Originally published at James Madison Institute.

​America’s Antitrust laws have been essential to the legal landscape for over a century. They were designed to protect competition and consumer welfare. However, the Biden administration’s onslaught on competition through flawed antitrust efforts has threatened consumer welfare and profitability. This is especially true for “Big Tech” companies that generate substantial consumer welfare and billions of dollars in economic activity. 

While these efforts are purportedly aimed at safeguarding the interests of consumers, they pose a major threat to free-market capitalism and, thereby, the nation’s prosperity. Understanding the origins of antitrust laws illuminates why current antitrust accusations are far from their original purpose. 

Antitrust laws trace back to the Sherman Anti-Trust Act’s enactment in 1890. The landmark legislation was aimed to curb anticompetitive practices. Section 1 prohibits contracts in restraint of trade, regardless of the size of the firms participating. Section 2 prohibits monopolization or the abuse of monopoly power by firms with substantial market shares. Further reinforcement came with the Clayton Act in 1914, which focused on preventing mergers that could substantially lessen competition or tend to create a monopoly.

However, applying antitrust laws lacked consistency and often yielded ambiguous results, especially during the mid-20th century. 

Fast forward to the 1970s, legal scholars proposed a paradigm shift. Figures like Aaron Director, Robert Bork, and others delved into the legislative history of the Sherman Act, concluding that its primary purpose was to protect consumers from the harm caused by cartels without undermining economic efficiency.

This approach laid the foundation for what we now call the consumer welfare standard, a critical development in antitrust enforcement. 

In the late 1970s, the U.S. Supreme Court recognized this standard in several cases, asserting that business conduct raising antitrust concerns must be evaluated based on demonstrable economic effects. This standard has since guided antitrust law, emphasizing a simple question: does the conduct make consumers better or worse off? If the conduct improves or does not harm consumers, the conduct is allowed; otherwise, the government can intervene. 

The consumer welfare standard is a seemingly straightforward approach that has been a guiding light to antitrust cases. But it has failed to hold those currently at the Federal Trade Commission (FTC) and Department of Justice accountable for their excessive efforts.

In recent years, calls to wield antitrust laws to address the conduct of prominent technology companies like Amazon and Google, which some pejoratively call “Big Tech,” have gained momentum. However, these movements are misguided and pose significant risks to the principles of free-market capitalism. 

Expanding the enforcement powers of antitrust agencies, as advocated by some on the left and right, revives an old “big is bad” approach reminiscent of a bygone era when antitrust enforcement was highly politicized. Instead of fostering competition, such a progressive approach undermines the competitive market process. This destroys the instrumental activity that provides innovation, affordable prices, and high-quality goods and services, all critical for human flourishing.

This lawsuit purports to challenge Amazon’s management of its online marketplace, alleging that sellers are forced to charge high prices and lose profit by using Amazon’s add-on services and advertisements. The FTC contends that these choices are obligatory and accuses Amazon of operating as a monopoly, leading to higher prices for lower-quality products.

Numerous surveys and studies reveal that consumers are pleased with Amazon’s services, so this attack against the consumer welfare standard does not appear to be about what is best for customers despite the claims of progressive antitrust enforcers. Moreover, consumers have the agency to take their dollars elsewhere, as Amazon is hardly the only online seller. 

The principles that drive capitalism are rooted in competition; when competition is stifled, consumers and entrepreneurs lose.

Another example of abusing antitrust is the Department of Justice’s (DOJ) lawsuit against Google. 

The suit contends that Google has dominated the market as the default browser on popular devices through monopolistic means and must be stopped. However, Google is the default browser via legal marketing tactics, which the consumer can easily change, as numerous search engine options can be implemented on any device. 

Therefore, the case fails to meet the standard of a solid antitrust law violation of making consumers worse off. Consumers still have many options when selecting a default browser, but most choose Google because they like it best. 

This lawsuit is emblematic of a broader issue – applying antitrust laws to preserve competition. Antitrust laws should protect consumers by evaluating whether they are better or worse off due to a company’s actions. It should not be a mechanism to stifle competition to level the playing field. Enforcing such laws without considering the diverse preferences of consumers is a disservice to the very principles on which capitalism–and antitrust laws–were founded.

If we’re going to have antitrust laws rather than just letting market forces work, the consumer welfare standard is an essential framework for evaluating antitrust cases. 

It ensures that the focus remains on improving people’s lives rather than manipulating the market based on antitrust enforcers’ interests or political persuasions. This standard can help keep regulators from blocking innovation and economic growth by limiting their ability to pick winners and losers.

While concerns about the size of large tech companies and their censorship practices may be warranted, granting more power and discretion to government bureaucrats is not the solution. Expanding antitrust laws and enforcement powers will lead to politicized enforcement, often aimed at serving the interests of big government, with a disregard for the effects on consumers and the broader economy. 

Such a big-government approach would curtail entrepreneurship, freedom of speech, job creation, investment, and economic prosperity.

Proposals to create new antitrust laws are unlikely to address concerns related to censorship and bias in tech companies. Instead, they will usher in uncertainty as legal standards evolve, causing companies to settle such cases to avoid costly legal battles. Such settlements may not necessarily benefit consumers or the economy and will drive up entry costs, creating a high barrier for startups.

At a time of elevated inflation, the labor market faces challenges, and the economy is in turmoil. Pursuing lawsuits against successful companies diverts resources from critical issues and misuses taxpayer money.

The time is now to refocus on what genuinely matters, acknowledge the limitations of government intervention in regulating markets, and allow the principles of free-market capitalism to flourish. This approach should recognize that dispersed, decentralized information through people in markets is much better than through central planning. 

Free-market capitalism is not the enemy but the best path to prosperity and freedom. We would be wise to have more of it, not destruction by the radical Biden administration.

Originally published at Daily Caller. 

The Biden administration wants to cap credit card late fees through the Consumer Financial Protection Bureau (CFPB). But hold on – this could spell trouble, especially for those the rules intend to help.

The CFPB’s proposed rule to cap credit card late fees may reflect a well-intentioned effort to enhance consumer protection, suggesting that lower-income households may be hurt the most. However, stakeholders, including the American Bankers Association, caution against doing so because of many unintended consequences. These include restricting access to credit for those in need, creating perverse incentives to not pay on time, and raising the cost of banking and credit by passing along these costs to everyone.

Late fees may be a nuisance, but they’re crucial to keeping credit card systems in check and getting credit to those who need it. By capping late fees at $8 and limiting them to 25 percent of the minimum payment, the CFPB risks upsetting the delicate balance of the financial ecosystem.

Whether we like it or not, credit cards serve as a lifeline for millions of Americans, offering convenience, security, and a way to build credit.

Indeed, for families living paycheck to paycheck, every dollar counts. But it’s imperative to point out that late fees are not solely punitive measures. Late fees encourage people to pay on time, reducing defaults and helping provide needed access to credit.

But if late fees get capped, it’s not just the big banks that’ll feel the pinch – it’s everyday people and small businesses. Banks will likely raise fees or tighten lending standards to compensate for lost revenue. That means higher costs and less access to credit for everyone.

Economist Dan Mitchell’s analysis highlights the unintended consequences of well-intended regulations and urges policymakers to tread carefully. Late fees contribute significantly to the bottom line for card issuers, but they also influence consumer payment patterns and debt management strategies. 

Imposing price controls like these on the marketplace isn’t free. People in the marketplace are best at pricing things, including credit card late fees. Government-imposed restrictions, such as caps on late fees, will distort market signals and hinder economic efficiency.

In Texas, where local banks are the backbone of many communities, as in many other states, this policy could hit especially hard. If banks can’t use late fees to encourage timely payments, businesses might struggle to get the credit they need to grow and thrive. 

In fact, Glenn Hamer, president of the Texas Association of Business, recently noted the symbiotic relationship between late fees and small depository institutions. Many local banks rely on late fees to cover operational costs and extend credit to consumers. Imposing strict limits on late fees could jeopardize the viability of these institutions, limiting access to credit for underserved communities.

The Small Business Regulatory Enforcement Fairness Act (SBREFA) underscores the importance of assessing the impact of regulatory proposals on small businesses. Late fees are a lifeline for small depository institutions, enabling them to compete in the credit card market. Any regulatory changes must carefully consider the implications for these businesses and the communities they serve.

Economist Milton Friedman warned: “Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.” 

Before the CFPB rushes into this, let’s pump the brakes. Because when it comes to late fees on credit cards, or “junk fees” in general, one size does not fit all.

Originally published at The City Journal. ​

In November 2023, Texas voters approved a constitutional amendment, HJR 2, which Governor Greg Abbott said would “ensure more than $18 billion in property tax cuts—the largest property tax cut in Texas history.” Texas homeowners’ hopes were dashed at the start of 2024, however, when they got their property tax bills. The promised $18 billion reduction amounted to only $12.7 billion in new property tax relief, a fraction of the state’s record $32.7 billion budget surplus, while the other $5.3 billion merely maintained property tax relief from years past.

While Texas doesn’t have a state income tax, it does have the nation’s sixth-most burdensome property taxes. These taxes obstruct peoples’ ability to buy homes and price others out of the homes they’re in. Texans expect and deserve clarity about their property tax bills, but state policymakers’ failed promises and lack of transparency have eroded public trust. 

Despite the governor’s claim, the 2023 tax relief package, spread over two years, isn’t even the state’s largest historic property tax cut. In 2006, the Texas legislature apportioned $14.2 billion to reducing residents’ property taxes, cutting school district maintenance and operations (M&O) property tax rates by a third for 2008–09 biennium, and making up the difference with a revised franchise tax, a higher cigarette tax, and a higher motor vehicle sales tax. Adjusted for inflation, 2023’s cut would have had to exceed $21 billion to surpass the 2006 cut.

The new package's biggest achievement was saving taxpayers $5 billion in 2023 by reducing the maximum school district M&O property tax rate by 10.7 cents per $100 valuation; it also raised the homestead exemption of taxable value for school district M&O property taxes to $100,000 and limited appraisal-value increases to 20 percent for other property. And yet, Texans’ total property taxes paid in 2023 nevertheless rose by $165.2 million over 2022, an overall increase of 0.4 percent. That net increase came from school district tax hikes to fund more debt ($890.2 million); municipal governments ($1.3 billion); county governments ($1.5 billion); and special purpose districts ($1.5 billion). These hikes effectively washed away state-level reductions. While this result is ultimately the fault of local governments, the state should have done more to provide relief and restrict localities’ spending and taxes.

This growth in local property tax collections is part of a larger trend. From 1998 to 2023, Texas’s total property taxes collected rose 338 percent while the rate of population growth plus inflation was just 136 percent. No wonder so many Texans feel as though they are being crushed by housing unaffordability.

How can Texas fix its spending problem? Rather than resort to temporary fixes, the state needs a robust spending cap in its constitution like Colorado’s Taxpayer’s Bill of Rights (TABOR), which limits state and local government spending increases to no more than the rate of population growth plus inflation. Though Colorado’s TABOR has been the gold standard for a state spending limit since its enactment in 1992, it can be improved. At this time, TABOR applies to Colorado’s general revenue, less than half of its total funds; it should be expanded to apply to all state funds, which would account for about two-thirds of its budget, as originally intended. Texas, or Colorado itself, could also improve the model by replacing the latter’s policy of refunding excess tax revenue to taxpayers with up-front income-tax-rate cuts. Texas enacted a statutory spending limit in 2021, but it lacks teeth, as an overriding constitutional spending limit covers just 45 percent of the budget and can be exceeded by a simple majority.

In conjunction with a stronger constitutional spending limit, the Texas legislature should implement strategic budget cuts. These efforts combined with the stricter constitutional spending limit would create opportunities for surpluses at the state and local levels, which would pave the way for the state to reduce school M&O property taxes annually until they are fully eliminated. This alone would shave off nearly half of the property tax burden in Texas.

Viewed from the coasts, Texas is a beacon of economic freedom. But as its spending and property tax data show, it isn’t perfect. The Texas legislature should acknowledge its failed promises and deliver real property tax relief for its citizens.

​Episode 85 is with Dr. Adam Michel, director of tax policy studies at the Cato Institute.

Today, we discuss: 1) Problems with OECD and global taxes; 2) Tax cliff coming in 2025 from many expiring TCJA provisions; and 3) Why a fiscal crisis without major spending reforms, how taxes influence human behavior, the truth about The Laffer Curve, and much more.

​Please like and comment on this video, subscribe to the channel, share it on social media, and provide a rating and review. Thanks! Also, subscribe and see show notes for this episode on Substack (www.vanceginn.substack.com) and visit my website for economic insights (www.vanceginn.com).

​In today’s This Week’s Economy episode 49, I provide a trigger warning about my 10 unpopular views, housing deregulation, property taxes, Gen-Zers moving to Texas, and much more. Please like this video, subscribe to the channel, share it on social media, and provide a rating and review. Also, subscribe and see show notes for this episode on Substack (www.vanceginn.substack.com) and visit my website for economic insights (www.vanceginn.com).