Although Donald Trump has made a number of recommendations to lower the cost of living for regular Americans, one prominent economist believes that there is one that would have a greater impact than anything the president has proposed thus far, according to a new Business Insider report.
Trump has outlined proposals to address everything from energy bills to credit card debt to mortgage rates. However, Nobel laureate economist Paul Krugman believes that such alternatives are insignificant compared to one action that Trump might take with easy ease: resurrecting a consumer watchdog from the Obama administration.
Key Highlights:
- President Donald Trump recently revealed a plan to impose an interest rate cap on credit cards.
- This idea quickly drew ire from the financial community, who argued that it would likely backfire.
- Economist Paul Krugman sees one big way Trump could actually address the affordability crisis.
- Donald Trump proposes a 10% cap on credit card interest rates starting January 20, 2026.
- Business leaders like Klarna’s CEO support the cap, while major banks and investors warn of risks.
- The proposal sparks debate on consumer protection, credit access, and industry profitability.
Krugman outlined the issues he sees with U.S. credit card lending procedures in a study of Trump’s policies published on his Substack, pointing out that Trump’s plan to eliminate the Consumer Financial Protection Bureau (CFPB) should be reversed.
“This would immediately help Americans with credit card debt, and many other struggling American families as well,”Krugman said. “No legislation would be required, since the CFPB was established by law. If Trump really wants to cap credit card interest rates, he should reach across the aisle and get legislation passed with Democratic support.”
Credit Cards, Consumers, Proposals & More
In a post on Truth Social on Friday, Trump said he would call for a one-year cap of 10% on credit card interest rates, arguing that consumers are being “ripped off” by rates that he said can be as high as 20% or 30%. Congress, not the president, has the power to implement such a cap. Similar proposals have previously stalled on Capitol Hill.
While some in the financial industry praised the initiative, major banks like JPMorgan Chase, UBS, and Citi cautioned that a 10% restriction might limit lending availability.
According to Krugman, there is a compelling argument for government intervention in the sector, which would directly help U.S. consumers.
“In straight economic terms there is a valid case for government intervention to protect consumers by reducing credit card interest rates,” Krugman said. “There is also a valid case for action to end other abusive credit card practices, such as exorbitant late fees.”
The economist stated that although he supports the president’s idea to reduce high credit card charges, he does not believe Congress would accept it. However, Krugman stated that it would take little work to revive the CFBP.
Other financial experts disagree with Krugman’s assessment of the advantages of an interest rate cap. Mark Zandi, chief economist of Moody’s Analytics, recently told Business Insider that many borrowers, especially those with middle-class and lower-class incomes, will probably have less access to credit as a result of the plan.
This week, UBS analysts had a similar opinion, claiming that Trump’s plan may also impede GDP growth by causing a drop in consumer spending.
The post Nobel Laureate Economist Offers Insights on U.S. Affordability first appeared on The MortgagePoint.
