Obama recently gave support for two bills that will regulate credit cards. In short, he wants to use the government to take away options from consumers by forcing credit card companies to limit interest rates and other forms of interest.

http://www.washingtonpost.com/wp-dyn/content/article/2009/04/20/AR2009042003558.html?wprss=rss_business

http://www.latimes.com/business/la-fi-credit-card21-2009apr21,0,7360732.story

The banks are struggling, so they are charging higher interest rates and finding more creative ways to profit. Obama, in order to “protect” us, is using the government to make some of what they’re doing illegal.

Summers (Obama’s economic advisor) said Sunday that the president was focusing on such credit card abuses as those "having to do with the way people have been deceived into paying extraordinarily high interest rates that they wouldn't have paid if they knew what they were getting themselves into."

Completely ignoring the long argument I feel like giving on how this kind of totalitarian government intrusion into the private activity of business and consumers is unjust, and the argument on how it’s not the proper role of government to use the threat of death and prison to get companies to do what they think is “right” for me, all of this shows a disgusting double standard, a vapid understanding of basic economics, as well as a snobby tone.

1. Snobby Tone

With all do respect, President Obama – back off – I’m an adult, and I don’t need you to “protect” me from being “deceived.” Credit card companies, along with all other businesses already have the fascist-feeling breath of the government breathing down their neck. Credit card companies will only issue you a card if you agree to the terms of use. Do all people read the long agreement? Nope, but I do.

We’re not children, and if you want to continue to view us as children who need your protection, that’s fine – but stop lying about “believing in the American people.”

If your friend is running a race and you tell him “I believe in you,” but the next day you tell the other runners they can’t run too fast, and if your friend is too far behind they must stop and tie their shoe until your friend catches up – how would your friend feel? Doesn’t the idea of “believing” in someone mean you are confident in their ability to succeed?

The truth is, President Obama, you believe we’re idiots. The premise behind the policies of protectionism is that people can’t be trusted in making decisions about their own life. We’re too stupid to save money, so we need the government to force us to save (social security), we’re too stupid to get a credit card, so we need the government to force them to lower rates. The truth is you don’t believe in “the American people.”

2. Vapid Understanding of Economics

The idea that to “lower interest rates” all we need to do is make it a law that they are low is so childish and intellectually bankrupt I don’t even know where to begin. If the idea that the way to reduce the price of something is to just make it law worked, why not legislate that all homes be sold no higher than $250? Make it a crime to sell any amount of food for more then $5! The truth is, criminalizing a certain interest rate, or the price of a good comes at a cost. The only incentive banks and lenders have to lend is interest – why risk millions otherwise? So by reducing interest rates, we reduce incentive to loan, and reducing incentive to loan means less loaning. All of this translates into the idea that there will be less people out there who are willing to loan, and this translates into less jobs and less competition.

On top of having the effects I listed above, foolish protective measures hurt the poor the most. If you have poor credit, you will only be given a credit card at a high rate since you are a risk. A business is in essence saying “Look, you’re a pretty risky deal, so we’ll give you a shot but only if you offset your risk with a higher fee” – If you make it a crime to offset risky customers with high rates, why loan at all? I have personal experience with this. A friend of mine approached me asking for a loan, and only did so because he had no other option. He was too much of a risk to get any additional credit, and since businesses legally can’t charge the interest they’d need to charge to offset the risk, they just turn him down.

In short, when you reduce the profitability of something, you get less of it.

3. Disgusting Double Standard

Right now many states are having budget problems, and in a pathetic effort to fix the budget issue many states have raised or threatened to raise taxes. Here in California they’ve already hiked the sales tax, and are threatening to raise other taxes. So here we have the SAME people who are “struggling” and “suffering” from credit card companies raising rates being financially raped by the state.

Consider this for a moment. A credit card can only charge you a higher interest rate if you agree to the terms of service. If you’re upset at the changing rates, you’re free to cancel, or just go to another card holder. Raising rates on “suffering” people is so offensive to Obama that he runs around talking about “protecting” us from the rise in rates by using the power of the government. At the same time states are raising taxes – taxes that nobody has any choice on paying, and your refusal to pay means you’re fined, and if you resist, put in jail. So on one hand we have a company raising rates on its voluntary customers, and on the other we have police aiming guns at people as a means to ensure you pay the ‘higher fees’ (taxes.) The credit card companies are demonized, while the efforts by the states are seen as necessary and good. What’s the difference? Both are simply adjusting to a struggling economy.

What makes the double standard glow is Biden saying the “rich” being forced to pay higher taxes is “patriotic” and a way to help America “get out of the rut.”

In conclusion: President Obama, I’m not a child, please read “Basic Economics” by Thomas Sowell, and when are you going to save me from higher taxes?

“I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase.” – Obama (video link http://tinyurl.com/cuxwr9 )

“The largest cigarette tax in history will take effect Wednesday, April 1, 2009, and many penny pinching smokers are considering kicking the habit. President Obama signed legislation earlier this month that raises the federal cigarette tax by 62 cents a pack.” - http://www.wrcbtv.com/Global/story.asp?S=10105485

Oops.

Is anyone surprised though? An interesting fact about the tax hike is that most smokers are low income.

“According to the Centers for Disease Control and Prevention, only one in five Americans smokes, so the excise targets a minority -- and over half of all smokers are low income, and one of four are officially classified as poor.” – Wall street journal

This is not even counting all the other ways the poor will be hurt under Obama offsetting his pathetic “tax credits” that amount to $10 a week for an individual (two happy meals at McDonalds!), such as printing money (inflation tax), or cap and trade. Setting this aside, one of the said benefits of the tax hike is that it will give high incentive or just force people to quit. Here are few quotes:

“This legislation also wisely increases taxes on other tobacco products to encourage smokers to quit tobacco use and not simply switch to other less expensive products.” – Medical News Today

“If the past is any guide, the sizable tax boost should have an immediate impact in getting many smokers to quit, and anti-smoking advocates were making the most of the moment yesterday.” – Washington Post

One of the “benefits” of a tax hike on cigarettes is that it will reduce smoking. Remember that voodoo concept supply and demand? When price goes up, demand goes down, right? If the price of cigarettes goes up, demand for them goes down.

The interesting thing about admitting this is the implications. If politically liberal people are happy to admit one of the effects of taxing something is we’ll see less of it, to remain consistent they must admit that this applies to all the things they want to tax. Statists want to tax productivity, investment, employers, trade, and work. So to say “We should raise capital gains made on investment and savings” is equal to saying “We should reduce capital gains made on investment and savings.” Simply change the words.

“This legislation also wisely increases taxes on employers to encourage employers to quit providing employment” – Medical News Today (parody)

“If the past is any guide, the sizable tax boost should have an immediate impact in getting many investors to quit investing, and anti-investment advocates were making the most of the moment yesterday.” – Washington Post (parody)

For those of us who are consistent in advocating free market principles, it’s not hard to come out of the closet and admit you accept controversial ideas like supply & demand. In the same way that ‘if price goes up, demand goes down’ applies to cigarettes, the same reasoning explains why minimum wage increases (and minimum wage in general) hurts the poor. When you use state force, backed by prison and death threats, to raise the price of labor by artificially setting price controls, you’d expect less ‘labor.’

“If the past is any guide, the sizable minimum wage boost should have an immediate impact in getting many employers to quit hiring, and anti-job advocates were making the most of the moment yesterday.” – Washington Post (parody)

Can you imagine how upset people would be in liberals advocated tax increases, or minimum wage hikes like this? Of course when do gooders advocate ideas like wage hikes this is exactly the consequences are. There’s no difference in the reasoning, just a difference in the rhetoric.

In short, by Obama legislating higher taxes for poor smokers, supporters of the tax have revealed an inconvenient truth – that an increase in price means we see less of it.