 2014. In Trump's first term, tariffs on China caused China to divert $21 billion of trade flows away from the United States to other countries (see below). In its 2025 paper on responses to Trump's tariffs, the International Monetary Fund (IMF) recognizes trade diversion as a response. Additionally, a study from the North American Journal of Economics and Finance shows how the signing of NAFTA and preferential tariff treatment with Mexico and Canada shifted US imports away from Asian sources toward Mexico. 

Trump's Tariff Strategy and Consequences for National Security

Trump's current trade strategy fits within this historical pattern of trade diversion. The problem is that Trump's posture on tariffs will continue to agitate U.S. allies and make it more attractive for some allies to deepen their economic ties with China. What Trump seems to not understand is that national security is not merely about what the U.S. can produce, but also the allies that one can rely on in times of crisis or need. Research shows that economic cooperation lends itself to stronger security cooperation.

Since tariffs make allies economically worse off, they are incentivized to look elsewhere. Having these allies increase trade and investment with China will create increased strategic dependence on China. What is more is that this re-engagement will mean that U.S. allies will invest more in China and Chinese suppliers. This entanglement with the Chinese economy will make U.S. allies less likely to align with U.S. strategic priorities. When allies rely more on China, China gains leverage and the U.S. will have less influence in trade negotiations, diplomacy, and security concerns abroad. This will undermine U.S. influence, which in turn weakens U.S. national security. 

"America First" Becomes "America Alone"

Trump's tariff strategy ultimately defeats its own stated purpose. Trump is not isolating China or strengthening American security. He is weakening the very alliances that give the United States leverage on the global stage. With a tariff-first approach, Trump is treating allies as economic adversaries, which understandably leads allies to diversify their trading partners more, including toward China. As allies partner more with China, the United States loses its global influence. National security is not only about domestic production, but also partners who share risks, supply chains, and strategic goals. By undermining these foundations, Trump is handing China geopolitical leverage. By alienating allies and strengthening a rival, "America first" becomes "America alone" while China has the last laugh. 

Immigrants Aren’t Draining Welfare: The Welfare State Is Draining America

Immigration is one of those peculiar topics in US policy debates that produce durable myths. They sound like plausible claims in theory, but collapse under the slightest bit of empirical evidence. Over the years, immigrants have been accused of spikes in crime, overwhelming public services, and draining this country's finances. These claims are so hard-wired into the political discourse that they harden into "conventional wisdom." Last year, I examined the "migrant crime wave" claim and refuted it by showing how immigrants are much less likely to commit crimes. 

Schrödinger's Immigrant and the Myth about Immigrants and Welfare

The welfare argument is no exception. In policy debates, you see what is jokingly referred to as Schrödinger's immigrant: an immigrant who is too lazy to work but manages to take all the jobs, which is a paradox that plays into an inaccurate, nativist caricature of immigrants. The nativist crowd at the Center for Immigrant Studies argues that immigrants consuming welfare and working can go together, thereby trying to refute the idea of Schrödinger's immigrant. While rhetorically clever, it only focuses on the theoretical possibility of the two co-existing rather than actual welfare consumption patterns. 

This is where research from the Cato Institute that was released last week comes into play. They actually did the work to see how much welfare and means-tested benefits are consumed by immigrants versus native-born US citizens. It turns out that immigrants consume about 24 percent less in welfare benefits than native-born citizens on a per capita basis. This finding lines up with a National Bureau of Economic Research paper from 2020 that looked at welfare use from 1995 to 2018. Guess what? Those researchers found that immigrants consume much less welfare than their native-born counterparts. 

Why Immigrants Consume Less Welfare

Immigrants consuming less welfare makes sense when you think it through. Immigrants are younger, healthier, and are more likely to either be working or actively seeking work. Because they come with a higher labor force participation rate and fewer chronic health conditions, they are less likely to need disability benefits or unemployment insurance. Furthermore, immigrants face legal and administrative barriers to receiving benefits. 

Immigrants as Net Contributors to Society

When you hear this anti-immigrant diatribe of immigrants draining the welfare system, it ignores the other half of the conversation, which is what immigrants contribute to the economy and to society. In 2024, I illustrated how immigrants contribute billions in income, property, and sales taxes every year. When you look at both the costs and the benefits, the picture flips. Immigrants do not merely "pay their own way." It turns out that immigrants are actually a net positive for government budgets. 

The Real Problem: The Welfare State

The evidence is clear. Immigrants are not the ones bankrupting this country. Immigrants use less welfare than native-born citizens and also contribute significantly in taxes. In net, immigrants are a benefit to the economy, not a burden. I have been consistent in critiquing the welfare state, whether it has been Social Security, Medicare, Medicaid, food stamps, or TANF. The anti-immigrant crowd rails against immigrants supposedly "draining the system" (which they don't), yet pays far less attention to the programs that drain this country's finances. If anti-immigrant nativists want to get at the real problem, they would go after the real problem of a large welfare state that costs the American people hundreds of billions of dollars every year. Otherwise, that is not fiscal responsibility or concerns about taxpayer dollars. That's just scapegoating dressed up as moral outrage.

Americans Pay, Trump Tariffs Stay: New Study Confirms Why Tariffs Are Ridiculous

From tomatoes and furniture to automobiles and movies, the U.S. tariff regime has expanded dramatically under President Trump's second term. Trump has insisted that tariffs would be paid by foreigners. Economists have shown that tariffs are hidden domestic taxes paid by the American people. This should not come as a surprise. As I explained last year, it was the American consumer that almost exclusively paid for the cost of Trump's tariffs in his first term. 

Now we have a study from the Kiel Institute released last week showing that about 96 percent of tariffs in Trump's second term have been paid for by the American people. That translates to Americans paying $267 billion in tariffs last year. This study is significant because it uses recent trade data and millions of imports transactions totaling trillions of dollars in trade. This study acts as hard, empirical evidence for the second-term Trump tariffs that goes beyond theory or anecdote. 

So why do Americans end up paying for Trump's tariffs? Tariffs are taxes on imports. When foreign exporters decide to not reduce their prices enough to absorb them (and let's be real...they rarely do, as we see with this new study), U.S. importers face higher costs. Most firms respond by passing the increase along to consumers, either directly in retail price increases or indirectly through higher costs for goods that rely on imported inputs. In effect, tariffs function as a hidden tax on American households, hitting every buyer in the store, from groceries to electronics. 

Trump's tariff rhetoric rested on more than the claim that foreign exporters would pay for them. Trump also promised that tariffs would protect American industries and workers, and that they would strengthen the United States in trade negotiations. The reality, as the Kiel Institute study makes crystal clear is that 96 percent of the cost of Trump's second-term tariffs have been borne by American consumers and businesses, not foreigners. 

As for protecting domestic producers, this protects a small group of well-connected producers, but causes net unemployment. This outcome played out with Trump's tariffs on steel and aluminum. Those modest gains to the protected industries are infinitesimally small in comparison to the cost to the consumers. In net, the tariffs act as a wealth transfer from the American people to the few producers who are protected as a result of Trump's tariffs. 

Regarding the leverage in international trade, it does not fare much better. Trump's logic was simple: raising the cost of exports for foreign countries exporting to the United States and they will capitulate to Trump's demands. What we see is that it is not foreign countries that pay for this bargaining tool, but it is U.S. consumers that foot the bill for Trump's negotiating strategy. This negotiation advantage is rhetorical in its bluster, but divorced from economic reality. 

Whether it is the idea that foreigners pay tariffs, the U.S. economy fares better, or it provides the United States with better negotiating leverage, we see that Trump's tariffs are myths built on a flimsy house of cards. Trump's tariffs ended up being a wealth transfer from the American people to select, well-connected domestic firms. The Kiel Institute study is not merely an academic exercise. It provides a clear and evidence-based counterargument against the populism that drives Trump's tariff policy. Americans get stuck with the bill, economists are shaking their heads, Trump's tariff promises remain unfulfilled, and yet the tariffs remain. If there were a 21st-century textbook example of trade travesty, these tariffs would be it. 

The Weight of Reality and How Fat Positivity Meets the Economics of Airplane Seats

Southwest Airlines made some changes to its airline policy that went into effect today. It might sound relatively uneventful at first glance, but one of its policy changes re-ignited a culture war. No, it was not announcing assigned seating, although Southwest distinguished itself by not having assigned seating. It was its decision to charge obese customers (or what Southwest calls "customers of size") for an extra seat if they take up two seats' worth of space on an airplane. 

Not Just a Tight Fit: The U.S. Versus the World

On the one hand, airline seats have been shrinking since the 1980s. On the other hand, economy seats across the world have a seat width of 16 to 18 inches and a seat pitch of 30 to 32 inches. Yet it is only in the United States that this amounts to a battlefield in the culture wars. Why? The United States is made up of a lot of fat people. I wish that were hyperbole. According to a 2024 study from The Lancet, about three quarters of Americans are either overweight or obese. A 2024 report from the Food and Agriculture Organization (FAO) found that the United States is the most obese country in the developed world. 

Fat Acceptance v. Economic Reality

The National Association to Advance Fat Acceptance (NAAFA), which apparently is a thing, took issue with Southwest's decision and framed it as an accessibility issue. The fact that there is a NAAFA or that the word "fatphobia" made its way into the English language is part of the problem. As I pointed out in my 2022 piece entitled We Should Not Shame the Obese, But We Should Not Glorify Obesity Either, obesity should not be normalized or glorified because obesity comes with serious health and economic consequences. 

While there are genetic and environmental factors that influence weight, too often people treat it like someone else's fault, whether it is the food industry, sedentary jobs, or society writ large. As I wrote last Rosh Hashanah, it is easy to blame circumstances for outcomes, but taking ownership of one's life means accepting the consequences of one's actions. Is it easy to maintain a good diet, sleep hygiene, and exercise regimen? It is not easy, but it is necessary for living a healthy life. As the saying goes, "if you do not make time for your wellness, you will be forced to make time for your illness." Treating being obese as a harmless identity or glorifying it undermines personal responsibility and a public understanding of those consequences.

Whether or not the people at NAAFA want to hear it, one of those consequences and downstream effects of obesity has to do with fitting in airline seats. There is an economic reality that the fat acceptance crowd does not want to hear. The number of seats on an airplane is limited, and this economic scarcity creates constraints. This is complicated by the fact that in spite of high revenue, airlines make about a 3-4 percent profit margin. According to the data from the NYU Stern School of Business (as of January 2026), this is actually a low profit margin compared to the overall average of 9.7 percent. It is especially low compared to pharmaceuticals at 18.5 percent, financial services at 22 percent, or insurance at 12.4 percent.

It's Economics, Not Oppression of Fat People

Rhetoric about discrimination against fat people collapses when it runs into economic reality. Airline margins are thin and airline seats are revenue generators. Because of these economic limits, the choice is not whether to charge, but rather who pays the cost. If the airline absorbs the cost, seats will become more expensive for everyone. If the non-plus-size customers pay for it, it creates crowding and resentment. If it is the plus-size customer, then that is cost-based differential pricing because a passenger who requires more physical space imposes higher capacity costs on the carrier. 

Competition Could Fix This....If the FAA Would Let It

There is another factor that the libertarian think tank Competitive Enterprise Institute (CEI) details in its analysis on this issue: a lack of market competition in the airline industry. CEI points out that airline consolidation and a lack of true competition reduce carriers' incentives to innovate or offer differentiated seating options, which incentivizes airlines to rely on blunt, uniform policies like charging for extra seats. Since competition is constrained, customers are left with few options when it comes to pricing or such customer quality measures as seat sizes. As a result of this market structure, airlines are left to allocate that scarce space in socially awkward and tense ways. CEI identifies such barriers as airline slot controls, exclusive-use gate leases, and barring foreign competitors from competing on domestic U.S. routes as culprits. I personally think it would be great if the Federal Aviation Administration removed those barriers, but whether they get around to it is a whole different story. 

Airline Economics > Culture War Outrage

When all is said and done, this is not about the moral failing of airlines or whether fat people are "oppressed." Blaming Southwest will not alter physics and tweeting about discrimination against fat people does not change such realities as airlines operating on wafer-thin margins, the finite number of seats, the lack of market competition, or that Americans take up more space than they used to. The truth is that this poorly functioning market cannot allocate seats as efficiently as it ought to. This is not personal or a moral condemnation of obese people. Planes cannot defy physics and passengers cannot contort themselves to fit into seats. Until the U.S. airline market faces real competition or until waistlines shrink, airline seating will remain as uncomfortable as the culture war arguments over it.

Trump’s Credit Card Crackdown and the Costly Consequences of His Price Controls

Credit cards are a convenient and safe way to make purchases, but they come at a cost. There are interest rates, annual fees, late payment fees, cash advance fees, balance transfer fees, foreign transaction fees, returned payment fees, the list goes on. These extra costs add up over time. Data from the Federal Reserve shows that U.S. credit card has increased over time and is now over $1 trillion. According to consumer intelligence company J.D. Power, 53 percent of current cardholders are carrying card debt, which is up from 51 percent the previous year.  

Trump has made affordability a top priority for his domestic policy in 2026. One aspect of affordability that Trump has eyed is credit cards. On January 9, Trump used Truth Social to announce his support for a credit card interest rate cap at 10 percent, which is even lower than what Bernie Sanders' 15 percent proposed in 2018. The following Tuesday, January 13, Trump said that he was in favor of the Credit Card Competition Act (CCCA), which includes a cap on credit card swipe fees. Three days later, the Senate reintroduced the CCCA. While capping credit card interest rates and swipe fees sound appealing or helpful on the surface, the truth is that they have unintended consequences for consumers and the credit market. 

Credit Card Interest Rate Caps Cannot Cap Economic Reality

President Trump's proposal to cap credit card interest rates at 10 percent for one year is rooted in affordability concerns. The Competitive Enterprise Institute (CEI) does a fine job at analyzing the empirical evidence and explaining how Trump's premise is based on a fundamental misunderstanding of how credit card markets work. Interest rates on credit cards are not arbitrary price gouging or profiteering by the "greedy credit card companies." They are the price of risk and operation costs for unsecured lending. Setting an artificial ceiling below the market rate does not make credit magically cheaper. It reduces availability by making lending to higher-risk borrowers unprofitable. CEI cites examples across borders and across time illustrating where interest rate caps constrained credit supply, showing that lenders retreat from offering loans when a price ceiling binds. This will mean fewer credit cards, reduced access for lower-income and subprime consumers, and unintentionally harming the everyday American that Trump claims that he is helping. 

Moreover, CEI points out that those who manage to keep their credit cards still pay in the form of higher fees, lower rewards, and reduced credit limits. This will parallel what happened with the Durbin Amendment's cap on debit card interchange fees, which resulted in higher checking account fees and lower rewards for consumers. An interest rate cap will punish consumers with the real potential of pushing Americans towards riskier alternatives, whether that is payday loans, pawn shops, or loan sharks.

Forced Routing Won't Solve Credit Card Woes

The 2026 Credit Card Competition Act (CCCA) continues the approach of earlier versions of the CCCA by requiring large credit card issuers to allow merchant to route transactions over multiple networks, inching at leas one network outside of Visa and Mastercard. The premise of this bill is to encourage competition to loosen the grip of the "Visa-Mastercard" duopoly, which arguably exists. According to the most recent market data, Visa and Mastercard account for about 90 percent of the market measured in purchase volume. While this aims to increase competition and put downward pressure on swipe fees, the bill does not impose a hard federal fee cap like the Durbin Amendment does for debit cards. 

Regardless of the market concentration, this forced routing is not a solution to the problem. Fortunately (or unfortunately, depending on how you view it), this forced routing has been proposed and scrutinized in the past, which gives more to say about the proposal. As International Center for Law & Economics (ICLE) Senior Scholar Julian Morris points out, this routing scheme would incentivize merchants to reroute transactions to the lowest-cost network, regardless of rewards or security. This would explain why a research paper from the University of Miami shows that if implemented, small businesses will lose access to $700 billion in access to revolving credit and $1 billion in rewards (Chakraborty, 2024).

This is plausible because we already saw with the Durbin Amendment's debit card interchange fee cap what happens, as CEI illustrates in its analysis. Rather than lower consumer prices, the cap primarily benefited large retailers while banks recouped lost revenue by charging higher fees and reducing free or low-cost banking services, all of which harmed the consumers that this was meant to help. Research from ICLE details historic examples of these price controls beyond the United States, including Australia, the European Union, and Spain prior to joining the European Union (Morris et al., 2022). 

The CCCA's forced routing mechanism is different than a hard cap, but it is an example of using federal power to try to engineer lower prices with price controls in a complex market, damn the unintended consequences. If this passes, do not be surprised if there are higher credit card fees, lower credit access, lower cash back rewards, and lower rewards points. 

Two Different Policies, One Failed Approach of Price Controls

In the 2024 presidential campaign, Kamala Harris proposed a ban on price gouging for groceries. Aside from me calling her out on economic idiocy, Trump called her proposed price control Communist and "Soviet-style." He was right to do so because price controls are a staple of a communist economy. 

Trump’s critique, however, loses credibility when he embraces that same Soviet-style thinking that price controls work because his intention is to help with affordability. It does not matter whether it is through an interest rate cap or the CCCA's forced routing. Price controls are government meddling that do not eliminate prices, but rather shifts prices and typically does so towards the very customers politicians are claiming to help. 

Smaller competitors like Discover, American Express, or fintech networks do not need government mandates to compete. They can grow organically by offering better rewards, lower fees, superior technology, and innovative consumer experiences that attract both banks and merchants. Meanwhile, the government can remove burdensome regulations, whether it is compliance costs for new entrants (e.g., AML, KYC, PCI), adjust risk-weighting rules to better reflect actual credit risk (especially in Basel III in Dodd-Frank), repeal the existing price controls in the Durbin Amendment, and simplify disclosure requirements for merchants. Real competition arises when incentives alight naturally, not when the government attempts to engineer outcomes. 

Markets do not become more humane when one political party adopts price controls versus another. And they sure do not stop being destructive when it is targeted at credit cards instead of groceries. Economic reality does not change for an election year, no matter how much politicians wish it would.