On the question of credit, the senior Republican senator from Missouri finds himself well to the left of the White House, only slightly less progressive than democratic socialists like Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez, and very much out of step with the business-friendly old guard of his party.
Sen. Josh Hawley will introduce legislation to cap the annual percentage rate of credit cards at 18%, RealClearPolitics is first to report. The average APR, by most estimates, now hovers near the 24% mark.
“Americans are being crushed under the weight of record credit card debt,” Hawley said just weeks after the Federal Reserve Bank of New York reported that national household credit card debt had hit the sobering and historic $1 trillion milestone.
“The government was quick to bail out the banks just this spring,” he continued, referencing the now-liquidated Silicon Valley Bank of California and Signature Bank of New York, “but has ignored working people struggling to get ahead.” Setting rates on credit cards then, the Republican said, would be a “fair” and “common-sense” way to give “the working class a chance.”
Hawley isn’t the first to try. The left has attempted for decades to limit rates, most recently when Sanders and AOC introduced the Loan Shark Prevention Act in 2019 to cap credit card APR at 15%. The bill languished in committee without a vote in the Senate, and Sanders lost the nomination to President Biden – who later attempted to assuage fears that Democrats were drifting toward ideological extremism by proclaiming “I beat the socialist.”
Though once dubbed “the senator from MBNA” due to his close relationship with the now-defunct Delaware bank with a lucrative credit card line, Biden has turned a more critical eye on the industry. The White House seeks to slash credit card late fees, an effort that Hawley says he generally applauds. His proposal, however, would go much, much further than anything proposed by the administration.
“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,” Hawley told RCP in defense of his proposal, “and we need to get back to it.”
Hawley likely has a better chance of continuing the ongoing realignment of the Republican party than of meaningfully affecting the kitchen table finances of families with his latest proposal. His bill has little chance of making it to Biden’s desk, but there are signs that the Grand Old Party, historically chummy with corporations, may now be chilling toward industry.
House Speaker Kevin McCarthy publicly divorced the Chamber of Commerce this year. Ohio Sen. JD Vance is at war with the railroads over safety regulations. Businessman turned presidential candidate Vivek Ramaswamy seemed to rebuke the ghost of Reagan at last month’s primary debate.
For his part, Hawley has found his corporate villain in credit companies. “We know what they’re doing,” he said. “They're out there actively encouraging and finding new ways to get consumers indebted – they hike rates, and they can make a killing on it.” He continued, “Who does this hurt? Working people.”
The populist senator, who penned a biography of President Teddy Roosevelt titled “Preacher of Righteousness,” rejects what others on the so-called new right derisively dismiss as “market fundamentalism.” This makes Hawley an apostate to the more libertarian wing of his party that still sees unfettered capitalism as a good in and of itself.
“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,” he said, before blaming that laissez-faire approach for offshoring jobs and holding down wages.
In the wilderness of the post- and perhaps the intra-Trump years, Republicans like Hawley, as well as Florida Sen. Marco Rubio and Indiana Rep. Jim Banks, have sought a new identity for the GOP as the blue-collar party. “If we’re serious about being a party of working people,” the Missouri conservative said, “then we're going to have to address the challenges that working people face.” This requires taking on vested special interests, in his estimation, including those “that the [GOP] mistakenly, in my view, has cozied up to in recent years.”
Arguments against capping credit card APR are well-known in the Senate from the last time Republicans defeated similar attempts by Democrats. Then-Sen. Pat Toomey of Pennsylvania railed in committee against attempts by “government planners” to set prices, warning that they often trigger “huge unintended consequences, which inevitably harm the people they are supposed to protect.”
Those that seek to cap interest rates, Toomey said, believe that the measures “would result in borrowers getting cheaper credit, but that’s just not the case.” Instead of lower interest rates, he argued, “those most in need would simply lose access to credit. If a lender can’t recoup its costs, it won’t make the loan.”
But Hawley doesn’t think this will happen. “I think the idea that these banks will leave large segments of the population alone, and leave all the potential profits on the table,” he said of a scenario where APR was capped at 18%, “I think is probably unlikely – highly, highly unlikely.” He noted also that the National Credit Union Association has kept rates at that level for its members for some time and that his proposal wouldn’t favor one segment of the credit card market over the other.
Hawley knows that he is implicitly rejecting the neoliberalism of the Reagan and Bush administrations, but the senator appeals to older Republican authorities.
“Let's remember what Lincoln said, and Theodore Roosevelt after him, both referring to the rights of labor and capital,” he said, drawing from the first address that the founder of the Republican party made to Congress in 1861. “Each has its rights, but one should not be privileged above the other. … In today's economy, there’s absolutely no danger that working people are going to be privileged over capital.”
