The R Street Institute’s Finance, Insurance and Trade (FIT) policy department is committed to an efficient and effective market-based approach to public policy questions involving the transfer of risk, including risk-based insurance regulation and ending environmentally destructive taxpayer subsidies; market-based approaches to banking and housing; support for the rules-based international trading system; and expanding the freedom of Americans to trade around the globe.
With the outbreak of a global pandemic and the resulting recession, 2020 has been a tough year for Americans. As lawmakers enter the 117th Congress, addressing these concerns will be a top priority. At the same time, there are a number of other important priorities that lawmakers will face. The FIT Department would like to highlight a few issues that lawmakers will face in the next Congress.
Finance. When Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in the aftermath of the financial crisis, it included a provision known as the “Durbin Amendment’—named for Sen. Richard Durbin (D-Ill.)—that set price controls on interchange fees charged to retailers for debit card processing. Price controls almost always lead to an undersupply of the product or service to which the control applies. In this case, free checking accounts significantly decreased after the Durbin Amendment was implemented. For example, the Durbin Amendment led to an estimated one million  Americans losing access to the banking system. In other words, it hurt the poorest Americans most.
Now, some members of Congress and various special interests want to expand this misguided policy to credit cards. The likely result of such an expansion would be the loss of certain credit card perks and a loss of access to credit for lower-income Americans. Congress should reject this idea and work toward repealing the Durbin Amendment’s price controls on debit transactions.
Insurance. The National Flood Insurance Program (NFIP) provides flood insurance to about five million Americans. Yet, as currently structured, the program is unsustainable—it is billions of dollars in debt and full of misaligned incentives. It has also crowded out private flood insurance policies and perpetuates the development of flood-prone areas. As floods become more frequent and more severe, Congress should reform the NFIP program.
There are common sense, bipartisan proposals to fix the program, including encouraging private sector alternatives to NFIP, investing in better mapping so consumers better understand their flood risks, addressing repetitive loss properties and barring subsidies for new construction in flood prone areas.
Trade. Over the last several years, President Trump has abused a number of unilateral trade authorities—particularly Section 232 of the Trade Expansion Act of 1962—to wage haphazard trade wars with countries all around the globe. This reckless use of tariffs angered long-term allies and hurt the U.S. economy.
In 2015, Congress passed Trade Promotion Authority (TPA) on a bipartisan basis, which is set to expire in July 2021. Congress should renew TPA to ensure that the Biden administration can negotiate much-needed trade agreements, while at the same time reasserting its authority over the imposition of tariffs. As part of its efforts to renew TPA, Congress should establish an expedited process for consideration of tariffs proposed by the executive branch under a number of trade statutes, including Section 232 of the Trade Expansion Act of 1962; Sections 122, 201, 301 and 406 of the Trade Act of 1974; the International Emergency Economic Powers Act; and the Trading with the Enemy Act. In other words, Congress can rebalance trade authority by establishing that the executive branch cannot unilaterally impose tariffs under these statutes; Congress itself can require its approval before such tariffs can be levied and reestablish itself as the final arbiter of tariff policy.
This is by no means an exhaustive list—rather a high-level overview of the top priorities among the three policy areas within R Street’s FIT department. We stand ready and willing to help lawmakers address questions of finance, insurance and international trade policy.
Image credit: Avigator Fortuner
- “estimated one million”: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2446080