Affordability is undeniably one of the defining economic challenges facing American families today. From groceries to energy, to housing and property taxes, the cost of living has risen faster than wages, leaving many households stretched thin. Policymakers are right to acknowledge this pressure, but acknowledging a problem is not the same as solving it correctly.
Much of today’s affordability crisis can be traced directly to government actions over the last several years. In response to the COVID-19 pandemic, federal policymakers injected trillions of dollars into the economy through stimulus checks, expanded benefits, and emergency programs. That unprecedented surge of spending dramatically increased liquidity, distorted markets, and fueled inflation that continues to erode purchasing power.
State and local governments share some responsibility as well. Flush with federal aid, many states expanded programs far beyond core responsibilities, often with little oversight. Some initiatives turned out to be not merely wasteful, but outright fraudulent, as recent scandals in Minnesota have made painfully clear. When government spending grows without discipline, taxpayers ultimately pay the price through higher costs and reduced affordability.
Given this backdrop, it is essential to scrutinize proposed solutions that aim to address affordability. History shows that when government intervenes directly in markets, particularly through price controls, the results are rarely beneficial. Well-intentioned policies often create unintended consequences that worsen the very problems they were meant to fix.
That concern is especially relevant in the debate over credit card regulation, including proposals such as the Credit Card Competition Act. Supporters argue that government intervention in interchange fees will lower costs for consumers. In reality, these proposals represent a significant departure from free-market principles and move toward centralized price-setting by government.
At their core, these efforts resemble the type of price controls long favored by Senators such as Bernie Sanders and Dick Durbin. These are policies that substitute government mandates for market signals. Interchange fees are not arbitrary; they are part of a complex ecosystem that supports fraud prevention, payment security, consumer rewards, and access to credit. Government-imposed caps or routing mandates risk undermining those benefits, especially for small banks, credit unions, and consumers who rely on affordable credit options.
Our colleagues, and frequent collaborators at Americans for Tax Reform and the Georgia Public Policy Foundation have rightly warned that these proposals go well beyond the proper role of government. Rather than fostering competition, they tilt the playing field through regulation, picking winners and losers while introducing new compliance costs that will ultimately be passed on to consumers.
Many policymakers are sincere in their desire to make life more affordable. But sincerity does not guarantee sound policy. Any proposal aimed at affordability must be evaluated through a clear lens: Does it rely on free markets and limited government, or does it expand government control in ways that distort incentives and reduce consumer choice? Government-imposed price controls, whether on rent, energy, or credit card fees, have a long track record of failure. If policymakers truly want to address affordability, they should focus on restoring fiscal discipline and reducing inflationary spending. In the end, affordability improves when government steps back from price-setting and focuses instead on the conditions that allow competition, innovation, and growth to flourish.
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