What's a little liberty?

Earlier this month, Bank of America backed off from a proposed $5 monthly fee for debit card users. The plan had sparked a considerable public outcry and even critical comments from President Barack Obama. As a consumer, I’m glad the idea was dropped.

But the calls for government involvement point towards a disturbing, and increasingly prevalent, mindset. Government is not the solution for anything we don’t like in our lives, and especially not for problems that government itself actually created. Looking at the principles involved suggests that we need to be careful about compromising liberty in other, perhaps larger, proposals for government intervention.

Few national issues ever manage to pierce the Orange Bubble, but this particular story got prominent coverage from the ‘Prince.’ Unfortunately, it’s easy to miss the ultimate cause of the fee amid the student outrage. In the article, a quote from Professor Elizabeth Bogan nicely summed up the matter: “The whole approach was symbolic of regulatory overreach, where regulators are trying to make tiny microeconomic decisions with a blunt instrument like price controls.”

As the article goes on to explain, the tale begins with the regulatory law known as Dodd-Frank, ballyhooed to no end by liberals as their solution to the recent financial crisis. The Durbin Interchange Amendment, named for Senate Assistant Majority Leader Dick Durbin (D-Ill.), imposed limits on the fees that banks could charge merchants for debit card transactions.

Did we need certain regulatory and cultural reforms after the Panic of 2008? Yes. Was Dodd-Frank the solution? Almost certainly not. It should be no surprise that banks simply started charging fees elsewhere, in this case to consumers, to make up for lost revenue. This is a clear case study in the law of unintended consequences, perhaps the only law that has never interested liberal members of Congress. In (ostensibly) responding to the fallout from the last heavy-handed federal intervention in the economy with Dodd-Frank, America almost immediately got another unintended consequence.

As much as it hurts consumers, Bank of America has every right to charge fees like the $5-per-month charge. Businesses exist to make profits, and when they don’t make profits, they eventually stop existing. That means less freedom for consumers to choose their bank and less freedom for bank employees to find jobs. It might even mean less freedom to choose a bank for its customer service, convenient ATMs or other perks. In a free market, consumers have every right to vote with their feet and find a bank that realizes it can make more money by not charging a certain $5 fee because enough people dislike it — Bank of America eventually realized that anyway.

Nevertheless, political figures as prominent as President Obama insisted that the proposed debit card fee simply illustrated the need for even more federal regulation. As he told ABC’s George Stephanopoulos, the story is “exactly why we need somebody whose sole job it is to prevent this kind of stuff from happening.” The banks, President Obama said, could be told: “You don’t have some inherent right just to, you know, get a certain amount of profit, if your customers are being mistreated.” Banks don’t have the right to profit from a crime, but the president wasn’t suggesting that the fee rose to the level of an actual crime. Ironically, the public awareness of the $5 fee is a textbook case of consumers not needing the federal government to babysit them all of the time by “prevent[ing] ... stuff from happening.”

This isn’t to say that our government has no role in addressing poverty, income inequality, unfair business practices or other ills. Its place is properly understood, however, alongside private, state and local action. Friedrich von Hayek taught us over 60 years ago that a central planner cannot possibly acquire and digest all of the information necessary to efficiently direct production and consumption from a central bureaucracy. What we must also realize is that even if it could, we still shouldn’t want it to do so.

That reason is our liberty. As Alexis de Tocqueville warned in the 19th century, citizens in a democracy might choose to surrender liberty to a powerful government in exchange for material comforts in the little things of everyday life. Tocqueville, one of the keenest observers of America, called it what it was: soft despotism.

It’s not as though our liberty will be purchased for $5 a month. But the very impulse to surrender even more of our liberty to the increasingly powerful federal government should give us pause, especially since the federal government usually vests its power in electorally unaccountable bureaucracies. Even on the small questions, it’s worth asking just what trade-offs are involved. Bank customers who liked Dodd-Frank should certainly realize that in hindsight.

The temptation to give in to government control is undoubtedly alluring. Resisting it requires attuning our reason to resist that urge. We have a long time to do so before we reach Tocqueville’s dystopia, but there is no simple light switch that we can flip to stop the advance of big government at the last possible moment, especially since the darkness of unwise capitulations slowly obscures the true meaning of liberty to all but the most unflagging eyes.

Brian Lipshutz is a politics major from Lafayette Hill, Pa. He can be reached at lipshutz@princeton.edu.