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Bankrupt

Let's just say that I agree with Noam and would be interested in hearing Ed Kilgore's take (though Ed's still right about this irrespective of what he may or may not think about bankruptcy). The bankruptcy bill is horrendous policy, and bad politics, but on top of that, any Democrat voting for it ought to at least find his whoring for credit card company donations embarassing and not be sending out blast faxes about it. Joe Biden, for all the eternal damnation and lack of presidential nominations he may have just brought upon himself, has at least acted appropriately weaselly about his weaseling.

March 8, 2005 | Permalink

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» Bankruptcy and "New" Democrats from CommonSenseDesk
If supporting this bankruptcy bill is the kind of position that [Read More]

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» Big Tent or Doghouse: whither "New Democrats?" from The Next Hurrah
by Kagro X Blogosphere outrage over Senate Democrats’ complicity in the bankruptcy bill is already on display; witness: Daily Kos, Atrios, MaxSpeak, Yglesias. Now, as action looks to be shifting to the House, complaints are starting to come in about [Read More]

Tracked on Mar 9, 2005 12:02:26 PM

» America: E Pluribus Unum from Backwards City
America: E Pluribus Unum You Better Hope Nothing Bad Ever Happens To You I direct you back to the heart of conservative ideology, The Just World Hypothesis. [Read More]

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» Bankruptcy and "New" Democrats from CommonSenseDesk
If supporting this bankruptcy bill is the kind of position that [Read More]

Tracked on Mar 9, 2005 4:13:16 PM

» Grassroots gets bi-partisan on bankruptcy bill from Preemptive Karma
Wow. It's not very often that the grassroots on the right and the left find real common ground. But the stinker that is the bankruptcy bill (screwing individual consumers and creating windfalls for banks and credit card companies)has given rise to... [Read More]

Tracked on Mar 10, 2005 10:37:47 PM

Comments

matt, check the link, it goes to Kenneth Baer's DLC article.

Posted by: jason | Mar 8, 2005 11:11:14 PM

Good point. Should be fixed now. Kenny's article was good, though, and you should read that, too.

Posted by: Matthew Yglesias | Mar 8, 2005 11:26:45 PM

You couldn't be more right Matthew. This is such a depressing day. There have been any number of Democrat-supported policies over the years that offended my lefty sensibilities, but at least a part of the time, if not frankly a majority of the time there was some reasonable justification for the bill either as policy or politics or both. We can hate the war in Iraq for all the reasons that are redundant to mention here, but the fact of the matter is that Saddam Hussein was a brutal tyrant and the prospect of a decent, functioning at least semi-democratic government in the heart the middle east is hardly a horrible prospect (should it ever come about). Likewise, there was more than a little mendacity and racism driving the welfare reform agenda, but on the other hand parts of the welfare state that are not universal tend to breed resentment and tend to be ultimately not sustainable, to say nothing about the fact that it had effectively alleviated poverty.

There is just nothing redeeming about this bill, not as policy, not as politics, not as anything, and the fact that more Democrats in both houses of congress than I can count on both hands not simply discreetly enabled its passage, but openly and warmly supported it (witness the insane letter from house Democrats at Scheiber's blog) leads me to wonder what planet these malevolent imbeciles reside on. Really. The Ralph Nader prophecy has finally come to pass. On economic issues, it appears there really is no difference now between Democrats and Republicans. If the GOP succeeds in destroying social security (which will almost certainly require Democratic assistance in the senate) why should I or anyone bother voting for Democrats anymore?

Posted by: Robin the Hoodlum | Mar 8, 2005 11:31:31 PM

"out" ==> "ought?" Or what? WTF? See Delong and Drum and rewrite. PLEASE!

Posted by: jerry | Mar 9, 2005 12:01:39 AM

why did this bankruptcy bill seem to sneak up on everybody?

Posted by: praktike | Mar 9, 2005 12:03:40 AM

social security.

Posted by: David Weman | Mar 9, 2005 12:08:49 AM

"why did this bankruptcy bill seem to sneak up on everybody?"

It snuck up on the lefty blogosphere because, for the most part, the lefty blogosphere is more interested in foreign policy and social issues than in economics.

In the real world, it didn't sneak up on anybody.

Posted by: Petey | Mar 9, 2005 12:12:52 AM

Noam writes:

"Moderate Democrats have been under assault from grassroots liberals lately for selling out Democratic values in their rush to appease conservative interests."

The "grassroots" Democrats he's speaking of are actually "netroots" Democrats. And the values the netroots accuse moderate Democrats of selling out rarely have anything to do with economics.

If there were grassroots Democrats outside of the unions regularly pressuring the debate on economics, we'd be much healthier as a Party.

Posted by: Petey | Mar 9, 2005 12:24:22 AM

It didn't really sneak up. There was a tough fight in the last congress in which the bill was very narrowly defeated through some unlikely parliamentary moves. Given the lost seats in November, it was more-or-less a foregone conclusion that the thing would pass if and when the GOP decided to schedule a vote. They don't announce the schedules far in advance, so people started talking about Social Security. Then it got scheduled, you heard some buzzing, and next thing you know it's voting time.

Posted by: Matthew Yglesias | Mar 9, 2005 12:34:46 AM

So I was all set to oppose the bill based on the opposition of, among others, Instapundit. But, curiously, since I don't really care about the issue, I decided to actually figure out what it is supposed to do. And, lo and behold, I found out that I actually agreed with the bill!

It appears that the bill would only force into Chapter 13 (which requires some repayment of debts) as opposed to Chapter 7 (which generally doesn't) people who make ABOVE their state's median income AND who have the ability to repay at least $6,000 over 5 years.

So, can someone please explain to me why we should not be making WEALTHY people, who HAVE THE ABILITY TO REPAY, to actually repay some of their debts? Because I have not heard any objection that made any sense to me.

Now, of course, I understand that there are objections. But they generally seem to me to be unrelated (or, at most marginally related) to bankruptcy. I see one objection is that people don't like credit card marketing practices. But the relationship to bankruptcy is weak: some people run up debts on their credit cards? Come on. And then there is this extremely wierd provision of Schumer's: of all the crimes in the world, Schumer picks out "protesting abortions" as the crime for which you shouldn't be able to declare bankruptcy??? Howabout, oh, I dunno, murder? Rape? Securities fraud? Genuinely strange.

So, until someone explains to me why WEALTHY people who HAVE THE ABILITY TO PAY should not have to pay their debts.

Posted by: Al | Mar 9, 2005 12:37:43 AM

"There was a tough fight in the last congress in which the bill was very narrowly defeated through some unlikely parliamentary moves."

The Chuck-ster has single-handedly stopped this bill with the same abortion canard for several Congresses now, if I recall correctly...

Posted by: Petey | Mar 9, 2005 12:39:35 AM

"the fact that more Democrats in both houses of congress than I can count on both hands not simply discreetly enabled its passage, but openly and warmly supported it ... leads me to wonder what planet these malevolent imbeciles reside on."

There's no downside for them. Democratic activists outside of unions don't seem to care about economics.

The donations and volunteers go to Dean, not Kucinich.

Posted by: Petey | Mar 9, 2005 12:47:38 AM

"There's no downside for them. Democratic activists outside of unions don't seem to care about economics."

You're absolutely right, though even in all my cynicism I have to think that the sheer horribleness of this bill has to register at some point with the American people. There have been plenty of policies that have hurt the middle class ove the years, but there's just something so shocking and viscerally appalling about this particular piece of legislation, its naked pandering to some of the worst corporate interests in the country, and its open assault on the middle class. But the only real bright spot here is that I think we could be in an environment of great volatility, in which (like the new deal era) major policy changes may be enacted and then reversed within a few years.

Posted by: Robin the Hoodlum | Mar 9, 2005 12:59:11 AM

Al, is there any craven GOP policy that you don't support? Civil rights, maybe?

Posted by: praktike | Mar 9, 2005 1:02:39 AM

(to be clear: civil rights not craven)

Posted by: praktike | Mar 9, 2005 1:03:24 AM

No, I support the civil rights policies of the Party of Lincoln. But I disagree on most social policies: abortion, gay marriage, etc.

Now, will you tell me why you think that wealthy people who have the ability to pay their debts should not have to pay their debts? Is it just that you are against people keeping their commitments?

Posted by: Al | Mar 9, 2005 1:11:05 AM

Al, the major objection is that 50% of bankruptcies in that category are triggered by catastrophic illness. Many of those people had health insurance, but it didn't do enough.

The previous law let the bankruptcy judge decide which people needed to pay more back, and which people deserved more lenient terms.

The number of medically-induced bankruptcies is rising due to health insurance problems.

So, this bill sells out sick people to credit card companies.

AFAICT, this bill isn't "moderate" in any way. "Moderate" is being fiscally prudent and balancing the budget. Selling sick people out to credit card companies is corrupt, not moderate.

Posted by: Adina Levin | Mar 9, 2005 1:12:06 AM

I don't get it: OK, the bankruptcy is triggered by illness. And? Why should that exempt someone from having to pay his or her debts IF the person has the ability to pay? Remember, the bill ONLY applies to people who have the ability to pay ($6,000 over 5 years).

Posted by: Al | Mar 9, 2005 1:20:23 AM

Right on, Petey

Posted by: Ben P | Mar 9, 2005 1:21:26 AM

Al,

You can get state by state median income here: http://www.census.gov/hhes/www/income03.html

It ranges from $31,210 in West Virginia to $55,221 in New Jersey. That is not rich. I make slightly more than the median for my state, I would be forced into Chapter 13, reorganization, not discharge.

IANAL, YMMV, CYLLFTAC, usual warnings - this is the somewhat informed musings of someone who has been generally tracking this issue but is not an expert.

Let's supposed my wife got suddenly sick and died, and I was stuck with $200,000 worth of medical bills. I had to travel a lot during this period (flying to medical experts around the country), and also had to fly in her family to the funeral, so I also racked up $30,000 on my MBNA Visa card. Insurance isn't paying for whatever reason. Under current law (until it changes soon), if I declared bankruptcy, I could do it via Chapter 7, that debt would discharged, along with any non-secured debts, and I could start a life with a relatively clean slate. My house would probably be exempt (though the amount is wrongfully small in some states). The legal bill for this would run around $1000, but within 4 months I could expect to be living a debt free life, and have a chance to start anew.

Under the new law, I would be forced into the more expensive Chapter 13. That means the lawyer would be more expensive because of what needs to be done in Chapter 13. I would also have to pay back all of that $200,000. In addition, it would be easier to foreclose on my house under Chapter 13, as it is not exempt in the same way that it would be under Chapter 7. In addition, my credit card bills would be secured debt - meaning they jump to the head of the line for repayment. These debts could not be discharged at the end of the reorganization period. I would have to repay them, even though other secured debts, like a mortgage, have something they could actually seize instead of me repaying them. I would simply be stuck on the bankruptcy track, leaving all my "disposable" income to my creditors, year after year. I can't leave my job, whatever that may be, because if they do, my creditors will seize all of my stuff (exemption works differently under chapter 13). So I'd be stuck paying off debts that I have no hope of reasonably paying off. There would be no way for me to wipe the slate clean. Do the math - you can't pay off sums like this on median incomes, or slightly above it. And people do get into situations like this.

Under the first situation, I end up chastened, humbled, but able to start anew. Under the second, I have to assume a new identity to do that. It's a bad bill. These people really don't have the ability to pay - that's why they're declaring bankruptcy. This is not a bill that affects just the wealthy - this bill affects the middle class in an astoundingly bad fashion.

Posted by: Trickster Paean | Mar 9, 2005 3:09:44 AM

Trickster: you've read the bill? Does it actually require 100 percent repayment on unsecured nonpriority debts? And how can unsecured credit card debt be converted to secured status? Secured by what? Yeah, I work in the field of insolvency and think this is a bad bill -- it's been rumbling around Congress since 1999, I believe -- but I'm not convinced it is as horrendous as it's being made out to be. I suspect it will push some Chapter 7 debtors into abortive Chapter 13 plans which will default. This bill may make it harder but not impossible to get a Chapter 7 discharge.

Posted by: Deuce | Mar 9, 2005 6:39:06 AM

FYI: text of bill, S-256, is available on-line @ thomas.loc.gov

Posted by: Deuce | Mar 9, 2005 7:09:07 AM

Is Harold Ford REALLY our only chance to take that Tenn. Senate seat?

sigh

we need to take the bankruptcy fight out of Congress and into the market place-
http://gotv.blogspot.com/2005/03/bankruptcy-bill.html

Posted by: Alice Marshall | Mar 9, 2005 8:10:46 AM

"So, until someone explains to me why WEALTHY people who HAVE THE ABILITY TO PAY should not have to pay their debts" ...

And then maybe YOU can explain what we should do with governments that are head-over-heels in debt.

Posted by: Blue Iris | Mar 9, 2005 8:28:53 AM

The other odious things in the bill, remember, were that all the veteran and health care exemptions were defeated, AND along with homestead exemptions for the elderly. All the while the bill will allow the genuinely rich to shield their assets from creditors via asset protection trusts. So Al IS in favor of letting "wealthy people" avoid paying their debts after all.

Posted by: Constantine | Mar 9, 2005 8:49:58 AM

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