The Weekly Standard Indicts CSE Title IV-D Welfare Program

Indentured Families
Social conservatives and the GOP: Can this marriage be saved?
by Allan Carlson
03/27/2006, Volume 011, Issue 26

IN THE INTERNAL POLITICS OF the Republican coalition, some members are consistently more equal than others. In particular, where the interests of the proverbial "Sam's Club Republicans" collide with the interests of the great banks, the Sam's Club set might as well pile into the family car and go home.

Consider, to take one recent instance, the Bankruptcy Abuse Prevention and Consumer Protection Act, enacted last year, after a long delay, with support from congressional Republicans. A controversial clause that would have prevented abortion protesters from filing for bankruptcy to avoid paying court-ordered fines had stalled the measure. After the Senate rejected this provision, GOP leaders drove the bill through both houses of Congress and gained an enthusiastic signature from President George W. Bush.

In a nutshell, the new law makes a "clean start" after filing for bankruptcy much more difficult for families with at least one wage earner. Instead, most affected households will find themselves essentially indentured to a bank or credit card bureau, paying off their debt for years to come. "A new form of feudalism," one critic calls it.

In truth, some had abused the old law, turning repeated bankruptcy filings into a kind of circus. A tightening on this side probably made sense. Significantly, though, the new law made no real changes on the lenders' side, measures that might have reined in an increasingly predatory credit industry. It is common knowledge, for example, that credit card companies intentionally urge financially troubled families to borrow still more money, because they can charge these households exorbitant interest rates. As one Citibank executive has candidly observed, "They are the ones who provide most of our profit." Late payment fees, another favored industry device, reportedly deliver over 30 percent of credit card financing revenue. Assurances by lawmakers that the new law will bring credit card interest rates down fly in the face of these more fundamental corporate strategies.

True, in the context of America's new debt-driven economy, this treatment of financially troubled families may constitute "good business" (even if under older ethical standards it's the equivalent of offering a barrel of whiskey to an alcoholic). More fundamentally, though, the GOP's opting for an outcome that's good for Citibank's profits while disregarding the effects on families should cause no surprise.