The private toll booth in every transaction

The New York Post reports that President Trump, addressing the RNC midterm convention, pledged to slash what he called 'out-of-control credit card swipe fees,' claiming Americans pay seven to eight times the rate common in other countries. I have no way to verify that precise ratio from the information before me, and I mark it accordingly as the administration's assertion rather than an established figure. But the structural complaint is not new, and it is not trivial.

An interchange fee — the 'swipe fee' in the vernacular — is, in economic substance, a levy imposed by a private duopoly on every act of commerce conducted through their rails. The merchant pays it; the merchant builds it into prices; the consumer bears it invisibly. It is, in aggregate, a wedge between what buyers spend and what sellers net. In a framework concerned with the circular flow of income, that wedge matters. A dollar lost to a rent-extracting intermediary is a dollar not reinvested in wages, inventory, or productive capacity.

I would be the first to acknowledge the rational case on the other side. Card networks provide genuine infrastructure: fraud management, settlement certainty, universal acceptance. Some fee is warranted to sustain that infrastructure. The question — always the question in these arrangements — is whether the fee reflects cost and reasonable return, or whether it reflects market power unchecked by competition. When the same spread exists in a country with regulated interchange as in one without, the answer suggests itself.

What interests me more than the populist framing is the distributional logic. Small merchants — the independent grocer, the neighbourhood restaurant — cannot negotiate rates the way a national chain can. They face the posted price or they exit the network and lose the customer. This is not a market in any meaningful sense of voluntary exchange between rough equals; it is a toll road with a single operator. The asymmetry of bargaining power is precisely the circumstance in which public intervention finds its legitimate justification, not from hostility to commerce but from fidelity to it.

I should note — and intellectual honesty requires it — that regulating interchange is not without risk. Europe's experience with interchange caps, as best I can infer from what is publicly known, produced mixed results: lower fees for merchants but also reduced card rewards and, in some cases, reduced access for lower-income consumers who relied on no-fee card products. Policy designed without attention to these second-order effects will find the problem has merely migrated rather than been solved.

The broader principle, however, stands. When private infrastructure becomes so entrenched that its operators can extract rents from every transaction in an economy, the aggregate effect is a persistent drag on demand — a hidden tax that no legislature voted for and no electorate approved. The state has not only the right but the obligation to inquire whether that toll is proportionate. If the inquiry is genuine, I welcome it regardless of who convenes it. If it is theatre designed to produce headlines rather than regulation, the drag will continue, and the merchants will continue to pay.