Sen. Dick Durbin, D-Illinois, will stop at nothing to silence the critics of his top legislative priority: bagging a handout for his favored credit card companies and their airline partners, along with the nation’s biggest megaretailers. Several major airlines learned that the hard way after they dared to speak out about the harmful impact Durbin’s effort will have on American consumers and workers.
Earlier this year, Durbin teamed up with U.S. Sen. Roger Marshall, R-Kansas, to introduce the so-called Credit Card Competition Act. As is all too typical in Washington, the bill says one thing and does another. Rather than promote competition, the legislation dictates new rules for how credit card transactions are processed.
Under the current system, when a customer uses a credit card to make a purchase, the merchant pays a small fee, known as a “swipe fee,” to help offset the costs associated with the security, convenience and benefits that come with credit cards. Those fees are negotiated in the market, not by the government. The Durbin-Marshall Big Box Bill would put the government in the middle of the market, establishing price controls on swipe fees to secure a major windfall for megaretailers.
The Federal Reserve estimates that 84% of credit cardholders have a rewards card. Although swipe fees only support a tiny fraction of the cost of rewards, reducing them through arbitrary government intervention would make it economically impractical for credit card issuers to continue offering the same rewards programs available today. Cashback and airline miles programs that millions of Americans rely on to help ease the strain on family budgets and make travel more affordable would be wiped out.
According to an analysis by Airlines for America, a trade group representing several major U.S. airlines, “rewards earned from airline credit cards paid for 15 million domestic visitor trips that supported $23 billion in economic activity in 2022.” Eliminating rewards will not just hurt consumers, but all the hardworking people whose livelihoods depend on a strong travel and tourism industry.
The impact on Florida will be especially harsh. In 2022, more than 2.4 million people used miles to book travel to Florida. That travel directly supported more than 31,000 jobs with a total economic impact of close to $4 billion.
The ripple effects would be felt throughout the supply chain, from machinists and manufacturers to pilots and flights attendants. In fact, a coalition of four major airline unions, including the Association of Flight Attendants-CWA, Communications Workers of America, International Association of Machinists and Aerospace Workers and Association of Professional Flight Attendants, have warned lawmakers that the bill “would knock airlines off their solid financial footing and hurt unionized workers who are seeking new contracts.”
One might think that a progressive senator like Durbin, who has proudly proclaimed to be an ardent labor supporter — even touting his own previous union membership — would be more receptive to their concerns. Apparently, he cares more for corporate cronyism than labor.
In response to the backlash, Durbin recently sent a letter to the airlines that oppose his bill, pressing them with a laundry list of complaints and questions. The message was clear: Stay quiet or there will be consequences. What is most telling is that the airline whose co-branded credit card is exempted under the bill, Delta, did not receive a letter. Their partner, American Express, would gain a lucrative competitive advantage from this sweetheart carveout. Punish your detractors while lining the pockets of your allies. For a senator from Illinois, it’s Chicago-style politics at its finest.
Of course, Durbin has attempted to cover for the negative effects of the bill by claiming that consumers will come out on top when swipe fee savings are passed on. The problem is, we know they won’t be. This latest effort is essentially a repeat of Durbin’s previous legislation that capped fees on debit card transactions. That law resulted in fewer free checking accounts and higher minimum account balances, while nearly 99% of retailers either raised or maintained prices.
The Durbin-Marshall bill is more of the same. It is simply a customer-funded crony capitalism handout. Every member of Congress who supports this bill is putting Durbin’s special interests ahead of their own constituents. Americans who value their credit card rewards need to be paying attention and making sure their representatives look out for them.
Sal Nuzzo is senior vice president at Tallahassee’s James Madison Institute, a free market policy think tank.