It is increasingly the case that whenever you see a bad policy being proposed somewhere in the United States, it has already been tried in Minnesota.
The latest example: A new bill proposed by Senator Josh Hawley that would set a legal cap on the interest rate credit card companies can charge their consumers, allowing them to charge no more than an annualized rate of 18%. In other words, the bill would impose a price ceiling for credit. Hawley argues that credit card companies are “out there actively encouraging and finding new ways to get consumers indebted—they hike rates, and they can make a killing on it” and that “Americans are being crushed under the weight of record credit card debt” as a result.
Minnesota is already trying this. It is one of 20 states which have restricted payday loans, capping annualized rates at 36% starting January 1, 2024, though lenders can go up to 50% if they follow strict rules to ensure the borrower can make the payments.
These price ceilings are working no better for credit in Minnesota than they are for housing; the Star Tribune reports that “Minnesota’s biggest lender, Payday America, stopped offering the loans shortly after the law was passed this spring” just as “Payday lenders have largely disappeared in other states that added such interest rate restrictions.” Minnesotans, typically those “in communities of color and low-income neighborhoods,” who previously had the option of accessing a payday loan at an average annualized rate of 210% now have no payday loan option at all, although it could be said that this has brought the average annualized rate down to 0%.
Such proposals are not new. In 2019, Bernie Sanders and Alexandria Ocasio-Cortez introduced the Loan Shark Prevention Act which would have capped annualized rates on credit card debt at 15%. What is new about this proposal is that it comes from a Republican. “I don't think the fact that Wall Street has gotten its way for 30 to 40 years running in this country, and in our economy, without any kind of challenge, has proven to be a good thing,” Hawley has said, concluding, in the case of credit card debt, that “We have a long history in this country of statutes, at the state and a federal level, that prevent what we used to call usury—an old-fashioned word for ripping off working people…and we need to get back to it.”
Such arguments are increasingly common on ‘the right.’ They find their best champion in Oren Cass, whose 2018 book The Once and Future Worker argues that various social and economic ills—stagnant wages, increased welfare dependency, and falling life expectancies—“are the direct consequence of a decades-long economic consensus that prioritized increasing consumption—regardless of the costs to American workers, their families, and their communities.”
This ‘National Conservatism’ is a fairly explicit repudiation of a good chunk of ‘right’ or Republican thought since Ronald Regan. That tradition has its defenders, such as those rallying under the banner of ‘Freedom Conservatism,’ who warn that “More and more people on the left and right reject the distinctive creed that made America great: that individual liberty is essential to the moral and physical strength of the nation”—emphasis added.
To some extent, the marriage between conservatives and economic liberals has always been an awkward one. Free markets are, by their nature, disruptive. If your conservatism is about conserving a particular set of outcomes you are bound, at some point, to resist a system which is continually disruptive. ‘Conserving’ and ‘creative destruction’ do not mix well.
If nothing else, the vibrancy of these ideological and policy debates on ‘the right’ is a welcome contrast with the intellectual torpor on the left, where thought comprises nothing more than shouting “Racist” ever louder at ever more things and spending ever more money on ever more things. The only real debate between ‘moderates’ and ‘extremists’ on the left is over what they think they can get away with.
The results of this deliberate cultivation of ethnic division and pursuit of national insolvency will not be good for America. That is why the debate on the right matters. Whatever emerges from the clashes between ‘National’ and ‘Freedom’ conservatives will be what we have to take forward into battle with the left. It had better be good.
John Phelan is an economist at Center for the American Experiment. He is a signatory of the Freedom Conservative statement of principles.
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