Sunday, March 06, 2005

Bleeding the Middle Class 

From a transcript of Bill Moyers's NOW interview with Elizabeth Warren, co-author of The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke, who reports that Americans file for bankruptcy at a rate of one every fifteen seconds:
WARREN: Let's start with clothing. How much more are they spending today on clothing than they spent a generation ago? All those designer clothes. All those $200 sneakers. You want to know the answer?

Twenty-two percent less than they spent a generation ago. Less. Okay, food. They're eating out today, right?


WARREN: Mom's not there in the household. She's not cooking those meals at home. So when you add up all that they're spending on food, all the designer water, all the fancy things they're buying, all the pre-prepared food, all the eating out, how much more is today's mom, dad and two kids spending on food than they spent a generation ago? Answer: 21 percent less.


WARREN: Appliances. Hey, they have microwaves, and nobody had a microwave a generation ago. They have espresso machines today, right? Fancy popcorn poppers. The answer is today's family is spending 44 percent less on appliances than they spent a generation ago.

MOYERS: So, where's the money going?

WARREN: It's going to the mortgage. It's going to the health insurance.
In the late 1990's Hillary Clinton saw an op-ed Warren had written and asked for a quick lesson in the basics of bankruptcy:
WARREN: And she says, "Tell me about bankruptcy." And I got to tell you, I never had a smarter student. Quick, right to the heart of it. I go over the law. It's a complex law. Went over the economics. Showed her the graphs, showed her the charts. And she got it.

Within 20 minutes, she could play where the rest of it would come. Well, then that will mean this part's happened. That will mean this has happened. I said, "Yes, that's right." And at the end of the conversation, Mrs. Clinton stood up. She said, "Let's get our picture taken" which we did, and she said, "Professor Warren, we've got to stop that awful bill," referring to this bankruptcy bill that sponsored by the credit card companies.

So I left. She went back to White House, and I heard later from someone who is a White House staffer that there were skid marks in the hallways when Mrs. Clinton got back as people reversed direction on that bankruptcy bill. President…

MOYERS: That was supporting the industry. And because of her…

WARREN: President Clinton had been showing that this is another way that he could be helpful to business. It wasn't a very high visibility bill. And when Mrs. Clinton came back with a little better understanding of how it all worked, they reversed course, and they reversed course fast. And indeed, the proof is in the pudding.

The last bill that came before President Clinton was that bankruptcy bill that was passed by the House and the Senate in 2000 and he vetoed it. And in her autobiography, Mrs. Clinton took credit for that veto and she rightly should. She turned around a whole administration on the subject of bankruptcy. She got it.

MOYERS: And then?

WARREN: One of the first bills that came up after she was Senator Clinton was the bankruptcy bill. This is a bill that's like a vampire. It will not die. Right? There's a lot of money behind it, and it . . . .


WARREN: She voted in favor of it.


WARREN: As Senator Clinton, the pressures are very different. It's a well-financed industry. You know a lot of people don't realize that the industry that gave the most money to Washington over the past few years was not the oil industry, was not pharmaceuticals. It was consumer credit products. Those are the people. The credit card companies have been giving money, and they have influence.
This year alone, says Warren, credit card companies will collect $78 billion in interest charges. Meanwhile, in Washington: Jonathan Chait pinpoints a problem that our esteemed colleague Mithras touched upon a few days ago in comments:
The law is littered with abuses like the bankruptcy bill: measures that benefit a narrow economic interest at the expense of the broader public good. Most Democrats, like Biden, are smart enough to oppose most of them. But there's almost always a Democratic senator or two willing to shill for their home state industry's favorite abusive privilege . . . .

The trouble here is that the relationship each Democrat has with his home-state business interests is the relationship every Republican has with every business interest. The bankruptcy bill enjoys unanimous GOP support in the Senate. It's a familiar pattern: Noxious laws enjoy support from a coalition of all the Republicans plus a rotating handful of Democrats who have ties to interested parties. Almost all the Democrats are on the side of the angels on almost every issue. But it doesn't take many Democratic defectors to give the Republicans a majority.
(Thanks to Susan Madrak of Suburban Guerrilla for the Chait link.)

UPDATE: Josh Marshall of Talking Points Memo has just started a new side blog at which Elizabeth Warren and several of her students from Harvard Law School will discuss the bankruptcy bill and related issues. Here's a typical sample from contributor Ryan Spear:
Supporters of the bill are determined to ignore the empirical data that shows about 50% of bankruptcies are traceable to medical emergencies (and about 90% stem from illness, divorce, job loss or deaths in the family) and that this bill would disproportionately harm those who go broke through no fault of their own. Instead, they mouth empty platitudes about “morality” and “responsibility,” as if it was immoral and irresponsible to have a heart attack or get laid off.

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