Archives: April, 2009

Love the Cards, Hate the Card Issuers

God hates the sin but loves the sinner, we are told.  Americans have a similar attitude towards credit cards.  They love the cards but hate the card issuers.

Naturally, President Barack Obama has picked up on this sentiment and wants the credit card companies to be “fair.”  Reports the Washington Post:

The Obama administration yesterday called for an end to unfair credit card industry practices such as retroactive interest rate increases for any reason, late-fee traps that penalize borrowers with weekend or middle-of-the-day deadlines and teaser rates that last less than six months.

In a written statement released by the Treasury Department, the administration outlined practices it would like Congress to reform as it considers two bills that would crack down on the industry. One proposal would force card companies to apply payments above the minimum amount to the highest interest rate debt. To crack down on over-limit fees, the administration would also like Congress to require card companies to get customers’ permission to set up accounts so transactions over the limit can still be processed.

There are lots of reasons to criticize the practices of  credit card companies, but many of the rules are simply mechanisms to charge riskier borrowers more.  If you pay off your bill every month, you don’t pay the extra fees and interest.  If you are more disorganized, short on cash, or both, you pay more. 

Higher charges make it possible to provide more credit to more people.  Of course, politicians believe in the latter but not the former.  Banks should provide credit cards, make loans, and issue mortgages to everyone, irrespective of credit standing, at rates akin to those charged Bill Gates.  Anything more is viewed as a variant of “predatory” lending deserving condemnation.

Maybe it would be best for some people not to buy so much on credit, but that isn’t – at least so far – the government’s decision.  However, it would be more honest if government branded people with the Scarlet C and banned them from borrowing than prohibiting companies from charging higher rates and fees to reflect higher credit risks.

The credit card debate is stranger than most in Washington.  Listening to critics you’d think that the card companies were dragooning people off the streets, forcing them at gunpoint to sign up for cards, and demanding that they spend money else their children will be kidnapped and sold into slavery.  Precisely who was forced to accept and use these terrible cards with their terrible terms?  No one.

Instead of posturing as defenders of the body politic, crusading politicians should, as my friend Don Boudreaux of George Mason University suggested,  give up their day jobs and start credit card companies.   These entrepreneurs then could offer consumers better cards with less onerous terms, making everyone better off.

Any takers?

New at Cato

New articles, videos and Podcasts today:

  • Ilya Shapiro asks the Supreme Court to review a medical law case with First Amendment issues in a new legal brief.
  • At National Review online, Edward Crane discusses Obama’s 100-day record.
  • Also at National Review online, James Tooley tells the story of black-market schools in impoverished countries.
  • Appearing on Fox Business Network, Gerald P. O’Driscoll Jr. discusses the Federal Reserve’s current meeting.
  • In Wednesday’s Cato Daily Podast, Aaron Yelowitz discusses the problems with employer health care mandates.

Not Everyone Needs to Go to College

William F. Buckley famously said that he’d ”rather entrust the government of the United States to the first 400 people listed in the Boston telephone directory than to the faculty of Harvard University.” That was, of course, a swipe at the practical wisdom of those people who spend their lives teaching in ivory towers, and a deserved one. But score one for the egg heads when it comes to identifying the practical reality of modern higher education.

According to a new report from Public Agenda, while college presidents blather on about their impoverished schools and what a tremendous public good higher education is, the professors (at least those that Public Agenda interviewed) are pretty darn realistic about the real problems in academia. This quote, echoed in professorial statements throughout the report, captures exactly what a lot of us libertarian types have been saying for years:

I think a big problem facing higher education is the idea that everybody should get into college. I don’t think everybody is designed to go to college. Not everybody needs to go to college. I know that’s shooting ourselves in the foot, because that’s where our jobs are. The more people show up at our schools, the more jobs we get. Not everybody needs to go to college. Not everybody should. Not everybody’s prepared.

Public Agenda doesn’t identify who the speakers are in its report, but whoever said the bit above – or any of the similar statements about too many people going to college or being pushed to go to college – actually deserves to get tenure.

The Stimulus Feeding Frenzy

Billions and billions of dollars! Get yours today!

I’ve written before about the massive lobbying game in Washington to get your own special interests written into the stimulus and budget bills. And about the efforts to pressure governments into spending that money NOW.

Today a friend sent me a new piece of the incredible expanding stimulus economy. A publishing company has created a new newsletter on how to keep up with “ever-changing opportunities and the complex requirements to apply for them” – The Money for Main Street Monitor. Yes, for only $229 a year, with this special offer, you can keep up with the lucrative and ever-changing “new stimulus funding opportunities.”

I’m omitting the specifics so as not to give this parasitical industry any more publicity, but here’s the text of the email advertisement:

Dear Nonprofit Professional,

Billions of dollars from the Obama stimulus plan are becoming available daily for funding thousands of new state, local and nonprofit programs!

And while it’s extremely time consuming and difficult to keep up with the ever-changing opportunities and the complex requirements to apply for them, we can help make that task easier than you’d imagine.

That’s why [the company] is proud to introduce our newest and much-needed online service: The Money for Main Street Monitor.

Just click on or cut and paste the following link into your Web browser to take advantage of a special one-week offer on this continuously updated service:

Continuous Stimulus Funding Updates

While we have diligently kept our readers up to date on the billions of dollars in funding coming from the Obama stimulus package, many tell us they need much more coverage!

Consequently, we have assigned a team of experienced Washington, DC-based editors to focus exclusively on new stimulus funding opportunities for health care, family services, education, mental health, disabilities and substance abuse programs, housing and community development!<

Through continuously updated articles, subscribers to this new online service will be kept up to date on the latest funding opportunities as soon as they emerge. And with our online format, subscribers will have access to our user-friendly search tools to instantly find the funding opportunities most suited for their organizations!

Plus, our updates – unlike those on government Web sites – are in plain English and easy to find.  And, we’ve included a wealth of grant-writing tips designed to help your organization get its share of stimulus funding!

We know how important it is for every organization to watch their dollars closely these days, and we’re doing are best to help. That’s why we are offering you a specially reduced rate for this much-needed publication, The Money for Main Street Monitor.

Just click on or cut and paste the following link into your Web browser to find out more about this special one-week offer:

Or you can call in your order toll free at 1-800-[GET OTHER PEOPLE’S MONEY].

This isn’t the only company making such offers. Lobbyists, consultants, newsletter publishers, and others will be making money this year guiding their clients to the pot of gold at the end of the stimulus. But in economic terms, all this effort is deadweight loss. Instead of devoting time and talent and resources to the production of real economic value, these people are being lured into the parasite economy, jockeying for money extracted from productive workers and businesses and redistributed by a Washington bureaucracy and the lobbyists that revolve around it.

State Secrets Case Proceeds

A three-judge panel from the Court of Appeals for the Ninth Circuit ruled yesterday that the State Secrets Privilege, a doctrine barring the introduction of sensitive information as evidence, did not bar a suit by former CIA detainees.  (H/T SCOTUSBlog)

The plaintiffs allege that the defendant, a contract airline associated with the extraordinary rendition program, knowingly flew them to countries where they would be tortured.  The panel held that individual pieces of evidence may be subject to the Privilege, but a suit could not be entirely barred by a government assertion that sensitive information could be revealed.

This presents a split in federal circuit rulings on the State Secrets Privilege.  The Fourth Circuit held that the Privilege could bar a civil suit entirely.  This expansion of the State Secrets Privilege, started under Bush and continued under Obama, is a departure from the fact-specific evaluation described by the Supreme Court in U.S. v. Reynolds.  “Judicial control over the evidence in a case cannot be abdicated to the caprice of executive officers.”

As my colleague Tim Lynch has written before, the State Secrets Privilege often has little to do with keeping secrets and a lot to do with avoiding liability.  All that remains to be seen is whether the Obama administration will appeal the ruling, either to an en banc rehearing by the full Ninth Circuit or at the Supreme Court.

Bipartisan Support for Choice Grows Every Year

When the Florida Legislature passed its education tax credit program in 2001, only one Democrat supported the measure.

Last year, the legislature expanded the program with votes from one third of statehouse Democrats, half the black caucus and the entire Hispanic caucus.

Last week, nearly half of House Democrats —47 percent—voted to significantly expand the revenue base for the state’s business donation tax credit program. House Republicans voted 100 percent in favor.

And yesterday, nearly a third of Senate Democrats—31 percent—voted to expand the tax credit program. And 92 percent of their Republican colleagues voted for the bill.

In all, 43 percent of state Democratic legislators voted in favor of education tax credits. Governor Crist is expected to sign the bill shortly.

They are not alone.

In 2006, Democratic governors in Arizona, Iowa and Pennsylvania signed new or expanded tax-credit initiatives. That same year, a Democrat-controlled legislature in Rhode Island passed a donation tax credit. A Democratic governor and legislature in Iowa raised their tax credit dollar cap by 50 percent in 2007.

Partisanship on choice is fading away because many politicians have come to realize that school choice saves money and children. The truth is beginning to spread; school choice is the most proven and effective systemic reform available.

The future of education reform is looking bright in the Sunshine State and across the nation.