President Donald Trump‘s bet on artificial intelligence is pushing productivity growth to 5%. And the fruits of his signature domestic achievement, his self-styled One Big Beautiful Bill Act, are set to bloom in full this year.
Trump should finally feel ready to tout an economy that is shedding the dregs of Bidenomics. Instead, he is oddly cowering in defense.
He could be touting a 16% reduction in the federal deficit.
Now, even as consumer spending is on the rise while inflation is slowly but surely trending back toward the Federal Reserve’s 2% benchmark, Trump has announced a 10% cap on credit card interest rates, “effective January 20, 2026.”
The good news for the rest of us is that Trump cannot, legally or practically, enforce a unilateral interest rate cap without Congress. House Speaker Mike Johnson (R-LA) and Senate Majority Leader John Thune (R-SD) have indicated that the proposal would be dead on arrival in both chambers. But the sheer desperation of Trump’s proposition raises the uncomfortable question of why he feels so hopeless about an economy that is otherwise signaling momentous improvement.
Republicans correctly ridiculed former Vice President Kamala Harris for proposing grocery price controls in an 11th-hour attempt to salvage her 2024 presidential bid when she was the Democratic nominee. Yet Trump’s price control proposals on credit card interest rates are no less laughable.
If you use a credit card correctly — that is, you pay it off at the end of every single month — it charges a customer 0% interest. While a credit card company pays customers’ bills up front and then rewards them with a percentage in cash back, points can be redeemed for travel and other perks, such as rental car insurance or airport lounge access. If you let a credit card company pay for all of your month’s expenses and fail to reimburse it, you pay an average interest rate of about 24%.
If used wisely, this is a fair, solid, and stable line of credit. Let’s say a blue-collar worker takes out an extra $500 in December to pay for his children’s Christmas gifts but can’t pay it back until his next paycheck comes in January; a 24% interest rate amounts to a mere $10 borrowing cost for the privilege of a $500 advance.
Should an interest rate cap actually become law, lending would immediately be restricted solely to the highest-income earners with the highest credit scores. It would leave lower-income borrowers dependent on payday loans that charge between 300% and 900% interest.
The Federal Reserve Bank of New York found that whereas credit card interest rates average in the single digits for borrowers with FICO scores north of 800, interest rates, on average, are more than 20% for borrowers with FICO scores in the 600s. This is not because the banks hate poor people, but rather because poor people cost more to trust with loans.
The New York Fed found that credit card charge-offs — that is, when a lender writes off an outstanding debt owed as a loss — average almost 4% of total balances.
TRUMP EMBRACES FAILED LEFT-WING, CREDIT CARD INTEREST CAPS
Borrowers with 600 FICO scores have an average charge-off rate of 9.3%, while those with perfect FICO scores have charge-off rates of just 1.3%. Wharton estimated that a 10% interest rate cap would thus render 80% of customers unprofitable, cutting them off from the stability of credit cards and becoming dependent on loan sharks.
If the White House’s goal is to effectively parent suboptimal consumers and stop them from recklessly borrowing their way into debt, a crackdown on the novel monstrosity that is at-home sports gambling would be a worthy start. But capping interest rates will not give the poor cheaper access to credit. It will simply deprive them of any reliable finance at all.
Tiana Lowe Doescher (@TianaTheFirst) is an economics columnist for the Washington Examiner.