NJ’s Unjust ‘Social Equity’ Legal Weed Regulations Not Unjust Enough for Some

My 8/17/22 post covered New Jersey’s regulations of the state’s emerging legal cannabis industry, which is based on reactionary, un-American “social equity” premises. The law favors individuals identified under so-called “disadvantaged” groups like racial minorities, those once incarcerated for marijuana usage, and women.  The industry is overseen by the Cannabis Regulatory Commission (CRC), which even has its own Diversity Director. 

Apparently, the bigotted structure of the law is not enough for some. On 8/15/22, the New Jersey Star-Ledger editorialized that N.J. promised help for small weed licensees. So start helping already. 

The first step toward getting a license to operate a cannabis business is approval by the CRC. But after that, the applicant must get a license from the municipality it wants to operate in, which can cost many thousands of dollars, reaching as high as $50,000 just to open. That’s bad enough. But apparently the unfair favoritism some receive from the CRC based on skin color or gender is still not enough.

Complains Linda Solana, “Charging me the same high amount as everybody defeats the purpose. They just don’t get what social equity really means.” 

But I do. This is how open bigotry has become. Unequal treatment before the law is now accepted in NJ. Yes, that’s what so-called “social equity” really means; not fair and impartial, the actual meaning of “equity”, but just the opposite; bigotry, cronyism, legal favoritism, racism, sexism. 

The fees are outrageous. No one should need permission from the state, the municipality, or any other governmental entity to start a business or earn a living. But compounding that injustice with “social equity” injustice just compounds the immorality of the regulatory assault on NJ’s weed entrepreneurs. What to do? Fire the CRC’s Diversity Director, outlaw the licensure requirement, outlaw the municipal shakedown fees, and return to America's fundamental Constitutional mandate that forbids any state to “deny to any person within its jurisdiction the equal protection of the laws.” 

Related Reading:

NJ’s Racist, Sexist, Un-American ‘Social Equity’ Cannabis Law

The Permission Society: How the Ruling Class Turns Our Freedoms into Privileges and What

We Can Do About It by Timothy Sandefur

The Growing Horror of Occupational Licensure

Licensure Epidemic

It’s Time to End Occupational Licensure for The Objective Standard

In Answer to a Reader about Licensure

The Pravda-ization of the American Press

A little-discussed piece of the Democrats’ statist legislative agenda is among the most dangerous to liberty long term; the schemes to subsidize private news and media organizations through tax favoritism. Under a federal proposal, “newspapers, digital news outlets and radio and television stations could claim a payroll tax credit for employing eligible local journalists,” according to the Associated Press. On the New Jersey state level, subscribers to local journalism companies would get a tax deduction, according to the New Jersey Star-Ledger.

It’s true that all kinds of government favors are dished out to private businesses. But subsidizing media companies carries a special danger, because media companies exist at the intersection of economics and freedom of the press.

In Help save local news: Give subscribers a tax break, the New Jersey Editorial Board (SLEB) writes on NJ’s proposal;

A New Jersey lawmaker is trying to bolster local journalism after more than a decade of layoffs, with some help from the government: A tax deduction for subscribers.

Under Assemblyman Roy Freiman’s bill, you’d get a $250 deduction on your state income taxes if you subscribe to a New Jersey paper or digital publication. For most families, it would be a small savings. But every bit helps.

The obvious objection is, if private citizens don’t choose to patronize these journals, why should they be forced, through the back door of tax favors for subscribers, to pay to support these journals? If the market doesn’t support these local media companies, why should the government be bailing them out? Anticipating this line of dissent, the SLEB asks;

Why, you might ask, should newspapers get a subsidy from the government? Well, other businesses do. 

This point was inevitable. Once precedents are set, they tend to grow. And government subsidies to businesses have grown like malignant cancer. Of course, the proper response to the SLEB’s question is, Why should any business that can’t succeed in the market get a government subsidy, directly or through tax favors? The answer, of course, is that they shouldn’t. *

But there’s a much larger danger lurking than merely the economic objection. In an amazing paragraph, the SLEB seems to be pointing straight at the danger involved, without even realizing it:

[The local media] have a better-informed opinion of Joe Biden or Phil Murphy than their state assemblyman, or a massive local economic development project like the $400 million Wind Port in Salem County. “I felt that I lost my voice at the Statehouse,” Assemblyman John Burzichelli (D-Gloucester) lamented, citing the lack of quality, in-depth coverage of South Jersey.

So what Burzichelli and Freiman are doing, essentially, is looking to buy, with taxpayer money, more “quality” reporting in support of their agendas; but quality, defined by whom? What kind of editorial or news content will local newspapers, which apparently includes statewide newspapers like the Star-Ledger in the “local” category, be able to maintain when politicians they depend on for financial support are counting precisely on the local news outlet to be their “voice?” What independence will be left to them when the likes of Assemblyman John Burzichelli have legislative control over the economic lifeblood of the publication? Will an editorial board of a newspaper that is at least partially dependent on tax favors be as ready to criticize politicians or their programs—politicians who have the power to rescind the tax favors? How will a news outlet respond when Burzichelli and his ilk complain about the “quality” of some “in-depth coverage” put out by the outlet?

As I’ve said, the press is not like other businesses. With the press, as I’ve said, you’re dealing with the direct intersection of economics and First Amendment liberties. The SLEB seems to get, on some level, the inherent danger:

Because this tax break is going to the subscriber, it has the advantage of not running aid to news organizations directly, avoiding the issue of the government picking winners and losers. 

Well, how is the government indirectly “picking winners and losers” any different? Direct or indirect, it’s a distinction without a difference. President Biden’s federal bill would direct the tax break directly to the company, not the subscribers. Presumably, the SLEB is against that bill, as its stated premise indicates. But, either way, press outlets would become dependent, at least in part, on politicians for their survival.

Independence from any government interference is vital to a free press. But with media companies tethered to government for economic support, their independence would be, of necessity, at the very least compromised. 

I don’t want to get too apocalyptic here. Pravda was an organ of the ruling Communist Party of the old Soviet Union under a state that controlled the flow of information across the board.** Under the federal and NJ bills, any news outlet would be free not to take the federal tax credit to preserve their integrity, although the Jersey deduction is more problematic given that it applies to subscribers. On the surface, nothing about these bills includes any direct government requirements in regard to content. 

But we can’t minimize the danger, either. The mere fact of government financial support has got to figure into the thinking of the editors in regard to content, sooner or later. This would be especially true of economically marginal media enterprises who may feel they can’t survive without the tax favors. This government lurch into the economics of the free press is a direct assault on press independence, and by logical extension on press freedom. It is, in my view, a violation of the First Amendment’s unequivocal ban on the government abridging freedom of the press. It will, in the end, through practice and precedent, be the end of the independent press if they are not nipped in the bud. “Freedom of the press” would become a hollow slogan. 

For New Jersey, it’s bill is a continuation of the Democrats’ assault on Press freedom under Governor Phil Murphy. Now it is spreading to the Federal level. These bills set America on the road to the Pravda-ization of the American press. 

* [I have often pointed out that a tax credit or wrote-off is not a subsidy, and that’s true. But unlike education tax credits or the home mortgage interest deduction, which applies to all parents of school-age children or all homelowners without discrimination, a credit or write-off narrowly tailored to specific private entities while excluding other private entities—in this instance, “local” media but not national media—it is government favoritism, and has the same effect as a subsidy. So, in this article, I will treat tax credits, write-offs, and subsidies as essentially the same thing.]   

** [Pravda was subsequently sold off, and eventually split up, after the fall of the Soviet Union.]

Related Reading:

New Jersey Civic Information Consortium’s Immoral Taxpayer Grab

Keep the press free from the academics and the politicians by Paul Mulshine

NJ Government Takes First Step to Becoming ‘the Sole Arbiter of Truth’

N.J. just became the first state to help revive local news By Susan K. Livio -- NJ Advance Media for NJ.com

Art Theft Approved in Jersey City

No. I’m not referring to thieves who break into museums and steal paintings. I’m referring to artists who steal from innocent people.

64% of Jersey City, New Jersey voters approved a referendum to impose an Art Tax.  Adrienne Romero reports for The Jersey Journal:  

Kate Kilpatrick stood in the parking lot of 107 Morgan St. where the city’s autumn oddities and alternative art market was shining a spotlight on small business creators.

Kilpatrick, dressed in a long black dress and colorful face mask, was selling her Victorian-inspired jewelry, which has helped keep her financially afloat during the pandemic.

On Wednesday, Jersey City became the first municipality in the state to create a tax that benefits its local arts and help local artists like Kilpatrick. Artists who sold their creations at the alternative art market Saturday said Jersey City is setting a good example for other municipalities. 

I don’t mean to be too hard on Kilpatrick and her cohorts. After all, our economy is flooded with taxpayer-funded subsidies. Artists pay taxes, too. So they are victims. Their pockets are routinely picked by our government for the unearned benefit of sundry others. Why shouldn’t they get a little cut of the loot?

But this is all wrong. It’s legalized burglary. And fighting it requires calling out every new institution of it, no matter how inconsequential it may seem. A few government-confiscated dollars to subsidize art is just as wrong as $billions for “clean energy” subsidies. And it’s not just wrong for the legalized burglary, politely labeled “redistribution of wealth,” that it is. The art world will be thoroughly corrupted. The question is, which artists will be privileged to get the loot, and which will not? How will the criteria be chosen? Cronyism and political connections, that’s how. Political cronyism won’t foster good art. It will foster politicized art. Only a free market--a market free of government coercion--can foster a healthy art market. Art consumers, not government officials, should decide what art gets funded and what doesn’t. Voluntarism, not force. 

This is an immoral tax. The 64% are free to “support the arts” anytime they want. But their values should not be forced on the 36% who have other uses for their money. This is not proper government. A government should protect every individual’s right to spend their money as they see fit. Rights-protecting functions like police and anti-fraud laws are proper tax purposes. They protect us from thieves. Forcing people to pay for art they would not buy voluntarily is not rights-protecting. It is rights-violating. A government should never become a tool of theft and favoritism. 

Related Reading:

Energy Subsidies: Cronyism Breeds Cronyism

Turning a Subsidy into ‘Payment for a Value Delivered’: Corporate Welfare for NJ Solar Companies

"Clean" Energy Subsidies vs. Oil Industry "Subsidies"

Cronyism Doesn't Promote Competition: It Limits Competition

New Jersey’s Political Attack on Takeout Food Delivery Service Providers

In N.J. lawmakers may limit Grubhub and other restaurant delivery fees during pandemic, Samantha Marcus (NJ Advance Media for NJ.com) reported on May 12, 2020:

Lawmakers will consider a bill Tuesday capping the fees delivery services like Grubhub and Uber Eats can charge restaurants, for whom takeout and delivery are their only lifeline during this public health crisis.

The bill (S2437) would permit these third-party sites that coordinate takeout and delivery services to charge eateries no more than 20% of the cost of an individual online order and no more than 10% when that third-party company isn’t actually making the delivery.

“While some companies have provided meaningful support to the restaurant community, other companies offering third-party food takeout or delivery services may charge restaurants a service fee exceeding 30% of the order price, thereby compounding the current financial strain on restaurants,” the bill says. The caps would remain effective during any state of emergency longer than seven days and would supersede any local caps already in place.

There is a lot of rationalization going on. Aside from the statement in the bill cited above, which complains of “financial strain on restaurants,” Jersey City Mayor Steven Fulop, who already “issued an executive order barring companies like DoorDash and Postmates from charging more than 10%,” says:

“For all their hard work to stay afloat and achieve profitability, these third-party fees are hindering local restaurants’ chances of survival which is simply unfair and unethical amid this health and economic crisis,” Fulop said in a statement. “Many of the restaurants have had to make a shift to relying solely on delivery and takeout under the circumstances, and this cap is our latest effort to identify any available options to provide relief to our local businesses.”

Don’t even ask where a mayor gets the power to issue such an order.

Food delivery companies have stepped up to enhance the restaurants’ “lifeline”--takeout business. Now they’re being attacked. 

If the cost of the fees of third-party delivery services are uneconomical for restaurants, why do they use them? Because on balance, the benefit outweighs the cost. But it’s pointless to point out the economic harm of price controls. Politicians who want to wield bully power against private citizens believe they are above any law. If a private restaurant owner pulled a gun on a service provider, demanding lower fees under threat of robbing him of $10,000 or $20,000, the restaurant owner would be charged with a crime. Yet, that’s precisely what these politicians are doing--acting as criminals. The penalty for charging prices not to the liking of the politicians is $10 to $20 thousand. These penalties are legalized extortion. Fulop has unimaginable nerve charging these private delivery companies with “unfair and unethical” behavior. Unless fraud is involved--and no wrongdoing has been alleged--the shoe is on the other foot. It is unethical to coercively interfere in the private voluntary contract terms between restaurants and delivery companies. It is doubly unethical, because it is tyrannical, for politicians to use the legal machinery of the state--the gun power--to impose their arbitrary price terms on private companies.

I suspect that there is a huge element of cronyism going on. In our mixed economy, it is not uncommon for businesses to lobby politicians for special favors at the expense of competitors or against trading partners whose terms they don’t like. Laws such as S2437 don’t happen in a vacuum. I have no doubt that legislators have been inundated with complaints from some restaurateurs. If that is the case, shame on them.

The right to free trade--that is, to trade in the absence of force--is fundamental to a free society. And the absence of forcible interference extends to the government, whose job it is to protect individual rights. If equal protection of the law means anything, then that protection extends to all individuals, including business owners. Free trade depends on the sanctity of contract. This law, which as of this writing has not been enacted but has passed a key Senate committee by a bipartisan 12-0 vote, is economically destructive, and immoral because it violates individual rights to freedom of association, which includes the right to voluntary contract on mutually agreed terms.

If America were truly a capitalist nation, this immoral act of powerlust would not happen. Essentially, capitalism involves the separation of economics and state. To fight for capitalism means to fight for justice. Fighting against laws such as this is what it means to fight for the separation of economics and state. A pandemic is no excuse for this law. The constitution is designed to restrain the government from violating individual rights. The fees these restaurants and delivery companies mutually agree to violate no one’s rights. The constitution does not get suspended in a pandemic. Article I, Section 10, Clause I says that “No State shall . . . pass . . .  any Law impairing the Obligation of Contracts.” Legislators, mayors, et al should honor it, pandemic or not.

Related Reading:

On Mylan’s EpiPen Pricing Controversy

How Anti-"Price-Gouging" Laws Really Work

Banning "Price Gouging" (Or How to Hamper a Recovery)

Energy Subsidies: Cronyism Breeds Cronyism

Nuclear plant owners expand search for rescue to more states, the Associated Press reports;

The natural gas boom that has hammered coal mines and driven down utility bills is hitting nuclear power plants, sending multi-billion-dollar energy companies in search of a financial rescue in states where competitive electricity markets have compounded the effect.

The plant owners' strategy is similar to that in Illinois and New York: give nuclear power megawatts the kind of preferential treatment and premium payments that are given to renewable energies, such as wind and solar.

New Jersey is in on the act. Public Service Electric and Gas (PSEG) succeeded in getting a nuclear  “bailout” bill through the legislature and sent to Governor Murphy. The same bill required a compromise, via a companion bill, creating massive new subsidies--labeled “incentives,” not bailouts) for unreliables solar and wind.

As usual, cronyism breeds cronyism. “That guy’s getting a subsidy, so why not me.” How about eliminating the "preferential treatment and premium payments" throughout the energy industry, and letting market forces—the cumulative individual voluntary choices of producers and consumers—determine energy sources?

Related Reading:

Free the Market to Sort Out the Future Course of the Energy Industry

If ‘Renewable Energy’ Technology Has Truly ‘Proven Itself,’ Why Does the Renewable Industry Need NJ’s 80% 'Renewable' Mandate?

Climate Change Catastrophists Who Oppose Nuclear have Anti-Humanist Premises

To Avoid ‘Amazon Wars’, End Corporate Taxes

Amazon has been soliciting bids from states for the purpose of locating its proposed second headquarters. The bids include things like a description of available talent and educational facilities, transportation infrastructure, and so on. But it also includes favorable tax treatment.

This is a big deal. Amazon’s new headquarters is expected to directly bring 50,000 new jobs, and many more in secondary economic effects. New Jersey’s bid includes $5 billion in state tax concessions, and another $2 billion in local property tax concessions. The New Jersey Star-Ledger pushed back against the “bipartisan strategy” of tax incentives that states use to attract business investment. In N.J. escalates destructive Amazon war, the Star-Ledger editorialized:

Desperate to lure jobs, towns and states compete with tax incentives. The loser is the public, the winner is rich corporations, and New Jersey is now a chief enabler.

We're the bad boy of this "Bachelor"-like competition, offering some of the biggest subsidies, and forcing other states to do the same. Never has that been more apparent than in the escalating interstate fight over Amazon's second headquarters.

Gov. Chris Christie just offered the online retail giant $7 billion in city and state tax incentives to locate in Newark - nearly the biggest tax break ever, second only to Boeing's $8.7-billion handout from Washington state.

These are billions we could use to shore up transportation and housing, to improve our business climate and attract even more companies. Which is what we should be doing, instead of escalating this mutually-destructive bidding war. States should enter into a non-aggression pact, agreeing not to engage in these subsidy battles. If companies were forced to settle without them, the winners would be the taxpayers.

Yes. And states with the most favorable tax climate. Where does NJ rank?

I left these comments:

I agree that the tax incentive game is unfair, because it favors some companies over and/or at the expense of others.

But I think this kind of political bidding war is a legitimate and healthy form of competition. Why should politicians be able to go on taxing unfettered? Why should states be shielded from the destructive consequences of their own policies?

And if you really want to tamp the competitive pressure on New Jersey’s, get rid of the corporate income tax.  A business corporation—what Steve Jobs called “one of the most amazing inventions of humans”—is a legal and abstract framework for people to work together toward the a common productive mission. The money the company earns in revenues and profits stays with the company to further that mission, until and unless it is paid out in employee compensation, dividends, interest, and capital gains for investors, and mass market products to consumers—at which point it is taxed through sales taxes.

When you tax corporate profits, you are in essence double-taxing employees, investors, and consumers. In addition to their direct taxes, corporate taxes force employees to pay through lower wages, investors through lower income and capital gains, and consumers through higher prices and less innovation. Despite appeals to envy by politicians (and editorial writers) demagoguing about “rich corporations,” it is actually anyone associated with the corporation who pays the price of the corporate income tax, one way or another. That’s what makes the corporate income tax so dishonest and regressive. We can see the property taxes we pay. We can see the personal income taxes. We can see the sales taxes. But it’s not so clear that we are actually the ones paying the corporate income tax. The corporate income tax is a way for politicians to suck more money out of all of us without us seeing it.

The “rich corporations”? Do not ask for whom the corporate tax tolls. It tolls for us. In the end, only individuals pay taxes, because a business corporation is really just an association of individuals. NJ has the third highest corporate tax rate among the states; a flat 9%. No wonder NJ politicians have to “offer” big tax breaks.

New Jersey has a lot going for it. But NJ has the worst business tax climate in the nation. Instead of the $billions in annual tax breaks, we should become the 7th state to go corporate tax free. Abolishing the corporate income tax could substantially reduce the need for the state to bid for business and make NJ much more attractive to business. If lower taxes are good at attracting job-creation—and that’s the whole point of “tax incentives” competition—why not make the incentive permanent? And it would get rid of the most dishonest tax we have—the corporate income tax.

Related Reading:

The Left’s Insatiable Lust to Soak American Business

Fairness, not Envy, Should Be the Purpose of 'Tax Reform'

Corporate Tax Inversion is an Act of Economic Justice.

Toward Less-Unfair Corporate Taxes

S-L—'Net neutrality too valuable to lose now.': No, Internet Freedom too Valuable to Lose, Ever

The Trump FCC is taking a lot of heat for its move to repeal so-called “net neutrality” regulations on internet service providers. Typical of the heat comes from the New Jersey Star-Ledger, which editorialized Net neutrality too valuable to lose now.

[T]he web has a bedrock principle: The mighty broadband providers such as AT&T, Comcast and Verizon shouldn’t be allowed to selectively slow down or block websites, and all internet data must be treated equally.

“Treated equally” means content providers like Netflix, which use extraordinary amounts of broadband capacity, can’t be charged more for their usage. Net neutrality means simply that federal bureaucrats get to override private contracts between providers of service and content.

This, supposedly, is good for consumers.

I left these comments:

So let’s get this straight: ISPs catering to government bureaucrats, rather than consumers, is good for consumers? That’s the absurdity behind “net neutrality.”

It’s not the big, bad “mighty broadband providers” we should fear. They’re the producers who invested the $billions to build the physical capacity that makes the internet possible. It’s the government—the political hacks—with its legal power to compel obedience, that we should fear. A government with the power to dictate “net neutrality” regulations on these private companies has the power to regulate anything on the internet. Just the implied threat of regulation is a form of physical coercion that can be levied against the ISPs—and indirectly on content providers. Regulatory power as such is the power to compel obedience at gunpoint. Don’t forget the IRS free speech-stifling scandal. It’s bad enough that the land of the First Amendment even has a Federal Communications Commission. Don’t compound that injustice with net neutrality rules.

I, as one consumer, will not be suckered by the statists’ hollow slogans into handing over control to government bureaucrats. The big content providers like Netflix and their customers don’t deserve government-coerced handouts [full disclosure: I am a Netflix subscriber]. They can pay their fair share for the consumer-driven products they provide. Internet fees are properly the right of ISPs and content providers to contractually negotiate among themselves without government interfering on behalf of one party or another.

Market supply and demand, not crony-oriented dictates of government bureaucrats, should be the concern of the ISPs. While the computer code of the internet is open source—free for anyone to use—the physical equipment of the internet is not some public domain. It is privately built networks, and the networks belong to whoever builds them based on the principle of property rights. The ISPs built their networks. They are, despite certain government-imposed roadblocks, largely subject to competition—new ISPs are free to enter the market at any time. An ISP has a right to set the terms according to its profitability, its capital expenditure needs, and the good of its overall customer base, whether it is pricing or who to sell their capacity, so long as it doesn’t violate anyone’s rights. Charging extra for heavy users of the network it built, owns, and operates is perfectly legitimate. If an ISP overcharge, the market will force it to alter its policies.

The internet, like the printing press before it, is particularly critical to a free society because it is a direct intersection of economics and free speech. Economic freedom and intellectual freedom are corollaries. The Left has been itching to get control of the intellectual marketplace of ideas, just as it has gained immense control over the marketplace of goods. They are enemies of free speech (think campaign finance controls). Net neutrality is not only about economic control—the government running roughshod over private citizens’ private property, bad as that is: it is an opening wedge of intellectual control. The only neutrality there should be is in regard to government and its laws: Unless there is evidence of fraud or other criminal behavior, keep government out of the private internet and apply equal protection of the law without favoritism. A government-controlled, politically corrupted internet is not a “free and open internet.” Only a market-oriented internet is truly free and open.

Net neutrality was first introduced under the GW Bush FCC. Obama made it worse. It is a bipartisan atrocity. Government-enforced “net neutrality,” if not the FCC itself, should be abolished.

Related Reading:

Toward a Less-Free Internet: The FCC’s New ‘Net Neutrality’ Regulations

"Net Neutrality" Really Means Government Control of the Internet

David Harsanyi: Forget Net Neutrality, and Abolish the FCC

Net Neutrality: Toward a Stupid Internet—Raymond C. Niles for The Objective Standard

Related Viewing:

NET NEUTRALITY NEUTERS THE INTERNET—Interview with Steve Simpson, the Ayn Rand Institute’s director of legal studies.

Credit Card Fees: Who's Really Rigging the Market?

“New Jersey has a unique chance to strike a blow for consumers, free markets and even to boost its economy. Will the state take it?”

That’s how John Holub, president of the New Jersey Retail Merchant Association, started his guest column, Let’s reduce credit card swipe fees, published last June in the New Jersey Star-Ledger. But a free market entails government neutrality, in which force is banished, all transactions are strictly voluntary, and government simply bans force and fraud but otherwise protects every individual’s rights equally and at all times. A government that passed laws favoring one economic interest, such as consumers or merchants, at the expense of other economic interests, in this case the credit card companies, is not protecting a free market. It is initiating force, violating the most basic principle of a free market—the absence of aggressive, or initiatory, physical force.

What does Holub demand that lawmakers legislate?

Every time you swipe a card to pay for something, the bank that issued the card charges the merchant a fee to process the transaction. The problem is that MasterCard and Visa control a dominating 80 percent of the market, enough control to price-fix these fees at exorbitant levels with little competition.

Now a bipartisan group of legislators wants to fix this rigged market. Their bills (A752 and S1924) would throw open the market to competition by permitting merchants to pick which network they will use to process their credit card transactions.

Right now, if a customer whips out a Visa card at a restaurant or gas station, the merchant must use Visa's network to process the transaction. But with merchants free to use any number of networks at their discretion, the networks will have to compete and fees will fall.

So Visa and MasterCard setting terms and prices for their own product by voluntary agreement with merchants is “price fixing.” But the NJRMA seeking legislative favors forcing their terms on  Visa and MasterCard is not. Sounds like Newspeak. George Orwell must be chuckling, “I told you so.” Visa and MasterCard have a right to set the condition that only they can process sales transacted with their cards. Holub’s answer to that is that Visa and MasterCard are monopolistic, and cites AT&T as an analogy:

We know it will work because we've seen lots of evidence. Consider AT&T, where long-distance calls were hugely expensive until in the 1980s. The government required that consumers have a choice of carriers. Rates plummeted from dollars a minute to mere cents.

The analogy to AT&T is ridiculous. AT&T was a government-enforced monopoly. Competition was legally forbidden until Congress acted. That is not the case with credit cards. Visa and MasterCard are not monopolistic in any way. They are open to competition. Their 80% market share is earned by the voluntary choices of merchants and consumers. The merchants benefit by accepting Visa and MasterCard. Otherwise, why accept them? But they want to have their cake and eat it, too. They want the benefits of the business Visa and MasterCard bring them, without having to abide by voluntary contract with them.

Holub also cites the example of debit cards: “Congress reformed the way Visa and MasterCard dominate that market by requiring the banks' costs be reasonable compared with their profits.” But two wrongs don’t make a right. Price controls are immoral and contrary to the principles of a free market.

Visa and MasterCard have a great product that fosters commerce and they are profiting handsomely from it. But remember that the credit card business is highly competitive. I get solicitations all the time, with banks falling all over themselves to offer  better “cashback” or “rewards” incentives to use their cards.

Visa and MasterCard can not “rig the market.” They can only set terms relating to their own product, which merchants are free to accept, attempt to negotiate terms more to their liking, or forego doing business with Visa and MasterCard. Only government, with its law-making power of the gun, can rig. That’s what the merchants are after. Granted, Visa and MasterCard undoubtedly have their own lobbyists sometimes seeking to get legislation that favors them. That’s wrong, too—although most lobbying is likely designed to fight against legislation that hurts them. And in this case, the banks are playing defense.

Holub has no business waving the free market banner. What he advocates is the exact opposite of free market economics. It’s pure cronyism for the NJRMA to try to get lawmakers to rig the contract terms in their favor.

NOTE: As of this time, the bills Holub supports, A752 and S1924, have not been enacted by the New Jersey legislature.

Related Reading:

Credit Card Fees

B of A's Debit Charges: It's About More Than Fees

B of A Rescinds Debit Card Fees

Wolves, Vultures, Consumers - and New Debit Card Regulations