THE SENATE spent much of yesterday debating and coming to wrong conclusions on the minimum wage and tax cuts. It intended then to debate propositions having to do with school aid, agribusiness, drug policy and the future of East Timor. Under an agreement between the parties, the results of these deliberations were to be attached as amendments or political ornaments, take your pick, to an underlying bill that would significantly tighten bankruptcy law. But very little debate seemed likely on the bill itself, and that is wrong. Aside perhaps from the minimum wage, the underlying bill is more important than the ornamentation. In several respects it is defective and has the potential to do serious harm.
The question in bankruptcy law is always the same: how to achieve a balance between society's interests in seeing that people pay their debts and the need to prevent debtors from being permanently ruined by them. The strong economy in recent years, together with competition in the credit card industry, has produced a sharp increase in consumer use of credit. There has been a related spike, now perhaps subsiding, in bankruptcies. The bill seeks to make sure that people don't take undue advantage of the bankruptcy laws -- that those who can reasonably be expected to pay at least a part of their debts aren't excused entirely. That's plainly fair, and there seems to be broad agreement that the law needs some toughening. But critics, including the administration and a number of civil rights groups, believe the legislation tilts too far.
There are multiple issues, but basically the administration would make it easier for people at or below the median income to qualify for the kind of bankruptcy in which most debts are excused, and harder for creditors to dislodge them. The administration would also like to impose additional disclosure and other requirements on credit card companies, whose blandishments it believes are partly responsible for the current problem.
But the House already has passed by a veto-proof 313 to 108 an even tougher bankruptcy bill, and the complexity of the issues together with the impatience of the Senate leaves the administration in a weak position. The Senate yesterday voted along party lines for a slower minimum wage increase than the president wants, together with a costly and regressive tax cut. He says he'll veto a bankruptcy bill to which those are attached, as, at least in the case of the tax cut, he should. What he'll do if eventually the bankruptcy bill is sent to him separately is unclear.
What Congress should do, before it sends him the bill, is make sure that in the name of financial responsibility it doesn't unduly squeeze people who, because of job loss, family breakup, medical bills, etc., can't help themselves. It isn't clear that in the episodic legislative process thus far that balance has been achieved.