Tuesday, March 08, 2005

Republicans Oppose Covenant Law

I know that our modern economy cannot entirely revert to the proscriptions of Leviticus 25:35-38 or Exodus 22:25 which prohibit charging interest on loans to the poor. And it may not be possible to implement the Mosaic law which requires the cancellation of debts every seventh year, as stated in Deuteronomy 15:1-6. Thus, I do not think that Hebrew covenant law can or should be implemented literalistically, but shouldn't those who care about it at least aim to honor its spirit, especially if the spirit of the laws actually confirms some of the bedrock principles of our liberal democracy--life, liberty, and the pursuit of happiness?

Apparently, our leaders on Capital Hill have decided, at the behest of the credit card companies, that the spirit of such laws must be thwarted because it is inimical to the spirit of capitalism. Thus, the Senate is currently in the process of passing a bill that toughens bankruptcy law. As Paul Krugman describes it, the new law will "make it much harder for families in distress to write off their debts and make a fresh start," and thus "many debtors would find themselves on an endless treadmill of payments."

Of course, Hebrew society also found it difficult to abide by these laws, and the prevalence of debt slavery--an endless treadmill of payments--became so acute that the prophet Amos correlates this iniquity with the imminent destruction of Israel by the Assyrians. Thus, Amos condemns those who "practice deceit with false balances, buying the poor for silver and the needy for a pair of sandals, and selling the sweepings of the wheat" (Amos 8:5-6). That is, the wealthy have built their fortunes by practicing deceit with false balances (think Enron), buying the needy for a pair of sandals (think high interest credit cards which many depend on for their survival), and selling the sweepings of wheat (think any practice which nickel-and-dimes the poor). The book of Ruth indicates that the wealthy were to leave the last sweepings of their harvest as charity for the needy, but the plantation owners instead would typically sell every last bit, thereby maximizing profits and further relegating the working class to its endless treadmill of high interest payments.

So Amos warns the wealthy, "because you trample on the poor and take from them levies of grain, you have built houses of hewn stone, but you shall not live in them" (Amos 5:11). The wealthy will not live in their mansions because the Assyrians will destroy them and banish the Israelites from the land, which Assyrian King Sargon II in fact does by 721 B.C.E. In sum, Amos offers his prophetic critique of Israel for its failure to live up to the ideals of covenant law, in particular for its mistreatment of the poor which is quintessentially represented in the practice of debt slavery. It is important to note that Amos does not focus primarily on issues of individual immorality; rather, he indicates that the entire economy of Israel exhibits a systemic distortion of social justice, and the only way to change such a fundamental problem is through a fundamental reform of society.

In many ways, bankruptcy law is the modern solution to this fundamental problem. It guarantees that no one can be bound to catastrophic debt without hope of recovery. The legislation currently under consideration, however, represents a regressive step back to the days of debt slavery, creating what Krugman calls a "debt peonage" society, which he names after the economic system of the post-Civil War South in which debtors were forced to work for their creditors.

One point of clarification, most of the bankruptcies which this law will effectively make impossible are not caused by free-riders attempting to scam the system by building up debt and then using Chapter 7 bankruptcy law to avoid repayment.
A vast majority of personal bankruptcies in the United States are the result of severe misfortune. One recent study found that more than half of bankruptcies are the result of medical emergencies. The rest are overwhelmingly the result either of job loss or of divorce.

To the extent that there is significant abuse of the system, it's concentrated among the wealthy - including corporate executives found guilty of misleading investors - who can exploit loopholes in the law to protect their wealth, no matter how ill-gotten.

One increasingly popular loophole is the creation of an "asset protection trust," which is worth doing only for the wealthy. Senator Charles Schumer introduced an amendment that would have limited the exemption on such trusts, but apparently it's O.K. to game the system if you're rich: 54 Republicans and 2 Democrats voted against the Schumer amendment.

Other amendments were aimed at protecting families and individuals who have clearly been forced into bankruptcy by events, or who would face extreme hardship in repaying debts. Ted Kennedy introduced an exemption for cases of medical bankruptcy. Russ Feingold introduced an amendment protecting the homes of the elderly. Dick Durbin asked for protection for armed services members and veterans. All were rejected.
So the result of this legislation: the rich get richer, and the poor get poorer. What would Amos say?


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