​Don’t miss the latest economic news in 9 minutes:

💸New CPI inflation report shows a 3.4% increase over the last year, while real average weekly earnings have dropped 4.4% since Biden took office. The Fed must act faster to cut its balance sheet, as I discussed on Fox Business with Cavuto. #Bidenomics #Inflation

📈Biden's tariff practices are a tax hike on those earning less than $400K, despite promises. Join me on the Sean Hannity Show, Lars Larson Show, and NTD News where I discussed the high costs and the failure of Bidenomics. #Tariffs

📚Government schools in Texas are fully funded, NOT UNDERFUNDED like some are saying! Despite declining enrollment and failing test scores, progressives still push for more funding. It's time for universal ESAs to empower parents and lower property taxes. #SchoolChoice

💬 Like, subscribe, and share my take on key economic issues every week. For more info, subscribe to my newsletter at vanceginn.substack.com and check out vanceginn.com.

Originally published at Econlib.

​Through the Consumer Financial Protection Bureau (CFPB), the Biden administration has proposed a regulation to cap how much credit card companies can charge us when we’re late on a payment to just $8. 

This sounds great on the surface, right? 

Lower fees mean less stress when we’re struggling to make ends meet, as inflation-adjusted average weekly earnings have been down 4.2 percent. But, as with many things that seem too good to be true, there’s a catch. 

This well-meaning price control could make things the most challenging for those it’s supposed to help.

First, why do credit card companies charge late fees? It’s not just about making an extra buck. These fees support more credit available for everyone and encourage us to pay on time, which helps the credit system run smoothly.

Now, the CFPB is shaking things up by setting a price ceiling on these fees at $8. While it could save us some money if we slip up and pay late, credit card companies will find ways to compensate for this lost income. 

And how do they do that? Well, they might start charging more for other things, tightening who they give credit to, or increasing interest rates. That means, in the end, credit could be more expensive and harder to get for all of us.

Not just individuals who could feel the squeeze, but small businesses, too. 

Many small businesses rely on credit to manage their cash flow and growth. If banks start being pickier about who they lend to or raise their fees, these small businesses will find it more costly to get credit. This isn’t just bad news for them; it’s bad news for everyone, as the result will be higher prices for consumers, lower wages, and fewer jobs for workers.

Remember that small banks and credit unions are a big deal for the local economy. These institutions often depend on fees to keep things running. If they can charge less for late payments, they might not be able to lend as much. This could hit communities hard, making it tougher for people to get loans for starting a small business, buying a home, or building a project.

Economists have long warned about the dangers of well-intentioned but poorly thought-out regulations. By setting a one-size-fits-all rule for late fees, the government would make credit more expensive and less accessible for everyone. The idea is to protect us from unfair fees, but the real-world result would be different if access to credit were limited for those who need it most.

History proves that often the biggest challenge is to protect consumers from the consequences of government actions. In trying to shield us from high late fees, the government will set us up for a situation where credit is harder to come by and more expensive. This doesn’t mean we shouldn’t try to protect consumers. Still, we need to think carefully about the consequences of our actions and let markets work, which is the best way to protect consumers as they have sovereignty over their purchases.

While capping credit card late fees sounds like a simple fix, the ripple effects would be complex and wide-reaching. It’s crucial to keep credit accessible and affordable, support small businesses, and ensure the financial system remains robust. 

Let’s look at the implications of this price control regulation before rushing into it. Price controls never work as intended, as history has proven. Instead, we should ensure people in the marketplace determine what’s best for them rather than the Biden administration’s top-down, one-size-fits-none approach. 

Originally published at AIER. 

R​ecently, the Biden administration handed  $1.5 billion to the nation’s largest domestic semiconductor manufacturer, GlobalFoundries, the biggest payout from the CHIPS and Science Act of 2022 so far.

The argument for this corporate welfare is America is too dependent on chips from China and Taiwan so more should be made domestically. Instead of seeing how America should reduce the cost of doing business for all semiconductor businesses here, some businesses will be picked as winners and others as losers. The cost of this form of socialism gives capitalism a bad rap and should be rejected.

This move echoes a broader trend of governments worldwide intervening in their economies through industrial policy. A cocktail of targeted subsidies, tax breaks, and regulatory tinkering, industrial policy aims to sculpt economic outcomes by favoring specific industries or firms, all for the supposed benefit of the national economy. Industrial policy puts business “investment” decisions in the hands of government bureaucrats. What could go wrong? 

While its champions tout its potential to boost competitiveness and spur innovation, the reality often tells a different story, especially in light of massive deficit spending. In practice, industrial policy tends to fan the flames of higher prices and sow the seeds of economic destruction. 

Politicians too often meddle with voluntary market dynamics by artificially bolstering favored sectors through subsidies and tax perks, resulting in the misallocation of resources and distorted prices. Moreover, the infusion of government funds to bankroll these initiatives with borrowed money can contribute to the Federal Reserve helping finance the debt, increasing the money supply, and stoking inflation.

The nexus between deficit spending and prices looms large over industrial policy. 

When politicians resort to deficit spending to bankroll industrial ventures, they put upward pressure on interest rates by issuing more debt and competing with scarce private funds. Elevated interest rates disturb private investment, ushering in a likely economic slowdown. 

Suppose deficit financing leans heavily on monetary expansion, whereby the central bank snaps up government debt. In that case, it fuels inflation by flooding the market with money that chases fewer goods and services.

The national debt is above $34 trillion, and the Federal Reserve has already monetized much of the increase in recent years. Racking up even more deficits is insane: repeating the same mistakes and expecting a different result. Excessive spending and money printing have landed us with above-target inflation for over three years running. 

The repercussions of industrial policy ripple beyond inflation to encompass the broader economic landscape. 

Excessive government meddling in specific industries crowds out private investment and entrepreneurship. When particular firms enjoy subsidies and preferential treatment, it distorts the competitive landscape and deters innovation. This stifles economic vibrancy and impedes the rise of new industries or technologies crucial for sustained growth.

For a cautionary tale of how Biden’s recent move could play out, look no further than Europe. 

Nations like Sweden, heralded by the West as a utopian example of big government yielding big benefits, spent the last year grappling with economic strife driven by dwindling private consumption and housing construction. Europe’s penchant for industrial policy, marked by subsidies, high taxes, and regulatory hoops, has contributed to its economic stagnation. 

To sidestep the dilemma of industrial policy missteps, policymakers should stop propping up their favorite sector or industry and instead unleash people to flourish by getting the government out of the way.

Politicians should foster an environment conducive to entrepreneurship, innovation, and competition. This entails cutting government spending, reducing taxes, trimming red tape, and championing trade by removing barriers to private sector flourishing.

By allowing market forces to determine resource allocation and rewarding entrepreneurship and risk-taking, people here and elsewhere can unleash their full potential and adapt to changing circumstances more effectively than under industrial policy frameworks.

​Biden’s billion-dollar amount to one company may seem like a lot, but that’s just a drop in the bucket of what’s to come from the CHIPS Act. Instead, these funds should be eliminated, preventing Congress from taking us further down the road to serfdom.