A political shakedown artist may be a parasite on society, but one has to acknowledge that there’s an art to pulling if off.
With Democrats riding high in 2010 in the wake of the financial crisis, Sen. Dick Durbin (D-IL) traded heavily on the unpopularity of the banking industry to secure price controls for one of his biggest campaign donors, the big box stores.
The fees charged by credit card companies to process store payments, were “fundamentally unfair,” Durbin said then, and had to be stopped to punish the banks.
The rhetoric worked, resulting in a huge payoff for the retail industry to the tune of $6 billion a year. Meanwhile, economists say the stores benefiting from the artificially reduced prices have passed roughly zero of the profit onto consumers, another supposed reason for the policy.
Then Donald Trump’s surprise victory in November happened. The election result was particularly painful for the retail industry’s political operation, which had invested heavily in Democratic lobbyists and in sucking up to Hillary Clinton.
As a businessman, Trump understands how the market works. He certainly isn’t going to be cowed by the flimsy “fairness” rhetoric that Durbin used to help his donors in the Obama era.
But times change, and artists like Durbin don’t stand still. With Republicans preparing legislation to gut his namesake amendment that put the “swipe fee” price controls in place, Durbin has suddenly become very concerned with increasing competition in the market.
His amendment, as Durbin now argues in a new op-ed, addressed a “market failure,” and the credit card companies are fighting to repeal it because they “want to kill competition.”
In other words, the senator who defended communists at a May Day parade is now trying on his best Milton Friedman imitation.
Unfortunately for Durbin, his task is like putting lipstick on a pig. For one thing, his amendment instituted the least-market friendly solution in existence. For another, any real economist who has looked at this scoffs at the notion there’s a market failure involved.
The idea that Visa and MasterCard are insulated from competition is actually laughable.
A new payment system could come in any number of forms that add more competition to an already well-functioning market.
Alternative currencies like Bitcoin are exploding and offer the potential of distributed payment systems that allow consumers to run transactions directly with merchants or each other.
Think about it this way: Americans relied on paper currency for over 200 years. In the last decade, cash has practically become obsolete. We’re in the Internet age — the barriers to entry on offering a better payment system have never even been close to as low as they are right now. Visa, MasterCard, Discover, and American Express will need to create and innovate to stay in the market.
There is no economic argument for price controls. This is, as it always has been, a political shakedown by the retail industry and its political cronies. As Stephen Moore, a top campaign adviser to Trump wrote in a 2014 National Review article, Durbin is a “political thug.”
Republicans in Congress are right to eliminate the “swipe fee” price controls, which hinder competition. Durbin and his big box store donors can try pretending they care about market forces all of the sudden, but it’s not fooling anyone.