March 22, 2011

Teachers and Credit Cards

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I’m basically a supporter of regulations limiting the amount that credit card companies can charge merchants in interchange fees. If there were real competition in the card market, I’d probably feel differently, but in reality there’s an effective duopoly, and both members of that duopoly have conspired to require merchants to sign contracts that forbid them from engaging in price discrimination by charging more for credit card purchases if they want to. This has created a situation in which card companies and banks have an incentive to charge higher and higher fees, which are subsidized by everyone since everyone has to pay the same higher prices that merchants charge to cover the fees, and then rebate those fees to their most favored customers in the form of airline miles and other goodies. It’s hardly the biggest outrage in the world, but it’s still pretty ridiculous.

Now, I’m also a moderate supporter of teachers unions, and it turns out that the NEA is opposed to regulations limiting interchange fees. Matt Yglesias wonders if this changes my mind:

I don’t particularly think we should take the NEA’s word for it, but I wanted to call attention to this simply because I think confirmation bias is one of the biggest problems we have on the web. It occurs to me that several bloggers who I normally agree with but who had strong favorable views about the Durbin Amendment that contrasted with mine—Kevin Drum and Mike Konczal in particular—are also people who’ve really taken the lead in making the case that labor unions are a crucial “countervailing force” to advancing middle class economic interests. So I wonder if any of them are inclined to rethink their views of the swipe issue in light of this.

Hmmm. The NEA provides this explanation: “With educators and others of moderate income facing daily challenges to make ends meet, Congress and the Federal Reserve must tread lightly when considering proposals that could increase financial burdens on these families.” And maybe so. But my first thought when I read this was, “Gee, I wonder if what they really care about are the interests of credit unions run for teachers?” Luckily, it turns out Mike Konczal had the exact same suspicion, which saves me the time of looking into it. You can read his thoughts here.

So for now, anyway, I haven’t changed my mind. It’s not as if I have to agree with every single stance ever taken by a labor union, after all. And as before, I stand ready to abandon regulations on interchange fees if card companies allow merchants to freely charge extra for card purchases if they want to. That would be the free market at work. Oddly enough, they don’t seem very excited by that prospect.

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