Wednesday, February 9, 2011

Government and the law of unintended consequences

I generally don't trust government for solutions to problems, and I don't subscribe to the idea that government programs, regulations and intervention in our lives are any kind of solution. It's not. Usually, government makes it worse. Just look at the history of the Community Reinvestment Act and most of our "welfare" programs. Here's a couple more:

PROMISES, PROMISES: 'Widows' tax' lingers
Tens of thousands of the nation's war widows find it perplexing and downright disrespectful to their late military husbands: In order to fully collect on insurance their husbands bought for them when alive, they must marry another man.

Credit card rates at record highs near 15%
Interest rates are now hovering near record highs, at an average rate of 14.72%. And if your credit is bad enough, you could even end up with a rate as high as 59.9% APR. That's because while the CARD Act helped crack down on certain fees and requires more disclosures, it didn't cap every credit card holder's worst enemy: interest rates. Sure, the new rules prevent banks from raising most interest rates retroactively, but there's no limit on the rates they can charge new customers.

In my own personal experience, my credit union raised my interest rate, unannounced, from 5.9 percent to 8.9 percent, just before the CARD act went into effect. Recently, I purchased a TV from Sears with a no-interest-for-15-months deal. When I use the card next time, the interest rate on purchases is 24.95 percent. Incredible. And I have a very high credit score. It will be interesting to see how low I can get them to go; if not, I'll cancel and shop elsewhere...

While some regulation and oversight is necessary, government meddling usually goes way too far, and makes things worse. It's called the law of unintended consequences.

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