This week’s Weekly Update is a day early since tomorrow is Veterans Day and the Taxpayers Protection Alliance’s (TPA) office will be closed. We will be taking this time to remember all the veterans who have served this country. My father was in the service working in military intelligence. My grandfather was in Normandy and helped liberate a concentration camp in Germany, so this day has special meaning to me. TPA thanks all veterans and their families for their sacrifice and service and wishes them a very Happy Veterans Day.

Trying to Ground Airline Miles Programs

Some politicians seemed determined to subject Americans’ routine financial transactions to Washington’s micromanagement — consumer welfare be damned. More than a decade ago, Sen. Dick Durbin (D-Ill.) managed to foist the eponymous Durbin amendment into Dodd-Frank, subjecting debit-card transaction fees to price controls. Undeterred by this policy’s decade of degrading debit cards’ consumer value, however, Durbin this year reintroduced the Credit Card Competition Act (CCCA), which would extend similar regulations to credit cards. The CCCA would have far reaching implications including disincentivizing the accrual of airline rewards miles. Nobody much likes the CCCA. It failed to gain any traction in the 117th Congress and seems poised to do no better in the 118th Congress. Nonetheless, Sen. Durbin has doubled down. In a recent letter, he and Sen. Roger Marshall (R-Kan.), a CCCA cosponsor, encouraged the Department of Commerce and the Consumer Financial Protection Agency to investigate
airline-issued credit-card rewards programs. Finding their legislative efforts stalled by their colleagues’ better-developed common sense, the duo attempted to further their technocratic vendetta with the unaccountable and nondemocratic administrative state.

As a rule, consumers benefit greatly from credit-card-driven rewards programs. In fact, 30 million Americans, and almost a quarter of American households, hold an airline-issued credit card. These cards generated more than three fifths of frequent flier miles/points in 2022 and over time have generated 15 million domestic trips. These rewards programs are a clear win for consumers looking to travel and save some money. Outside the airline industry, consumers reap tens of billions of dollars in points-driven rewards each year. The CCCA would largely end these rewards programs and push card issuers to otherwise raise costs for consumers. The economics are simple: When the government regulates away part of a business’s profits, the business generally will try to recoup its loss by raising prices or nixing customer perks.

To understand the CCCA’s likely harm to consumers, consider the observed effects of the Durbin amendment. The damage extended far past lost rewards points. The Durbin amendment managed successfully to lower covered banks’ average interchanged fees to $0.24 from $0.50, reducing revenues from such fees by $6.6 billion–$8 billion annually. However, this produced no consumer savings. Instead, it enriched large retailers, to whom it transferred an estimated “$1 billion to $3 billion annually from low-income households,” according to an analysis from George Mason University. The Richmond Federal Reserve discovered that, in the amendment’s wake, only 1.2 percent of retailers lowered prices, while 21.6 percent raised prices and more than three quarters did nothing. Moreover, to recoup lost profits post-Durbin, banks raised account (and other) fees significantly and offered fewer fee-free accounts. By 2013, only 38 percent of banks offered free accounts, down from 76 percent in 2009. Many banks
also raised the minimum account balance required to avoid fees. “[A] typical lower income bank customer who previously qualified for a free current account but, after Durbin, no longer meets the minimum monthly balance requirement, is likely paying around $12 in monthly fees, as well as an additional $1 or more in ATM fees,” the George Mason authors write. “That’s an annual cost of around $160.” Some politicians seem reflexively uncomfortable with the idea that major industries remain unregulated. This leads them to go in search of fabricated monsters to destroy, to tilt at windmills and do battle against armies of sheep. As in the cases of Durbin amendment and the CCCA, such misgovernment forces the American people to pay the check.


EV Subsidies Still a Problem

Advocates of total transition to electric vehicles (EVs) face a problem of how they can convince drivers to abandon cheaper, longer-range, more convenient cars powered by internal combustion engines. This group insists that the speedbumps slowing EVs’ widespread adoption will soon vanish and consumers will happily drive America into an electrically powered transportation future. A quick review of the facts renders these arguments dubious. EVs on average cost significantly more than their combustion-engine cousins. EVs’ added cost can be by as much as roughly $22,000. Spurred by copious federal subsidies, auto manufacturers have produced many more EVs than consumers demand. Unsold inventory has accumulated. General Motors and Ford already have pushed back their internal output targets. What’s more, Ford hemorrhaged more than $70,000 per EV sale in 2023’s second quarter. Its EV operations are projected to lose $4.5 billion in 2023. Ford CEO Jim Farley puts the ideal EV price point at $25,000,
but batteries alone cost $18,000. Farley’s electric Mustang Mach-E SUV begins at $44,000, costing about $25,000 more than a comparable Edge model.

Even EVs’ limited successes thus far depend heavily on government support. The Inflation Reduction Act (IRA) allotted an originally estimated $14 billion for clean-vehicle subsidies and $30.6 billion for EV battery manufacturing. Upon further scrutiny, these estimates leapt to $390 billion and $196.5 billion, respectively. The IRA’s total clean energy spending, once estimated by the Congressional Budget Office to cost $391 billion, will likely drain more than $1 trillion over a decade. What’s more, Biden has moved via executive action to limit drastically the number of new gas-powered vehicles marketed by the 2030s. A new report from the Texas Public Policy Foundation highlights more opaque and oft forgotten subsidization that EVs enjoy. These include Corporate Average Fuel Economy (CAFE) standards, indirect subsidies, and socialized infrastructure costs. Authors Brent Bennett and Jason Isaac’s top-line findings wrinkle the brain. They calculate that “[n]early $22 billion in federal and
state subsidies and regulatory credits suppressed the retail price of EVs in 2021 by an average of almost $50,000.” These numbers predate the IRA’s passage. EV owners often enjoy exemptions from various state taxes. “Our preliminary analysis indicates that, on average, these states taxes come out to about 1.7% of the cost of electricity and that EV owners avoid approximately $300 per year in liquid fuel taxes and registration fees, after paying any electricity taxes and EV registration fees,” Bennett and Isaac report. Although libertarians may rightly object to tax hikes, selectively granted tax exemptions nonetheless function as subsidies, sending distorted price signals and interfering with the free market.

The Biden administration hopes EVs will make up half of new cars sold by 2030. However, even his prolific subsidies will likely fail to overcome a number of clear barriers. For one, this revolution may face a crippling shortage of battery components, which has opened a fissure between anti-mineral-mining environmentalists and EV advocates. Toyota says it will take a more balanced approach for now, emphasizing hybrid vehicles as a means to conserve resources. According to the company, the materials consumed by a single EV battery are enough to produce technology for 90 hybrids. “The overall carbon reduction of those 90 hybrids over their lifetimes is 37 times as much as a single battery electric vehicle,” Toyota says. Politicians who rush to save the world one EV at a time presume a fully electric consumer-vehicle fleet would impact the climate significantly. This seems unlikely, however. Personal vehicles worldwide produce just three percent of global emissions. The U.S. has just 12
percent of the global fleet, writes Holman W. Jenkins Jr. of The Wall Street Journal’s editorial board. Noting that an EV halves the emissions of a gas-powered car, Jenkins Jr. calculates that even a maximalist American EV mandate would reduce total emissions by just 0.18 percent. Basic economic rules such as supply and demand will ensure Democrats learn that their dreams for a totally electrified America will not manifest themselves. Markets respond poorly to regulatory manhandling, a fact that even the best of intentions cannot alter. However, in the interim, the federal government’s foolish subsidies and emissions mandates can cause havoc in the auto industry.

BLOGS:

Monday: The Real ESG Activists Lie Within the SEC ([link removed])

Tuesday: The Supreme Court and the Federal Government’s Backdoor Censorship Campaign ([link removed])

Wednesday: TPA Submits Testimony in Support of Michigan SB 365 ([link removed])

Thursday: TPA Submits Testimony to City Council of Superior, Wisconsin ([link removed])


Media:

November 4, 2023: TPA Executive Director Patrick Hedger appeared on KNSS Radio (Wichita, Kansas.) to discuss TPA’s new polling on entitlement reform.

November 5, 2023: TheWashington Examiner (Washington, D.C.) ran TPA’s op-ed, “How blatant self-interest continues to drive trade policy.”

November 5, 2023: TPA Executive Director Patrick Hedger appeared on WJAS radio (Pittsburgh, Pa.) to discuss TPA’s new polling on entitlement reform.

November 6, 2023: WBFF Fox45 (Baltimore, Md.) interviewed me about the taxpayer implications of the new Harborplace development in Baltimore.

November 7, 2023: The Center Square ran TPA’s op-ed, “Biden administration’s broadband price controls will harm effort to close digital divide.

November 9, 2023: I appeared on WBOB 600 AM (Jacksonville, Fla.) to talk about recent polling on the economy and a potential government shutdown.

November 9, 2023: WBFF Fox45 (Baltimore, Md.) interviewed me about transportation funding in Maryland.

November 9, 2023: NTD News mentioned TPA's new polling on entitlements, in "Republicans Tout Plans to Rescue Social Security During 3rd Debate."

Best,
David Williams
President
Taxpayers Protection Alliance
1101 14th Street, NW
Suite 1120
Washington, D.C. xxxxxx
www.protectingtaxpayers.org ([link removed])

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