The hot news item in early August 2023 was that consumer credit card (CC) debt in the United States had reached an all time record high of $1.03 trillion. This was the first time in history that debt had exceeded the trillion dollar mark. Consumer credit card debt does not include commercial credit card debt.

The news was revealed in the Quarterly Report on Household Debt and Credit issued by the Federal Reserve Bank of New York for the period from the first quarter of 2023 (Q1) up to the second quarter (Q2) of 2023.

The report reveals that the number of credit card users who carry their debt from month to month rose from 39% in 2021 to 50% in 2023. In other words, 14% fewer credit card holders pay off their monthly credit card bill now compared to 2021. And, the number of credit card accounts increased from Q1 to Q2 by 5.48 million, bringing the number of card accounts to 578.35 million.

A September 12, 2023 NBC report was headlined on its website, “Inflation is driving up consumer credit card debt by billions of dollars.”[1] Inflation and higher interest rates are the main culprits and those are fueled by fiscal policies of whoever occupies the White House.

Americans are besieged with increasing debt, and that debt, insofar as credit cards are concerned, comes at a high cost-average credit card interest rate in the US is currently 24.45% according to website LendingTree.[2] Senator Josh Hawley (R-Mo) has offered a bill in the U.S. Senate to cap credit card debt at 18%.

Senator Josh Hawley is one of the fire breathing Republican conservatives who routinely pounces on and demolishes Biden Administration officials and Biden appointees who appear before his committees. Yet, his sense of fairness-capping the CC interest rates seems to go against conservative values.

First, this is another case of government interference with private business. A core conservative value is to keep government small and out of our affairs as much as possible.

Second, Senator Hawley’s compassion for those facing what some might consider usurious interest rates is to be commended, maybe. Another core conservative value is personal responsibility. Which includes responsibility in personal financial matters.

Paying interest is, after all, no different than renting a tuxedo for a wedding. You pay Mr. Tuxedo Renter a fixed amount of money to use his tux for a given amount of time, and when finished, you take it back to him. When we need a large sum of money for purchase of a large item such as a house or car, Mr. Banker rents us the money to

purchase the item. We agree to pay back the money over a fixed time period with the rental cost added-interest.

Just who is paying those high interest rates?

A March 2023 article on Forbes website which cites statistics from a report by the Federal Reserve Bank of San Francisco, says that in 2021, 28% of all consumer payments were made with credit cards. The article goes on to state, “The percentage of payments made by credit cards is larger for households with higher income: it jumps to 34% for households earning $100,000 to $149,999 and 44% f or those earning over $150,000.”[3]

Washington politicians use a phrase when discussing government finances-discretionary spending. For the federal government, discretionary spending is spending other than what it calls entitlement spending and government operations. Over the course of the past seventy or eighty years, politicians have placed more and more congressionally created programs in the “entitlement” category.

An article on the Investopedia website, dated September 1, 2023 by Marc Davis has this to say regarding consumer spending.

Consumer spending consistently accounts for about 70% of the U.S. economy. What Americans buy with all of that consumption is divided into two major categories: First, there's non-discretionary spending on necessities such as food, medicine, housing, and clothing. Second, there's discretionary spending, which includes all non-essential goods and services.[4]

Consumers are in the same fix as the federal government: both have required spending and desired spending. And, neither group has the discipline to control either category. The feds have the upper leg in that it can print more money to pay the increasing debt its managers-the politicians- are creating. When John Whatzisname, the neighbor down the street, gets his electric bill, the provider expects him to pay with the dollars he has. If he doesn’t have the dollars, his option is to pay with a credit card and pile on further debt since he can’t run down to the office supply store and say, “Hey, print me some money!”

It used to be, in a day not many people remember now-before easy credit and credit cards- that when the economy tightened up, John Whatzisname would look at his financial needs and resources and begin cutting his outgo-his discretionary spending. Perhaps he and wife cut back on their restaurant visits. Maybe John delayed the purchase of that new bowling ball he has wanted the past few years. He probably took his shoes to the cobbler for new soles, instead of buying new shoes.

In July 2022, U.S. News and World Report reported in an article titled How much is cable bill per month? that the average cable bill for a household was $217.42 per

month. That is $217.42 of discretionary spending per month. CNBC News reported in June 2023 the average mobile phone bill is $144.00 per month. That is $144.00 of discretionary spending per month. And, today, each person in a household over the age of eight months has a mobile phone, laptop pc, Ipad, or some other electronic communication device all bought with discretionary dollars.

What will Senator Hawley get out of his proposal to cap credit card interest at 18%?

He may get some votes from a few folks who think he has done them a favor. In the end, Hawley’s proposal reflects and will promote the undisciplined nature of Congress and the American consumer who will come to feel the reward of permission to keep the spending pedal to the metal with the relief that he can create more debt because the payments will be more affordable.

While I applaud Senator Hawley on most of his work in Washington, on this matter he has become just another Washington politician, pandering to a group of people who can vote. And, the unintended consequences if this measure passes, could be the tightening of credit which may prevent many who now hold credit cards and high amounts of debt, from obtaining more credit for items they really need-such as homes or cars.

A postscript: what Hawley should support.

Senator Hawley would benefit the American people far better if he would file legislation to add the federal debt, now above $31 trillion, to Americans’ personal debt. He and other politicians remind us at election time that the federal debt will burden our children and grandchildren. Why kick the can down the road? Let the federal debt burden us now. Divide the federal debt by the number of residents and report that amount of debt to the credit bureaus. If, say, John Whatzisname brings in $75,000 per year as a medical technician, has a wife and two children and decides to purchase a home valued at $280,000, his lender will find that John owes the bank $14,000 on his car loan,$9,100 to his credit card company, and his student loan is now down to $76,000, which brings his debt to $99,100. The lender will give John a call. It might go something like this: “And, by the way,” his lender tells him, “there’s that $247,569 debt you are carrying which is your personal portion of the Federal Debt. So, your total debt is, uh...$346,669. Sorry John, but we can’t offer that home loan now. Perhaps in fifteen or twenty years when Congress lowers your portion of the country’s debt...come back and see me then.”

[1] https://www.nbcnews.com/business/ consumer/credit-card-debt-rising-as-student-loan-payments-restart-rcna104442

[2] https://www.lendingtree.com/credit-cards/average-credit-card-interest-rate-in-america/

[3] https://www.forbes.com/advisor/credit-cards/credit-card-statistics/

[4] https://www.investopedia.com/financial-edge/0512/the-spending-habits-of-americans.aspx