Members of Congress, who continue to run up record budget deficits with their big spending ways, wagged a finger this month in the collective face of the American consumer and said, "Learn to live within your means, or else."
Republican leaders finally pushed changes in bankruptcy law through the Senate after decades of trying. They -- and the 18 Democrats who joined them in supporting the bill -- sent a clear message that the explosion of credit card debt that led to more than 1.6 million bankruptcies last year was entirely the fault of consumers, this being the era of personal responsibility and all. The House is expected to pass the bill soon.
In a nutshell, the bill makes it more difficult to wipe out debt through bankruptcy by making it harder to file for protection under Chapter 7, which allows debtors to erase their debt almost entirely. Instead, as many as 100,000 debtors not meeting certain criteria would have to file Chapter 13, which requires debtors to repay a portion of their debt, according to the Consumer Federation of America.
During the debate on the bankruptcy bill, some Democrats joined Republicans to defeat Democratic amendments that would have placed new limits on lenders, too. Among the amendments that were shot down was one that would have discouraged predatory lending, a topic on which Congress has failed to act in recent years.
In an eye-opening Washington Post story on March 6, Kathleen Day and Caroline E. Mayer reported that "bankruptcy experts say that too often, by the time an individual has filed for bankruptcy or is hauled into court by creditors, he or she has repaid an amount equal to their original credit card debt plus double-digit interest, but still owes hundreds or thousands of dollars because of penalties. . . . Penalty interest rates usually are about 30 percent, with some as high as 40 percent, while late fees now often are $39 a month, and over-limit fees, about $35. . . . According to R.K. Hammer Investment Bankers, a California credit card consulting firm, banks collected $14.8 billion in penalty fees last year, or 10.9 percent of revenue, up from $10.7 billion, or 9 percent of revenue, in 2002, the first year the firm began to track penalty fees."
So, why all the focus on the consumer rather than the financial institutions that are profiting off the annual load of $690 billion in revolving consumer debt?
The people at the nonpartisan campaign finance watchdog Center for Responsive Politics believe they have an idea.
The millions of dollars in campaign donations contributed by the credit card industry over the years was money well spent," wrote the center's Steven Weiss on March 14 on the center's Web site, www.opensecrets.org.
The Washington Post reported that the banking, credit card and retail industries -- the powerful forces behind the measure -- gave a combined $56 million in campaign contributions to members of Congress in the 2004 elections.
But if you follow the money trail a little further, it gets more interesting.
According to the Center for Responsive Politics, the finance and credit card industries gave the bill's supporters in the Senate an average of $36,600 between 1999 and 2004. The industries gave an average of $20,221 to senators who voted against it.
All of the Senate's 55 Republicans voted for the measure, and received an average of $38,600 from those industries during that time. But one of the things that the center's report makes clear is how much these industries have done to court some Democrats.
The Democrats who supported the bill received an average of $12,600 more than the Republicans who voted for it and $31,000 more than the Democrats who ended up voting against it.
The banking and credit card industries had a larger hurdle to overcome among Democrats because there is more opposition to the bankruptcy bill from the left. So it seems to me that bill proponents targeted Democrats they thought they could sway. Of course, no politician would ever acknowledge voting a certain way based on campaign contributions.