Antediluvian Policymaking
While it's been a rotten week for low-income workers and the indebted, it's been a pretty interesting time lately for connectors of dots and readers of tea leaves. Let me try and tell the story as I see it:

1. Going After Broke. Even as the administration's push for Social Security "reform"--or, stripped of Orwellian padding, the right-wing drive to destroy the program and repeal the New Deal--seems stalled at best, and quite possibly headed straight for the rocks, other Republican acts of servitude to their corporate constituents plow forward. First and foremost among these is the bankruptcy "reform" bill. I'm no doctor, but close examination of the particulars here seem to cause great distress and occasional eloquence; everyone who doesn't work for a credit card company, from impassioned bloggers to New Republic editors, seems to agree that this egregious legislation can be boiled down to "socialism for the rich, capitalism for the poor."

If you're not inclined to follow the above links, Terence Samuel sums it up nicely on the TAP site:

Americans were carrying about $250 billion in revolving credit-card debt in December 1990. In December 2004, that total had risen to $791 billion, and a strange thing happened: As consumer debt rose, so did the number of bankruptcy filings.

The burning question surrounding the debate now taking place on the Senate floor is how much of the escalation is abuse, and how much of it is the result of the vagaries of an economy trying to find its way back to reality?

There were just over 600,000 personal bankruptcy filings in 1990; last year there were almost 1.6 million. Supporters say the bankruptcy-reform bill is aimed at forcing “wealthier” bankrupts to meet more of their financial obligations before walking away or starting over.
...
But if it passes -- and only long-shot players are betting against it now -- the real winners will be the credit-card companies, which will not have to charge off as many losses as they do now. And their profits, which are at already at record levels, will climb even higher. According to industry experts, credit-card issuers made more money in 2004 than at any time since 1988, when lower charge-offs and higher fees -- late, over the limit, and finance charges -- allowed the banks and other issuers to make upward of $30 billion.

The TNR editorial rightly notes that this is a fight Democrats should embrace with relish, to the point that they should filibuster the measure. I agree; in my first-ever Daily Kos diary to make the front page of that site, I suggested that the debate over the bankruptcy measure offered one of the clearest test cases imaginable for Thomas Frank's thesis that Democrats must embrace economic populism to counter the ostentacious social conservatism of the reactionary right. That this bill fails to discern between an individual who went broke buying Civil War Collectors' Edition Chess Sets by mail order, and one who lost it all because of unforeseen medical costs; that it protects those who file that are rich enough to put some assets in trusts; that it makes no provision for senior citizens who might lose their homes to predatory creditors, or for those in the armed services or veterans who have fallen victim to predatory lending practices, all would seem to bode well for vigorous principled resistence.

(Not to mention the fact that the difference between even a truly fiscally irresponsible individual, and the President and congressional leadership of this great country is really only about a trillion dollars. But more about that below...)

Sadly, it's not even clear that Democrats have the votes to sustain a filibuster; the three Democratic Senators from Delaware and South Dakota, two states where credit card companies hold great influence, have provided great aid and support for the bill, as has nominal Democrat Ben Nelson of Nebraska; yesterday they consistently voted against Democratic amendments offered to undo some of the offensive provisions noted above. If all four defected, and they would, Democrats almost certainly wouldn't be able to hold their remaining 41 caucus members against the pressure that would be brought to bear.

So this abomination is going to pass. To me, this raises the question of why this is such a priority right now, which leads me to...

2. What's the Matter With Greenspan? It's rare that one sees a public figure's internal conflict played out as transparently as has been the case with Fed chair Alan Greenspan this week. In the course of two days, "the Maestro" (as Bob Woodward, in a superhuman fit of ass-kissing, dubbed him some years back) came forward with the following pronouncements:

• The federal budget deficits are unsustainable at current levels;


• Repealing tax cuts, however, will hurt the economy; restoring budget discipline should be accomplished exclusively by cutting government spending;


• We should go ahead with the Bush plan to privatize Social Security (despite the additional trillions in deficits this would require);


• Bush's tax cuts should be extended;


• "Tax reformers" should consider a levy on consumption, gradually transitioning from the current model of income taxation

So we've got the basic premise that the current fiscal profligacy can't continue; this is clearly in keeping with Stein's law ("Things that can't go on forever, don't"), named after the Nixon-era chairman of the Council of Economic Advisors. There's Greenspan the pragmatist, who provided the country generally good service during the Bush 41 and Clinton presidencies.

But Greenspan the right-wing shill then took and held the floor, calling for a series of measures that would worsen the country's budget troubles. The Bush tax cuts, which had very little stimulatory effect, are the primary cause of the "unsustainable" deficits; privatizing Social Security--a step that Greenspan's previous involvement with this program, back in 1983 when he called for accumulating surpluses in the Trust Fund, was expressly designed to avoid--would make them far worse. And shifting the tax burden to consumption rather than income and investments (Greenspan calls for exempting capital investment expenditures) seems in lock step with the Republican push to move the burden of financing the public sector "from wealth to work", as John Edwards put it during his campaign. Truly, Grover Norquist or Stephen Moore couldn't have said it better.

Through all these positions, Greenspan has shown his true colors, as Paul Krugman states in today's NYT:

In 2001, President Bush and Mr. Greenspan justified tax cuts with sunny predictions that the budget would remain comfortably in surplus. But Mr. Bush's advisers knew that the tax cuts would probably cause budget problems, and welcomed the prospect.

In fact, Mr. Bush celebrated the budget's initial slide into deficit. In the summer of 2001 he called plunging federal revenue "incredibly positive news" because it would "put a straitjacket" on federal spending.

To keep that straitjacket on, however, those who sold tax cuts with the assurance that they were easily affordable must convince the public that the cuts can't be reversed now that those assurances have proved false. And Mr. Greenspan has once again tried to come to the president's aid, insisting this week that we should deal with deficits "primarily, if not wholly," by slashing Social Security and Medicare because tax increases would "pose significant risks to economic growth."

Really? America prospered for half a century under a level of federal taxes higher than the one we face today. According to the administration's own estimates, Mr. Bush's second term will see the lowest tax take as a percentage of G.D.P. since the Truman administration. And don't forget that President Clinton's 1993 tax increase ushered in an economic boom. Why, exactly, are tax increases out of the question?

The answer, as Krugman certainly knows, is that this is what ideologues do: contort the world to fit their views, rather than the other way around.

3. Here Comes the Flood. Watching these two narratives unfold this week--the bankruptcy bill, and Greenspan's incoherence--I am increasingly convinced that those in the know get that the U.S. economy is heading full-speed toward a brick wall, and just want to lock in the most favorable policy and legal environment for the aftermath of a major trauma. As Samuel reminds us, two-thirds of the economy is driven by consumer spending. Personal indebtedness and bankruptcy filings are at or near record highs. As you've probably heard, so is the national deficit. Individually and collectively, we're leveraged to the hilt.

And time is running out. It's only a matter of time before foreign investors stop buying U.S. debt; this will drive up interest rates, and trigger a lot of defaults. More and more people--working people--will have to look at filing for bankruptcy. The credit card companies, who have driven this bill, are just trying to rework the landscape on terms most favorable to them when it happens. And as usual, the Republican congressional caucus show that their first loyalty is to their institutional donors, not their flesh-and-blood constituents.