HomeBudget & Tax NewsThe Democrats' Recession Is Yet Again Proving Price Caps Are Stupid: Commentary

The Democrats’ Recession Is Yet Again Proving Price Caps Are Stupid: Commentary

Whether on interest rates or anything else, price caps are stupid and will further damage the already teetering economy.

We are inexorably headed into a government-imposed recession.

Government-created inflation has created record prices all across the board. Government-imposed restrictions on the delivery-to-market of real energy (oil and gas) has mightily constricted and contracted our economy. Government-imposed restrictions on almost all productive private sector activity has done the same.

Think of government regulations, taxes, and spending as caps on private sector growth.  Because they are. The bigger government gets, the more it crowds out the private sector. As government does more and more, the private sector is confined to doing less and less.

Government-created inflation now has the Federal Reserve raising interest rates. Some hikes now, with many more promised to follow. This makes it harder for the private sector to borrow money and lend it.

As government raises the floor for loans, the absolute last thing we need is government also lowering the ceiling. As you squeeze ever-more-narrow the window to lend, more and more people are squeezed out of getting a loan. And as is always the case with government action, the poorest are hardest hit.

Here’s government looking to cap loan rates….

Interest Rate Hikes: Gov Making Loans MUCH Harder to Get – Poorest Hardest Hit:

“‘Congressmen Glenn Grothman (R-WI) and Jesus “Chuy” Garcia (D-IL) today introduced the bipartisan Veterans and Consumers Fair Credit Act (VCFCA).’

“What is the VCFCA?  It’s a Socialist price cap bill.  I.e. a rate cap on payday loans.”

“But we know: If you cap something’s price – you murder that something.  Because if someone can’t make money on that something – no one will offer that something.”

And as price caps work our way down to no one offering loans to poor people….

Rising Rates Strain Consumer Lenders with APR Caps:

“The rising-rate environment is putting pressure on consumer lenders that cater to higher-risk borrowers but have nonetheless pledged not to charge annual percentage rates above 36%.”

Oh look: These lenders have pledged to match the Annual Percentage Rate (APR) cap government is looking to impose.  And very much like the private employers who impose an artificial price floor minimum wage (#FightForFifteen!) – these lenders find themselves being able to help fewer and fewer people:

“[T]he chief executives at Upstart Holdings and Oportun Financial … acknowledged that doing so will likely mean they cannot grant loans to certain borrowers who likely would have been approved at a time when interest rates were lower….

“‘There are a lot of people that, three months ago, might have been approved close to 36% that today would not be approved at all,’ Girouard said. ‘That’s just the nature of the business.’”

Ah yes, “the nature of the business.”

Something to which government hyperactivity is always antithetical.

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Seton Motley
Seton Motley
Seton Motley is the president of Less Government, a DC-based non-profit organization dedicated to reducing the power of government and protecting the First Amendment from governmental assault.

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