California is a great place for studying the thinking — or lack of thinking — on the political left.
The mindset of the Left was recently displayed in a big front-page story in the October 30 issue of the San Mateo County Times. It was an investigative reporter’s exposé of the “payday loan” business and its lobbyists.
According to the reporter: “In California lenders charge up to $45 in fees on a maximum $300 loan. This amounts to an interest rate of 460 percent, trapping some borrowers into a never-ending cycle of debt.”
Let’s take this one step at a time. Whatever the merits or demerits of the rest of the argument, $45 is not going to trap anyone in a never-ending cycle of debt, even if they are making only the bare minimum wage. Personal irresponsibility in managing money can trap anyone, but that is true regardless of whether or not they take out payday loans.
Now to the 460 percent rate of interest. You don’t need higher math to figure out that $45 is 15 percent of $300. How did we get to 460 percent? Very simple: By distorting the actual conditions of most payday loans.
As the name might suggest, payday loans are short-term loans to tide people over until they get their next check, whether a salary check, a welfare check, or whatever. Payday loans are relatively small sums of money borrowed for very short periods of time, often by low-income people who want some cash right now, for whatever reason.
Is it worth paying the $45 to get the $300 right now, rather than waiting a couple of weeks for your check to arrive?
No third party can know that. But taking decisions out of the hands of those most directly affected is one of the central patterns of the political Left that make them dangerous to the very people they think they are helping. This is not idealism. It is arrogance — and too often, it is ignorant arrogance, as in this case.
The 460 percent figure comes from imagining that the borrower is not just going to borrow the money for a couple of weeks, but is going to keep on borrowing every couple of weeks all year long.
Using this kind of reasoning — or lack of reasoning — you could quote the price of salmon as $15,000 a ton or say a hotel room rents for $36,000 a year, when no consumer buys a ton of salmon and few people stay in a hotel room all year. It is clever propaganda, but do people buy newspapers to be propagandized?
What about the $45 that is at the heart of all this runaway rhetoric? Does that do more than cover the risk and the costs of processing the loan? Apparently our crusading investigative reporter did not find that worth investigating, even in a long article that takes up another page and a half inside the newspaper.