Errors of Enchantment

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Yet another year before manned space tourism at New Mexico Spaceport

08.17.2021

As we have noted frequently in this space, New Mexico’s Spaceport opened on October 11, 2011. While Richard Branson’s much-hyped flight gained international attention and raised hopes for the facility, the recent announcement that manned space tourism flights would not take place for another year (late summer 2022) has to be considered another significant setback for the facility.

Yes, Virgin Galactic wants to launch tourists successfully and frequently, but that doesn’t do much to gain New Mexicans a return on their $225+ million investment. Will the launches actually happen next year? Only time will tell.

Jeff Bezos’ Blue Origin claims it will launch two commercial flights by the end of 2021. 

Spaceport America - Virgin Galactic

ABQ Journal realizes inflation is a problem, ignores government as cause

08.16.2021

The Albuquerque Journal has figured out that inflation is increasing rapidly and causing problems for New Mexico businesses. So, we got two stories (here and here)  in the Monday, August 16 edition of the newspaper which include interviews with numerous businesses and a few economists on the rapid rise in prices across the economy.

What was missing? Government “stimulus” policies, especially the “enhanced” unemployment benefits. The only hint of government’s inflationary policies impacting inflation is the following from the owner of Car Crafters saying, “it chafes him that people are out there making more staying home when he sees his staff pushing themselves so hard…It just seems unfair.”

What are those inflationary policies? Well, start with the Federal Reserve. That is discussed in detail by Mises Institute economist Bob Murphy here. 

The generous unemployment benefits and overall economic “stimulus” payments are direct factors as well. People have more money in their hands and with supply chains slow to normalize, inflation is an obvious result.

There are numerous other government factors impacting inflation including rising fuel prices (thanks in part to the Biden Administration’s ongoing anti-oil and gas policies including ongoing permitting issues and the Keystone XL pipeline cancellation.

quote-by-a-continuing-process-of-inflation-government-can-confiscate-secretly-and-unobserved-john-maynard-keynes-15-71-58.jpg

Responding to Ruben Navarette on masking kids

08.13.2021

Navarette is a Washington Post columnist whose writings often appear in the Albuquerque Journal. While we tend to not focus on national politics at RGF and almost NEVER respond directly to their columns, but THIS one (linked above and which ran in the Journal on Friday) truly set off RGF president Paul Gessing who in turn penned this response to Navarette.

Dear Mr. Navarrette,

I read your piece relating to masking kids in school with great dismay. I used to respect you as a proponent for school choice. Once upon a time you used to be a staunch advocate for transforming our schools into institutions that served the children and parents that pay (albeit indirectly) for them. Apparently when it comes to masks you take the “shut up and mask up” position.

If masks were effective at “stopping the spread” I’d at least give this perspective some credence. But if you can find me a study that shows masks on adults (let alone kids) are effective at stopping the spread of COVID 19 I’d love to see it. Instead we have seen increasing numbers of medical professionals including Dr. Michael Osterholm saying that cloth masks are simply not effective. Of course they recommend N-95’s, but no one is doing that correctly let alone our kids.

I have three children in school, 11, 9, and 5. All of them are attending new schools this year. I have serious concerns about them wearing masks both for socialization AND language acquisition. As a resident of New Mexico (which has performed worse on the virus in terms of deaths than Florida) I have deep envy for the citizens of Florida and their amazing Gov. Ron DeSantis. I urge you to at very least reappraise your position based on your historic views on school choice, but ultimately because “local control” is best implemented as “individual control.

Ruben Navarrette Jr. Wiki & Bio - Syndicated ColumnistCashman: Stop masking the truth. Kids can't handle face coverings

Pay New Mexico’s Legislature?

08.13.2021

In the private sector pay for performance is commonplace. Perhaps it is time for “reverse psychology” in New Mexico’s Legislature. A proposal by Sen. Daniel Ivey-Soto to pay New Mexico legislators was discussed in an interim committee recently and we talked about it with The Center Square.

New Mexico has an “unpaid” Legislature. While RGF does not take a philosophical issue with having such a Legislature, it is clear that what is currently happening in Santa Fe is not working. Most of that blame falls on voters who have repeatedly elected people who have no idea how to bring jobs and economic growth to the State, but it is at least possible that paying legislators will enable qualified people who cannot currently run for office to do so.

Will paying legislators actually reduce corruption or improve the quality of elected candidates? We don’t know, but we’re not opposed to trying something new. That said, IF legislators are paid, it would seem that the generous legislative pension system could be on the chopping block.  

Tipping Point episode 325: COVID-19, Electric Cars, Soccer Stadium, ABQ Homicides, and Campaign Finance

08.10.2021

NM vaccine mandate for state employees. Gov. and numerous other Democrat legislators, US senators/reps, and legislators send letter “asking” businesses to require vaccination for employees AND customers. Will this lead to fraudulent vaccine cards?

7 day moving average COVID deaths as of August 8, 465. In January that was 3,500. Aside from a month ago or so the ONLY time we had lower numbers of COVID deaths in the USA was in late March of 2020. NM death rate remains 13th-highest. Much-criticized Florida is 26th highest. Dr. Michael Osterholm who was one of Biden’s top COVID advisors recently made waves saying cloth masks don’t really work.  Floyd and Cloudcroft school districts stand up to the Gov. on masking kids and Floyd is suspended.

MLG is coming for your car again (clean fuel standards upcoming session) Also, On top of that the State is now involved in rule-making to require that between 7 and 10% of vehicles sold in NM by 2025 will have to be “zero emissions.”

A new taxpayer-financed stadium for the United Soccer team is on the ballot this fall: In public comment, critics outnumbered supporters about 13 to 1.

City of Albuquerque matches record w/ 81 homicides, RGF visits and photographs sites near the planned stadium.

RGF “loses” battle in war over campaign finance: 10th circuit Court of appeals claimed we didn’t have standing in a campaign finance case involving Santa Fe Soda Tax.

Keller using shiny stadium to distract from rampant crime

08.10.2021

This article first appeared in the Albuquerque Journal on August 10th, 2021.

Albuquerque Mayor Tim Keller has decided that, despite rampant crime and a homeless problem that has grown dramatically worse on his watch, building a new soccer stadium for New Mexico United should be a top city priority. The stadium itself, to be located somewhere in the vicinity of Downtown, will cost taxpayers in excess of $70 million. That doesn’t include land acquisition, parking or inevitable cost overruns.

If the City Council approves the deal, Albuquerque voters will vote on whether to finance the project this November. It is difficult to see how financing a new soccer stadium is anywhere near the top of the city’s agenda. Albuquerque is a city with serious problems.

Recently the Journal reported on rampant crime along East Central. Of course, crime and homelessness are rampant along Central, Downtown and in many parts of our city. It would be far easier to name the few places in Albuquerque where there is not a significant crime and homeless problem than to name all the places that have issues.

In a recent report WalletHub identifies the city of Albuquerque as having the fourth-highest increase in homicides per capita in the nation (2020 vs 2021). Combined with Albuquerque’s already high crime levels before the pandemic, public safety would top most lists for local needs.

Notably, the Albuquerque Police Department budget has not changed substantially in recent years. By no means am I suggesting more dollars always result in better outcomes, but the perceived lack of prioritization on public safety implicates Mayor Keller’s belief that crime is not as important as building a stadium. Or, perhaps, as he heads into his reelection campaign, he is trying to change the subject from crime to stadium.

And then there is the Downtown location. State and local governments have spent decades trying to revitalize Downtown Albuquerque with little success. With safety and homeless problems only getting worse and Downtown businesses still not recovered from the one-two punches of COVID-19 lockdowns and protests, this is a particularly risky time to invest taxpayer dollars in a Downtown stadium.

On the other hand, New Mexicans, not just locals, have flocked to The Pit, Isotopes Park and UNM Stadium for decades. These facilities are all located in the same area of town, have abundant parking shared among the various facilities and little in the way of crime or homeless issues. United does extremely well in attendance at Isotopes Park, allowing the team to vault to the top of attendance rankings in the USL.

It seems Keller is a believer in “Mad Men’s” Don Draper school of thought: If you don’t like what’s being said, change the conversation. He has failed in the basic government task of public safety and keeping the city clean, so now he’s distracting voters with a shiny new stadium.

In the end, economists across the political spectrum agree that taxpayer-funded stadiums are economic-losers.

To that end, the St. Louis Federal Reserve’s May 2017 report “The Economics of Subsidizing Sports Stadiums” concluded, “Rather than subsidizing sports stadiums, governments could finance other projects such as infrastructure or education that have the potential to increase productivity and promote economic growth.”

I urge the City Council and ultimately the voters to heed their advice.

Rio Grande Foundation is New Mexico’s free-market research institute and think tank. An advocate for open government, the author leads the foundation’s government transparency and accountability efforts.

Thoughts on a guaranteed basic income for New Mexico

08.10.2021

According to recent reports, the New Mexico Legislature held hearings on some kind of “guaranteed basic income” for New Mexico. At this point we’re going to reserve judgement for a more detailed proposal although we did post something relating to Santa Fe’s “fake” experiment with such a program. 

Here are a few thoughts:

  1. Will this replace or augment existing welfare programs? Obviously we prefer a replacement rather than an increase;
  2. How will this impact New Mexico’s already high unemployment rate and low workforce participation rates?
  3. Will it be given to ALL New Mexicans or just the “poor”?
  4. Will it resemble Alaska’s “dividend” program which is funded through that State’s “Permanent Fund?” 

    Unlike a lot of redistribution schemes coming out of Santa Fe we’re not going to dismiss this one out-of-hand. There are certainly right and wrong approaches to this issue.
    The Case for a Universal Basic Income in the Time of COVID-19 | Open Culture

How to oppose taxpayer financing for proposed United Stadium

08.09.2021

On principal, RGF opposes spending taxpayer dollars for the benefit of sports teams. But, in a world in which no priority is too big or too small for the federal government, let alone state or local government, to spend money on, that argument doesn’t get very far.

So, here are some of the most important arguments against the current plans for a New Mexico United Stadium. While the result of a vote will depend on many factors, the fact that so many people who DID take the time to offer public comments were opposed to taxpayer funding of the stadium is a strong indicator that the arguments are on that side (unlike many public comment opportunities, there was no interest group coordinating them, these were organic):

  1. THIS is the City’s priority? Albuquerque JUST set a record for homicides and there are 4.5 months left in 2021. Police cite “lack of resources” as a big issue. Clearly, there are OTHER more-important priorities for City government and our tax dollars.
  2.  Will the United have “skin” in the game? The Isotopes pay the City of Albuquerque over $1 million annually in rent for Isotopes Park which was built in the footprint of the existing baseball stadium (and thus at a cost savings). What will the United be paying or is this a one-way financial relationship?
  3. We know that downtown Albuquerque (including the areas around the proposed sites) face numerous challenges in terms of public safety and homelessness that could derail this project. What will be done to “clean up” these areas and why aren’t they being done NOW? Will those efforts be enough to keep fans coming?
  4. Little has been said about the properties that would need to be purchased to build the stadium and essential amenities. How much parking will be needed and how many existing buildings (including potential historical sites) will need to be leveled for this facility?
  5. What about existing sites? UNM has both a state-of-the-art soccer facility AND a little-used football stadium (less than 10 games annually) that could seemingly accommodate the United, how about a more cost-effective solution there? And, while the league the United play in seemingly requires a soccer-specific stadium, are they going to kick out their attendance leader because they share a stadium with a minor league baseball team?

New Mexico United's proposed stadium raises concerns from community members  | KOB 4

MLG is coming for your car, again

08.04.2021

A few weeks ago Gov. MLG told us that the Legislature would be considering her proposal for a “clean fuel standard” for cars sold in New Mexico. That involved a mandate to use various gasoline alternatives like ethanol, switchgrass, or whatever they can come up with.

On top of that the State is now involved in rule making to require that between 7 and 10% of vehicles sold in NM by 2025 will have to be “zero emissions.”

Interestingly, as the Albuquerque Journal points out,

NMED data shows the transportation category emitted about 16 million metric tons in 2018, or 14% of greenhouse gas emissions.

The oil and gas industry accounts for 53% of state pollution.

The state estimates the (clean car) changes would slash carbon dioxide emissions by about 2 million tons by 2030.

While the New Mexico Automotive Dealers Association appears poised to “go along to get along,” I’d expect a lot of “vehicle smuggling” to occur from neighboring states. Of course that will necessitate further enforcement and draconian efforts to deny registration to vehicles that don’t comply with these regulations.

California targets 2035 for all new-car purchases to be zero-emission  vehicles - ABC News

 

Tipping Point New Mexico episode 323: Busiest News Week Ever for New Mexico?

08.04.2021

New rules for COVID 19. State releases rules on Monday, CDC follows up, APS enacts universal masking in schools. What’s the science? Does it make any sense to tell vaccinated people to mask up? Masks are ALSO recommended. Are lockdowns coming?

20 cities across New Mexico held anti-masking in school policies. We attended the one in ABQ.

Sheryl Williams Stapleton is in trouble. We can explain the details and what it means. RGF has long had concerns with Rep. Stapleton’s name being attached to a facility at Expo NM. She has resigned from her House seat.

The NM United soccer team has unveiled plans for a new taxpayer-funded soccer stadium. RGF has concerns.

PNM is concerned about brownouts next summer when the San Juan Generating Station is closed.

A new report says NM is the #1 economically-failing state while Utah is the #1 thriving state. 

 RGF calls Attorney General’s Public-Nuisance Suit against medical-product sterilization firm a dangerous abuse of state authority

Senator Heinrich responds to our natural gas piece. So does Demis Foster of Conservation Voters New Mexico. We discuss.

Proposed United stadium locations plagued by homelessness

08.03.2021

According to KOB 4, the New Mexico United’s proposed stadium locations are as follows:

  • Railyard Site
  • Coal and Broadway
  • 12th and I-40
  • 2nd and Iron

In reality, while 12th and I-40 is on the extreme north side of downtown, the other 3 are rather close by. And they happen to be in an area of town that is isolated and full of significant numbers of homeless.

This series of photos was taken below the Lead/Coal overpasses over the rail yard on 2nd Street near downtown. Similar situations exist throughout downtown, but these shots are representative of the three of the areas being considered.

Is the Mayor going to clean up this area if elected? Will there be a massive police presence? Will people actually head to any of these unproven and dubious locations at night?

KRQE covers mask protests

08.03.2021

Over a very busy weekend the head of the Rio Grande Foundation joined New Mexicans (in Albuquerque) protesting against masking kids in school this fall. At its peak there were approximately 150 people in attendance. Especially notable were the loud horn honks from the numerous cement truck drivers as they passed. Blue collar workers certainly seem to oppose masking kids in school.

RGF’s Paul Gessing briefly spoke to the reporter for the story at the end below:

The Conservative New Mexican also had an excellent writeup of the Albuquerque event.

 

Professional enviro misstates RGF, defends Heinrich

08.02.2021

RGF certainly stirred things up when we outlined our serious concerns with plans put forth by Sen. Heinrich and nearly 50 American cities to eliminate natural gas hookups from American homes.

Today, Demis Foster of the powerful Conservation Voters New Mexico wrote to attack Gessing. She begins on an untruthful note saying, “Gessing claims most Americans rely on natural gas.” While he never actually wrote that, it is actually accurate. The following is from the Energy Information Administration. While Foster is right that 60% of cooking uses electricity, water and space heating (home) are predominantly NOT electricity. Overwhelmingly that means natural gas or some other fossil fuel, a point which the liberal Vox acknowledges even while advocating for “electrification.”

Foster makes a number of claims that just aren’t true including “G20 countries have subsidized oil and gas with $3.3 trillion since 2015.” That is from THIS report which actually says the subsidies have been for “all fossil fuels” (not just oil and gas). Of course the report defines “subsidy” not as outright government support for something, rather as a lack of carbon pricing. It is a poorly-sourced report to say the least.

Overall it is wonderful to be attacked by one’s political enemies. If we are taking flak, we’re over the target.

 

 

Some interesting COVID questions from the New York Times

08.02.2021

The New York Times tends to be far-left, but in their Morning Briefings which are free to receive, they often make some interesting points about COVID and the “science.” Unfortunately, in New Mexico our Gov. (and the APS school board) are forcing kids to wear masks this fall with no end in sight. All state workers also must be vaccinated or wear masks and be tested regularly. But the Times has some interesting questions (below).

Below that is the latest COVID death data for the USA from COVID (this time using 7 day rolling average). As you can see, while the media and politicians are hyping a crisis, in terms of what really matters (deaths), the reality is very different. We recognize that deaths ARE a lagging indicator and will keep an eye on things as things evolve.

Heinrich responds

07.30.2021

Apparently we caught Sen. Martin Heinrich’s attention with our opinion piece decrying his plans to eliminate natural gas appliances. Here is Heinrich’s response which also appeared in several outlets.

The Senator basically makes a few points:

  1. He personally is pushing a “voluntary” program to essentially help people pay the costs, not a mandatory program. That is true and we never said anything else, but as we noted in the original article 46 cities have adopted mandates of some sort or another. If Heinrich wants to use our tax dollars to get the federal government to pay for people to abandon gas appliances. Is it really a stretch to say he supports or would support actual mandates? He’s never criticized them.
  2. Heinrich claims that he personally saved money by switching to an electric hot water heater. Perhaps that is true for him personally, but all he is doing at least right now is switching natural gas power in the home for a mix of fossil fuel energy produced elsewhere. The chart below shows the current mix of electricity generation from the Energy Information Administration is about 10% wind and solar. Heinrich’s goal would increase electricity generation needs by 40% (due to increased demand) AND he wants 100% of that to come from wind and solar. That is going to involve MAJOR taxpayer subsidies, mandates, AND large tracts of land being eaten up by wind and solar projects. 

Of course, PNM is already warning of brownouts in 2022 when the San Juan Generating Station is forced to close under New Mexico’s Energy Transition Act.

New Mexico Attorney General’s Public-Nuisance Suit Against Medical-Product Sterilization Firm a Dangerous Abuse of State Authority

07.29.2021

On December 22, 2020, Attorney General Balderas filed suit against product-sterilization company Sterigenics, alleging that ethylene oxide (EtO) emissions from its plant in Santa Teresa were creating a public nuisance and asking the court to enjoin the emissions.

You can read the AG’s complaint here.

Here is one informative report on lawsuit. 

According to the federal court docket (Sterigenics had initially removed the case from state to federal court but the federal court refused to accept the removal and sent it back to the state court), private contingent-fee lawyers from the Delaware-based firm Grant & Eisenhofer are working with Balderas on the suit.

  • Such state AG-contingent fee attorney arrangements have become commonplace. The alliances raise questions as to who is really in charge of litigating on behalf of the public interest, and what really motivates the private plaintiffs’ lawyers.)
  • Grant & Eisenhofer is advancing hundreds of private lawsuits against Sterigenics. Having a state AG action be successful in enjoining EtO emissions would be a boon to the firm’s private litigation efforts.

Sterigenics has operated the Santa Teresa plant since 1989. It sterilizes surgical kits, preoperative skin products, syringes, tubing, and other medical equipment using EtO. 50% of the devices sterilized nationally are sterilized with EtO. An Albuquerque Journal story noted that the state hospital association wrote to Gov. Grisham explaining the consequences if the state shut down the plant. The story also relates an affidavit from a device company microbiologist noting the suit’s impact on its product and patients.

The nuisance that the suit alleges is from “uncontrolled” emissions of EtO that are allegedly increasing cancer risks in the areas around the plant.

  • The state’s complaint offers no evidence of actual harm. It only recited what U.S. EPA has said about EtO emissions, which are deeply flawed (see pp 9-10 of Sterigenics brief).
  • The “uncontrolled” emissions allegedly occur a number of ways, including the opening and closing of facility doors and when customers visit the plant and carry away their sterilized products.
  • The complaint essentially demands that the emissions limit Sterigenics must meet is zero

As explained well in the trade associations’ amicus briefs, companies like Sterigentics that use EtO in their sterilization must comply with detailed regulations issued by FDA, EPA, OSHA, and the state environmental regulatory agency. Those agencies undertake meticulous efforts to craft and issue those regulations and employ issue experts in the process of setting emissions limits.

  • A judicial verdict implementing the AG’s zero-emissions approach would directly conflict with federal and state regulations, placing the AG and the court into the role of environmental regulators, a role they are entirely unfit to fulfill.
  • That outcome creates a compliance nightmare for Sterigenics and bodes ominously for any business in New Mexico or businesses looking to locate offices in New Mexico.

On June 29, District Judge Beyer granted the state’s motion for a preliminary injunction, prohibiting “continued uncontrolled emissions of EtO.” It’s unclear as of this moment what has occurred in the meetings between the state and Sterigenics that the court ordered with a goal of creating a “monitoring protocol.”

Bottom line: The state AG isn’t doing the state, the state’s business community, or New Mexicans any favors by pursuing this regulation-by-litigation effort to usurp control over EtO and its use from federal and state agencies whose authority over EtO emissions are firmly bound in statutes. General Balderas’ lawsuit will stoke fear over miniscule EtO emissions and device sterilization and any victories in the suit could help the suit’s masterminds in the private contingent-fee lawyer’ bar turn EtO into the next asbestos.

Other resources:

https://www.reuters.com/article/factcheck-eo-swabs/fact-check-nasal-swabs-sterilised-with-ethylene-oxide-are-safe-to-use-the-sterilisation-process-is-tightly-regulated-by-international-standards-idUSL1N2LU1H0

https://www.ehstoday.com/environment/article/21152366/ethylene-oxide-the-next-regulatory-battleground

https://cei.org/studies/epa-should-revise-its-assessment-of-medical-supply-sterilant/

Sterigenics moves to upgrade shuttered device sterilization plant | Medical  Design and Outsourcing

Sheryl Williams Stapleton issue highlights systemic issues w/ NM Legislature & APS

07.29.2021

The story below from KOB TV discusses the well-documented situation with Democratic Rep. and Floor Leader Sheryl Williams Stapleton. While details are still coming out, there are a few major issues that RGF. has highlighted in the past.

  1. While New Mexico has a citizen legislature and conflicts are part of the deal, it seems that Stapleton used her dual positions in the Legislature and at APS to commit the crimes she is accused of committing. The Legislature SHOULD prohibit its members from simultaneously being employed by entities (like APS) that they have budgetary control over. It is one thing to work in an industry that may have an issue before the Legislature and perhaps have to recuse oneself. It is another thing entirely to appropriate state dollars for an entity you work for.
  2. At the VERY least the APS and other government bodies should NOT be able to pay their employees for the time they miss on the job as a legislator in Santa Fe. Rep. Bill Rehm introduce legislation to that effect back in 2015, so this is not a new issue. The practice of publicly-funded bodies like APS paying employees for missed time serving in Santa Fe was described at the time as “Triple Dipping.” Stapleton was engaged in this and other legislators continue to do it.

An Interest Rate Cap Will DEFINITELY Hurt Small Borrowers

07.29.2021

Today, the Senate Banking Committee, led by Chairman Sherrod Brown (D-Ohio), is hosting a hearing titled, “Protecting Americans from Debt Traps by Extending the Military’s 36% Interest Rate Cap to Everyone.”

Absolutely: ensuring affordable access to credit for lower-income families and workers is a noble and worthwhile goal. That goal is not achieved with legislative proposals such as the imposition of a 36 percent interest rate cap. Lower-income individuals rely on safe and affordable small-dollar lending offered by financial institutions to cover unexpected expenses. An artificial interest rate cap restricts incentives for financial institutions to provide such small dollar lending services to subprime borrowers. Without incentives, the institutions offering these products will simply stop offering them. Without access to these vital products, borrowers might find themselves with few, if any, options.

It should also be noted that top-down interest rate advocates fail to justify their proposals by merely citing the Annual Percentage Rate (APR) of a loan. Context is critical to understanding the purpose of small-dollar high-interest loans.To suggest that small-dollar loans from reputable financial institutions are excessively expensive by pointing to their APR fails to recognize the reality of how such products are utilized. These small loans are designed to cover emergency expenditures and are often paid back by borrowers within a short period of time. To justify rate caps by discussing such a loan’s cost in terms of a year is, as the economist Thomas Sowell has pointed out, “like saying that a $100 a night hotel room costs $36,500 a year, when virtually nobody rents a hotel room for a year.”

By considering this option, Congress is taking the role of “mother knows best”. They are effectively removing the decision making ability of borrowers. It’s easy to sit in your house with electricity and heat with a functioning car to take you to your place of work in the morning and pass judgement on people of lesser means who have been shut out by mainstream lenders. Given the events of the past year and the negative impact lockdowns have had, especially on low-wage workers, it would seem that the Legislature should have higher priorities than eliminating needed financial options for working people.

One-size-fits all interest rate caps will cut off access to credit and eliminate choices in lending products. We urge Congress to refrain from further restricting the ability of borrowers from accessing credit of their choosing when emergencies arise and pushing them to worse outcomes.

Senator Ben Ray Luján (202) 224-6621 (575) 526-5475
Senator Martin Heinrich (202) 224-5521 (505) 346-6601
Instant Loans: How to Get Instant Approval & Funding

An Interest Rate Cap Will Hurt Small Borrowers

07.28.2021

Tomorrow, the Senate Banking Committee, led by Chairman Sherrod Brown (D-Ohio), is hosting a hearing titled, “Protecting Americans from Debt Traps by Extending the Military’s 36% Interest Rate Cap to Everyone.”

Politicians often claim to be helping “the poor” with the policies they enact. But people with the resources to take extended time away from their work and spend months in committee hearings are inherently not “representative” of the people of New Mexico. They need to be reminded that most people live “paycheck to paycheck” and struggle to manage an expense from time to time.

If Congress and President Biden approve of extending the Military Lending Act’s (MLA) 36% rate cap for all consumers, not just military veterans, this would devastate the financially vulnerable by reducing their access to credit. It could very well push our most disadvantaged citizens to underground financial products in an unregulated, shadow economy.

“Proponents believe a cap on fees and interest would help consumers, especially subprime borrowers with less-than-perfect credit histories, by limiting what they pay on payday loans and other less-regulated short-term credit,” Credit Union National Association (CUNA) and other coalition members wrote in a letter to the Committee last week. “In reality, its impact would extend far beyond payday lenders to the broader consumer credit market to cover affordable small dollar loans (including “accommodation” loans) that depository institutions are being encouraged to offer, credit cards, personal loans, and overdraft lines of credit. As a result, many consumers who currently rely on credit cards or personal loans would be forced to turn elsewhere for short-term financing needs, including pawn shops, online lenders—or worse—loan sharks, unregulated online lenders, and the black market.”

Few banks offer personal loans and credit union loans designed for subprime borrowers. Referred to as “payday alternative loans,” these borrowers represent less than 1% of the 100 million Americans who make up the non-prime consumer market. The reality is that most traditional lenders simply will not or cannot make these loans to borrowers with lower credit scores.

One-size-fits all interest rate caps will cut off access to credit and eliminate choices in lending products. We urge Congress to refrain from further restricting the ability of borrowers from accessing credit of their choosing when emergencies arise and pushing them to worse outcomes.

Senator Ben Ray Luján (202) 224-6621 (575) 526-5475
Senator Martin Heinrich (202) 224-5521 (505) 346-6601
Instant Loans: How to Get Instant Approval & Funding