Retailers’ wrongful approach to credit card transaction fees

For most Americans, government price controls are thankfully fading memories. It has been nearly 40 years since we tried this “cure” for 4 percent inflation. The result was a disastrous increase to double-digit inflation.

Given this lesson, it’s mind-boggling that Congress would even consider imposing price controls. Yet, that’s what a measure before the House Judiciary Committee would do.

Merchants accepting credit and debit cards carried by millions of Americans pay a small fee on each transaction. This fee is used to cover the systems that give consumers fast, convenient and secure ways to pay for goods and services. Merchants benefit and can sell more products more efficiently and in more places (think online). It’s a win-win, the definition of a functioning, efficient marketplace.

However, some of the nation’s merchants decided they do not want to pay this fee, wanting all the benefits of the electronic payments system at an artificially low price. They are urging Congress to undertake radical intervention in the market.

Here’s their plan: Replace the free market with government-fixed prices. The merchants’ bill, H.R. 5546, would set up a three-judge panel with complete power to set the fees merchants pay.

These corporations — which would fight if Congress tried to set the price of their goods — want the price of payment card acceptance decided by three people, elected by nobody and accountable to no one.

Price controls have huge risks for everyone — except merchants. Look at what happened when this kind of price control was implemented in Australia. Predictably, merchants’ profits went up, but prices for consumers stayed the same or increased. The choices for consumers in terms of card benefits declined.

And there was less money to run the payments system. Price controls turned a win-win system to one with a single winner — merchants — and millions of losers.

Bad policy at the best of times, this is downright dangerous in a struggling economy. Consumers are worried about the economy. Businesses are working harder to keep up. It is the wrong time for government to clumsily insert itself into the marketplace, solving a problem that doesn’t even exist.

Two things are certain: Consumers will lose, just like they did in Australia, and a functional market will be broken by this kind of government interference.

Congress needs to stand up for our consumers and our economy and tell the merchants that we want no part of price fixing.

Washington



Aides: Get money-wise for yourself, taxpayers

From a congressional staffer
(name withheld)

Reading “Aides to Congress: Show us the money, but not twice a month” (May 28), it is easy to see why Washington has had such difficulty grasping the concept of fiscal responsibility. How can we as congressional staff expect to balance the nation’s checkbook if we can’t balance our own? Granted, the greater D.C. area presents numerous challenges when it comes to living expenses — but plenty of young people in both the public and private sectors handle this the right way by sharing living space, relying on public transportation and opting for homemade meals instead of constantly eating out at largely overpriced restaurants.

While I am not opposed to the two-paycheck-a-month proposal, I do find some people’s attitude on this issue highly absurd. Treating 25-year-olds like 15-year-olds will only prevent them from developing the (hopefully) more refined financial sensibilities of a 35-year-old. Whether our paychecks arrive in one installment or two, we’ll receive the same amount of income every month. If we can’t make ends meet on that income, perhaps some lifestyle changes are in order.

What’s more, developing good financial habits — regardless of where you are in the pay scale — helps make sure you won’t squander a bigger salary when you start earning one. Living beyond your means is just as silly whether you’re making $30,000 or $300,000 a year.

On behalf of those who have worked their way up the Hill without “supplemental support” from parents or other benefactors, I’d like to remind my fellow staffers that fiscal responsibility starts with each individual. We can’t hope to intelligently address our nation’s budget challenges until we start making sound financial choices for ourselves.