Consider, for a second, the debit card. If yours is anything like mine, it's a battered, unimpressive piece of plastic with some numbers on the front, and a signature on the back that's nearly worn off. I suspect most of us think about it when we lose it, and the hassle involved with canceling it, eliminating fraudulent charges, and getting a new one.
But a debit card is more than that. By itself it's a piece of plastic, but if it's backed by a multi-billion dollar payment network in every store in the developed world, it's the equivalent of carrying around your entire bank account. It's access to whatever purchase, in cash, that you want at any time. No need to worry about going into debt with a credit card, carrying cash, going to an ATM, remembering the checkbook, etc.
There are other impacts of debit cards across the economy as well. It's been estimated that debit card use reduces crime by about 10 percent because people carry much less cash than they used to, lowering the incentive to rob people. Because of that battered piece of plastic, millions of robberies and assaults have been prevented. That convenience costs consumers nothing ... or virtually nothing.
That's a good story. It's too good, for Washington. The system was paid for by the companies who made the decision to accept debit cards. And they got tired of it.
In the 11th hour of negotiations over the Dodd-Frank bill, they and some allies in Washington were successful in inserting a provision, called the Durbin Amendment, which ordered the Federal Reserve to figure out "a reasonable and proportionate" debit card fee, and then set the price of swiping a debit card at that level. It's a price control, and what used to be a private market that delivered a world-changing innovation is now under the supervision of the federal government.
The effects are typical for this type of policy — they're the same ones we saw in the Soviet Union, and the same ones we saw during Nixon's price controls in the 1970s. At the end of the day, somebody pays.
Now, instead of businesses that accept debit cards, the person who pays is the consumer. Free checking has plummeted, and minimum account balances have increased dramatically. Price controls often serve as price floors, and small businesses that take debit cards have seen their costs rise because regulation has squeezed the flexibility out of the system.
This is nothing new, and will come as no surprise to free-market conservatives. There are thousands and thousands of regulations across the statute books, and many more in the Code of Federal Regulations. Their collective economic effect is massive, like barnacles fouling the hull of a ship, slowing it down more and more over time. It's been estimated that if we hadn't added any regulations since 1980, the economy would be 25 percent larger. That's about $14,000 for every man, woman and child in the country.
These are the wages of big government.
What the Durbin Amendment shows is that in today's economy, no system, no matter how helpful it is to the average person, is exempt from federal interference. The federal government did not build the payment network. It did not participate in the billions spent, and the painstaking process of selling the new technology. It did not provide the ingenuity or creativity required to envision such a system and to actually make it work.
The efforts of thousands of private citizens did. How demoralizing to innovators it must be to have the government come in afterwards and say to them that the fruits of their labor are not theirs, that they must charge what the government deems to be "reasonable and proportionate" prices.
The good news is that the Financial Services Committee, on which I serve, has passed a bill to repeal the Durbin Amendment and fundamentally reshape Dodd-Frank in a free market direction.
The bad news is that Republicans are divided on repealing the Durbin Amendment, in part because many powerful interests benefit from the price control and are lobbying intensively to repeal it.
That debate, and the debate that will likely follow on the floor of the House, will be instructive in determining whether or not there exists a bipartisan consensus that federal regulation is the logical endpoint of innovation. I certainly hope not.
Ted Budd (@RepTedBudd) represents North Carolina's 13th district in the U.S. Congress.
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