As Regulation Increases, Consumers Pay The Price
By Wes Keene | March 22, 2010 | In Category: Economy, General
In 2009 customers got a free lesson in economic theory courtesy of our liberal Congress. In typical leftist fashion, they sought to earn votes by punishing evil credit card companies for their many sins. Penalties for not paying credit card bills were expensive, and the companies were free to raise interest rates on customers that were late or became an increased risk in the eyes of the credit card company. Naturally, this is an injustice only Congress could fix.
Readers might also remember that shortly after that legislation passed, the credit card companies abruptly raised interest rates on consumers of all stripes. While this was much less reported in the media, it affected far more people than the legislation was designed to help. People who don’t pay their bills are a minority. People that do pay are, of course, the overwhelming majority. Yet, Congress’ law said that credit card companies have to offer someone the same interest rate for the life of the purchase. That meant that even consumers who do not pay their bills are insulated from the consequences of their actions. So where did those costs get shifted to? The responsible payers, of course.
Legislators are free to try and impose their personal wills on companies, but they can’t really control the revenues companies need to survive. Laws can say who a company can and cannot raise rates on, but the effect is always like the chest of drawers in a Three Stooges Episode; as soon as you push one drawer in another one pops out.
Utility companies are more or less government controlled organizations, yet we’ve seen energy costs go up tremendously over the past 15 years. Weren’t oversight and price controls designed to make price hikes a thing of the past? While it’s true that utilities need to go to various regional advisory boards to seek permission to raise rates, but they always get that permission. At the end of the day, these regional board succumb to the pressure to keep utilities from having to ration service, and they opt to let the companies raise rates. Yet, because utilities aren’t free to work in the open market we’ve seen breathtaking lack of innovation. Ten years after everyone on the planet accepted credit cards, many utilities still don’t. As every bank worth doing business at offers online banking, many utilities don’t have online facilities for managing and paying your account. With all that oversight, there simply isn’t enough money to innovate.
March 21st marked a solemn occasion in America. With sweeping health insurance regulation, we have again expanded our reach into the inner workings of private industry. When government pretends it knows business better than businesses do, we can expect the stories above to play out again and again. Some liberal voters might get a warm and fuzzy feeling when companies are “cut down to size”, but inevitably those same voters complain again later when rates continue to climb. It’s easy to wonder how high prices need to go before consumers realize government is the problem, not the answer.
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