Them that has, gets

March 15, 2005

THE SIREN CALL of easy credit might be compared to the sales pitch of a drug dealer trying to hook a new customer. No money down. Easy payments. The first one's free.

Unsolicited credit cards come in the mail everyday, offering cashless shopping sprees to consumers - even children and dead people - with no regard to their ability to pay despite flattering claims to the contrary.

And yet the credit industry has spent a decade whining to Congress that too many spendaholics are escaping its clutches - last year, 1.6 million debtors were given a chance to start fresh by declaring bankruptcy.

Nobody admires a deadbeat. But the surge in personal bankruptcies over the past two decades can't be blamed on spenders alone. Further, the proposed remedy now likely to be enacted is crafted so broadly it may well ensnare individuals knocked flat by a job loss or medical calamity, ensuring that they never get back on their feet again.

Congress could perform a more valuable service by addressing the conditions that lead Americans to become overwhelmed by debt, particularly skyrocketing medical costs and high unemployment. It's no coincidence that the rate of bankruptcies drops each time the economy improves.

And while lawmakers may not be able to save people from spendthrift impulses, they shouldn't be rewarding the credit industry for its excesses, either.

The personal savings rate in this country is a scandal, averaging perhaps a penny on each dollar earned. As a result, many people have no cushion upon which to fall back when financial disaster strikes. And the federal government, which sets a terrible example by living wildly beyond its means, must depend on foreign investors to finance its debt.

Possible steps to alleviate this problem are many and complex. But cracking down on bankruptcies isn't one of them.

The bill approved by the Senate last week and expected to be adopted swiftly by the House would tighten requirements for debtors seeking the "fresh start" provisions of Chapter 7 bankruptcy that erases all their debt. Instead, many would be required to pay back a portion of what they owe over time.

Debtors most affected are expected to be middle-class families, women and the elderly in the South and Midwest, where bankruptcy filings are highest. The Senate refused to close a loophole that allows wealthy families to shelter their assets in trusts.

This is yet another example of the "them that has, gets" philosophy that prevails in Washington these days. The credit industry made $30 billion in profits last year. Yet the siren call that works so well in pushing plastic is also proving irresistible to lawmakers asked to believe creditors are the victims.

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