Friday, April 15, 2005

Sticking It To The Middle Class

An essential ingredient for a true democracy is a vibrant middle class.

This is a basic principle in political science, although America's political leaders seem not to know. The unprecedented attacks on the middle class, championed by the right wing, are a threat to the very democracy they claim to cherish. The latest attack is the We Love The Credit Card Companies Act, popularly known as the Bankruptcy Reform Bill, which passed both houses of Congress and is on its way to the Emperor for his signature.

Under current bankruptcy law, individuals can seek debt relief under Chapter 7 of the Bankruptcy Code if certain basic requirements are met. Although not all debts can be erased (like student loans), the discharge of debts afforded by bankruptcy law is designed to lift the burden of consumer debt and provide citizens with a "fresh start". The Congress Was Bought By The Credit Card Industry Bill does away with this. (

According to the Washington Post, the central feature of the new bill is that it takes away much of the discretion bankruptcy judges have in deciding who is eligible to wipe out substantial portions of debt by filing under Chapter 7 and who should be forced into filing for Chapter 13 bankruptcy, which requires some repayment of obligations over several years. Instead it would require judges to calculate eligibility by applying a formula, based on income and expenses, to would-be filers whose annual income is above the median in the region in which they live. Those who are required to file under Chapter 13 would have to make repayment for five years. Under current law, those payments cease after three years, even if the debt is not fully repaid. The new law provides that child support payments will go first to credit card companies in many cases, rather than to children.

The corporate media describe the bill as a success in combating fraud, but evidence from the Congressional Budget Office, the Government Accounting Office, the FDIC, the non-partisan American Bankruptcy Institute and numerous academic studies belies such claims. One academic study found that about half of bankruptcy filings are the result of medical costs (another aspect of the attack on the middle class - unaffordable healthcare). Another 40 percent are due to job loss, divorce, or a death in the family. Most of the others are due to natural disasters, service in Iraq or identity theft. At most, 3.6 percent, according to the American Bankruptcy Institute, involve anyone getting out of any payments that they could have made.

Congress had the opportunity to soften the blow of the new bankruptcy law for the 96.4 percent who are legitimately in distress, but each of the amendments to the bill was struck down. Our elected so-called representatives (please see my posting re lobbies) voted against
  • closing off the trust loophole for millionaires (assets in trusts cannot be touched in bankruptcy)
  • creating a minimum homestead exemption to save the homes of the elderly
  • protecting employees and retirees from corporate practices that deprive them of their earnings and retirement savings when a business files for bankruptcy
  • discouraging predatory lending practices
  • exempting debtors from means testing if their financial problems were caused by identity theft
  • limiting the amount of interest that can be charged on any extension of credit to 30 percent
  • protecting homeowners from medical debts.
  • protecting soldiers from the debts incurred as a result of going to war.


For those who mastered the art of connecting the dots during childhood, you will see that this bill is only part of the attack on the middle class. More and more middle class jobs are being outsourced, healthcare is less afforable and accessible and social security may be "reformed" so that you get less when you are old.

The message from the government is clear -- do not lose your job, do not get sick, do not go into the military and do not allow your identity to be stolen (as if you can control who hacks into Lexis Nexis). ( If such things happen, it is your fault, you are the bankruptcy-abusing criminal and you will not receive any of the Christian mercy Terri Schiavo got.

Say goodbye to the middle class and say goodbye to democracy.


At 12:15 PM, April 15, 2005 , Blogger bombsoverbaghdad said...

So glad you posted on this. This Act was the most naked example of the power of money in political lobbying I've seen in a long time.

I don't see how a credit card company can charge 24% interest (usury?) and, at the same time, be entitled to these marvelous creditors rights. We should all be so lucky. To top it all off, people are inundated with advertising, which causes insane spending habits. At some point in the near future, one would expect a backlash agains this type of naked corporatism, but with a media that pumps people full of hubris and pride, that may not happen.

Save now. Eschew frivolous spending.


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