The contraction of credit Sanders-Hawley would trigger would lower consumer spending, retail sales, leading to a decline in the production of goods and services.
Stephen Moore: Unleash Prosperity Hotline – Credit cards have become an essential lubricant that makes our consumer markets in America work smoothly and efficiently. These plastic cards (now accessible on cell phones) perform an essential function in the American economy, accounting for approximately one third of consumer spending and nearly one quarter of U.S. GDP. Those numbers are growing every year and will continue to as the U.S. economy moves toward cashless transactions.
The 10 Percent Credit Card Interest Rate Cap Act, co-sponsored by Senators Bernie Sanders (I-VT) and Josh Hawley (R-MO) would impose a 10% ceiling on credit card APRs for five years, and penalize issuers who violate it by forfeiting all interest on the debt.- We estimate that at least 64 million consumers would have less access to credit cards or would pay higher fees. Sanders-Hawley would put millions of lower-income Americans with poor credit ratings at risk of losing access to cards entirely. Some 60 million would face new credit fees and restrictions.
- The contraction of credit Sanders-Hawley would trigger would lower consumer spending, retail sales, leading to a decline in the production of goods and services. This economic tripwire could potentially tip the economy into a short-term recession, while the industry adjusts its revenue options as they adhere to these new rules.
- We estimate there would be up to $714 billion of potential loss to GDP from reduced consumer spending.
