As reported in the WSJ, the Credit Card Accountability, Responsibility and Disclosure Act will cost the credit card industry approximately $12 billion a year. I’m all for the provision requiring companies to tell consumers how long it will take to pay off balances, but handicapping actual contracts is going too far. This is what I really dislike about the Obama administration- they see a problem and jump on it, thinking that if they just tell people not to do thing they dislike everything will be fine. I especially enjoy the irony that they gave $800 billion in stimulus to help banks and now are tying their hands from making a recovery. Instead, why wasn’t the stimulus $12 billion less, and that difference could be made up by the taxpayers who act within their contracts instead of everyone who had nothing to do with any of this. Not to mention, of course, that private spending ensures that both parties are better off than they would have been otherwise. Government spending carries no such guarantee.

But the real thing that frustrates me about American consumers is their sense of entitlement. Whenever a product or service becomes commonplace in the economy, they decide that they deserve it and that it must be a part of their lives. What they forget, of course, is that for credit cards to exist at all, some people must default and pay penalties and interest- otherwise there would be no way to support them for the rest of us. How shortsighted is it to think that we can handicap the mechanism that makes them work and expect them to stay around for us to take advantage of?

The same thing holds for health insurance. People are so used to it that they scramble to make people insured and then worry about costs, without realizing that people who are insured have higher costs by definition– that’s just the way insurance works, and that’s even if you control moral hazard and adverse selection, which is pretty much impossible.