Friday, April 01, 2005

Individual Responsibility


A few weeks ago, a friend who is wrestling with his allegiance to the Republican Party expressed to me that he did not believe that the growing number of Republican initiatives which place new burdens on the working classes were driven by an actual "conservative" ideology. He expressed that he believed the initiatives came out of a form of selfishness which did not involve much thought of other people - instead, their focus is on "what's good for me". Whether or not "what's good for me" is good for anyone or anything else is considered irrelevant. Don't get me wrong - my friend isn't against selfishness. He just prefers to be honest with others - and with himself - as to his motives.

By way of contrast, others attempt to find a pureness of ideology in the Bush Administration's policies. Efforts to privatize Social Security, and destroy its foundations, are about creating an "owernship society" and demonstrating to workers the value of saving. Never mind that workers won't have any meaningful control over "their money" in the savings accounts, and that benefits as a whole will be significantly reduced. Tax cuts which fall disproportionately on the rich are about rewarding hard work and productivity. Never mind that most of our society's hardest workers see no significant benefit, even as they experience a decline in the real dollar value of their wages, while enormous benefit falls upon the profligate heir who has never worked a day in his life.

This conservative charity to the Bush Administration, of course, continues in analysis of the new bankruptcy bill:
Behind the Bankruptcy Reform Act, as behind the President’s proposal for social security reform, is an ideology of giving nonwealthy people greater responsibility for their own economic welfare, which entails subjecting them to additional financial risk. Under the present system, the prudent and the imprudent consumer pay the same high interest rates, assuming creditors can’t readily determine which consumers are prudent and which are imprudent. By lowering interest rates on credit-card and other consumer debt while at the same time discouraging default, the Bankruptcy Reform Act will encourage consumers to exercise greater care in borrowing—yet at the same time, because interest rates will be lower, the Act will enable prudent consumers (who do not face a high risk of bankruptcy) to borrow more and by doing so will increase their consumption options. The Act will not redistribute wealth from the poor to the rich, but from the imprudent borrower to the prudent borrower.
Where to begin....
  • The notion of "giving nonwealthy people greater responsibility for their own economic welfare"... Geez, while it is awfully nice of the rich to share the non-wealth, why don't the rich themselves get a share of this "greater responsibility"? Surely we're not going to pretend that all wealth is earned. Are heirs and trust fund babies so responsible in the manner in which they accept their fortunes that no further lessons or burdens should be imposed?

  • And this.... "Under the present system, the prudent and the imprudent consumer pay the same high interest rates, assuming creditors can’t readily determine which consumers are prudent and which are imprudent." - has he never heard of a "credit report"? Now, while I can't speak for those who don't pay their bills on time, I can't go to the mailbox without finding offers for low interest loans and credit cards. So unless the argument is that banks and credit cards companies are erring on the side of offering everybody cheap credit....

  • And this.... "the Act will enable prudent consumers (who do not face a high risk of bankruptcy) to borrow more and by doing so will increase their consumption options" How do I say... beyond the fact that prudent consumers already have available credit, one of the key distinctions between being a "prudent consumer" and an "imprudent consumer" is not taking on more debt than you can handle. I somehow doubt that, even if credit card companies started to offer lower interest rates, prudent consumers would suddenly decide to increase their debt loads - particularly given that prudent consumers understand that their "cheap credit" will only last until they are late on a couple of credit card payments, at which point their rates will be increased to a level just shy of usury.

  • And this.... "The Act will not redistribute wealth from the poor to the rich, but from the imprudent borrower to the prudent borrower." So I can expect Citibank to be issuing me a check sometime soon?

  • And this.... "Bankruptcy legislation being debated by the U.S. Senate is designed to make it harder for people to walk away from their credit card and other debts. But legal experts say the proposed law leaves open an increasingly popular loophole that lets wealthy people protect substantial assets from creditors even after filing for bankruptcy.". No mention? Well, I guess it isn't a problem for Posner that the imprudent wealthy get massive loopholes when they declare bankruptcy, as long as the working poor are taught a lesson in "responsibility".
Several years ago, following his own bankruptcy, M.C. Hammer was asked what it was like to be bankrupt. He smiled patiently at the reporter, and explained that there is a huge difference between bankruptcy for the poor and for the rich, that he continued to be extremely comfortable, and had no right to complain about anything. Bush is happy to keep it that way, and it seems that ivory tower conservatives are happy to give him cover.

1 comment:

  1. Over on The Volokh Conspiracy, Todd Zywicki argues that it was proper to leave open a loophole for asset protection trusts because he isn't aware of any cases where they have been successfully used in bankruptcy proceedings. We'll overlook for the moment the fact that it is unlikely that these trusts would be marketed if nobody was setting them up or nobody expected them to be useful in bankruptcy.

    What is the harm in closing a loophole, even if it has not yet been tested in court? I'll concede that Congress should reserve its time for "real issues", like whether baseball players are using steroids [cough], but what would have been either the harm or the burden of closing this particular loophole as part of the bankruptcy reform bill?

    The Senate version included the provision, so we can assume that our nation's senators thought there was something to this issue - so why did Congress and the President waste time and incur negative publicity by insisting upon its removal from the final legislation if in fact they believe it to be of no significance?

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