Today the Senate is expected to vote to limit debate on a bill that toughens the existing bankruptcy law, probably ensuring the bill’s passage. A solid bloc of Republican senators, assisted by some Democrats, has already voted down a series of amendments that would either have closed loopholes for the rich or provided protection for some poor and middle-class families.
The bankruptcy bill was written by and for credit card companies, and the industry’s political muscle is the reason it seems unstoppable. But the bill also fits into the broader context of what Jacob Hacker, a political scientist at Yale, calls “risk privatization“: a steady erosion of the protection the government provides against personal misfortune, even as ordinary families face ever-growing economic insecurity.
The bill would make it much harder for families in distress to write off their debts and make a fresh start. Instead, many debtors would find themselves on an endless treadmill of payments.
The credit card companies say this is needed because people have been abusing the bankruptcy law, borrowing irresponsibly and walking away from debts. The facts say otherwise.
A vast majority of personal bankruptcies in the United States are the result of severe misfortune. One recent study found that more than half of bankruptcies are the result of medical emergencies. The rest are overwhelmingly the result either of job loss or of divorce.
To the extent that there is significant abuse of the system, it’s concentrated among the wealthy — including corporate executives found guilty of misleading investors — who can exploit loopholes in the law to protect their wealth, no matter how ill-gotten.
One increasingly popular loophole is the creation of an “asset protection trust,” which is worth doing only for the wealthy. Senator Charles Schumer introduced an amendment that would have limited the exemption on such trusts, but apparently it’s O.K. to game the system if you’re rich: 54 Republicans and 2 Democrats voted against the Schumer amendment.
Other amendments were aimed at protecting families and individuals who have clearly been forced into bankruptcy by events, or who would face extreme hardship in repaying debts. Ted Kennedy introduced an exemption for cases of medical bankruptcy. Russ Feingold introduced an amendment protecting the homes of the elderly. Dick Durbin asked for protection for armed services members and veterans. All were rejected.
None of this should come as a surprise: it’s all part of the pattern.
As Mr. Hacker and others have documented, over the past three decades the lives of ordinary Americans have become steadily less secure, and their chances of plunging from the middle class into acute poverty ever larger. Job stability has declined; spells of unemployment, when they happen, last longer; fewer workers receive health insurance from their employers; fewer workers have guaranteed pensions.
Some of these changes are the result of a changing economy. But the underlying economic trends have been reinforced by an ideologically driven effort to strip away the protections the government used to provide. For example, long-term unemployment has become much more common, but unemployment benefits expire sooner. Health insurance coverage is declining, but new initiatives like health savings accounts (introduced in the 2003 Medicare bill), rather than discouraging that trend, further undermine the incentives of employers to provide coverage.
Above all, of course, at a time when ever-fewer workers can count on pensions from their employers, the current administration wants to phase out Social Security.
The bankruptcy bill fits right into this picture. When everything else goes wrong, Americans can still get a measure of relief by filing for bankruptcy — and rising insecurity means that they are forced to do this more often than in the past. But Congress is now poised to make the bankruptcy law harsher, too.
Warren Buffett recently made headlines by saying America is more likely to turn into a “sharecroppers’ society” than an “ownership society.” But I think the right term is a “debt peonage” society — after the system, prevalent in the post-Civil War South, in which debtors were forced to work for their creditors. The bankruptcy bill won’t get us back to those bad old days all by itself, but it’s a significant step in that direction.
And any senator who votes for the bill should be ashamed.
Peonage, also called debt slavery or debt servitude, is a system where an employer compels a worker to pay off a debt with work. Legally, peonage was outlawed by Congress in 1867. However, after Reconstruction, many Southern black men were swept into peonage though different methods, and the system was not completely eradicated until the 1940s.
In some cases, employers advanced workers some pay or initial transportation costs, and workers willingly agreed to work without pay in order to pay it off. Sometimes those debts were quickly paid off, and a fair wage worker/employer relationship established.
In many more cases, however, workers became indebted to planters (through sharecropping loans), merchants (through credit), or company stores (through living expenses). Workers were often unable to re-pay the debt, and found themselves in a continuous work-without-pay cycle.
But the most corrupt and abusive peonage occurred in concert with southern state and county government. In the south, many black men were picked up for minor crimes or on trumped-up charges, and, when faced with staggering fines and court fees, forced to work for a local employer would who pay their fines for them. Southern states also leased their convicts en mass to local industrialists. The paperwork and debt record of individual prisoners was often lost, and these men found themselves trapped in inescapable situations.
This interview originally aired on January 17, 2018. For the past year, we’ve all experienced an intense sort of political or news vertigo. It’s making us dumber by the day. Of course, part of this is due to the fact that Donald Trump is president and he constantly scoops the story of the latest outrage about himself by performing yet another outrage just as we start discussing the previous one. It’s exhausting and brain melting. But this is also because major media organizations have all chosen to constantly chase the rabbit. In a way, all of us in media are complicit. When we’re constantly on the run, it’s very difficult to take stock of where we are and where we’ve been. To take a good look at the big picture becomes a luxury that none of us seem able to afford. And this is going to have serious consequences. Our brains are actually being altered. The way we process news and information, our ideas about what constitutes resistance and what constitutes tyranny. In general, we live in a society that doesn’t study its own history — its unvarnished history. And often current events are analyzed in a vacuum that almost never includes the context or history necessary to understand what’s new, what’s old, and how we got to where we are. We’ve become detached from our own reality and our own work. David Harvey is one of the leading Marxist thinkers in the world and an authority on Marx’s “Das Kapital,” which turned 150 years old late last year. Harvey is Distinguished Professor of Anthropology and Geography at the City University of New York and he was one of the pioneers of the discipline of modern geography. David Harvey has a new book out. It’s called “Marx, Capital and the Madness of Economic reason.”