When it comes to domestic issues that pit the interests of large corporations against those of ordinary Americans, few equal the exploding crisis in consumer debt. Yet with the exception of John Edwards, none of the leading presidential contenders in either party has made this a serious campaign issue. Perhaps this shouldn't come as a surprise, since the same financial institutions that engage in predatory lending practices constitute their largest contributors, as well as what is perhaps the most powerful lobby in all of Washington.
As it stands, approximately 40 percent of American households spend more than they make each year, and the average household debt to credit cards is about $10,000. According to the Federal Reserve, consumer credit card debt in the United States totals $880 billion; this figure, adjusted to current dollars, has increased a hundred-fold in the last 40 years. These numbers, huge by any standard, represent a growing factor in the nation's questionable economic future.
Those carrying credit card debt are not limited to self-indulgent spenders: "The Plastic Safety Net," a 2005 survey of low and middle income households conducted by Demos and the Center for Responsible Lending, found that declines in public and private benefit programshealth coverage, pensions, and unemployment insurance among themhave contributed to the growth in credit card debt. For example, 29 percent of households surveyed reported that medical expenses made up a portion of their current balances.
Meanwhile, lenders continue to aggressively troll for new borrowers, including many with low incomes and existing debt. According to Maxed Out, last year's SiCKO-style film about the credit card crisis, lenders send 4 billion credit card offers through the mail every year. And a 2006 report from the Government Accountability Office documented the growth in sneaky practices the companies use to increase profitshidden fees, "trailing" interest, and so-called disclosures that "have serious weaknesses that likely reduced consumers' ability to understand the costs of using credit cards."
Even so, today the credit card business remains virtually unregulated at the national level. Companies can chargeor changeinterest rates at will. And while the companies may be regulated at the state level, two states, South Dakota and Delaware, have consumer protection laws so weak that credit card companies simply set up shop there and run their operations from these safe havens.
To make the situation worse, the new bankruptcy law that went into effect in 2005 makes it much harder to declare bankruptcy, and requires filers, including those with very modest incomes, to pay off much of their credit card debt regardless. Initiated in 2001, the law was vigorously opposed by consumer groups and unions, but championed by the president, whose largest campaign contributor had been the credit card giant MBNA (which subsequently merged with Bank of America). On an initial vote in 2001, it also won the support of 36 Senate Democrats, including current presidential candidates Joe Biden, Hillary Clinton, and John Edwards, while only Chris Dodd voted against it (as did Dennis Kucinich in the House).
"I've never seen a bill that was so one-sided," said Consumer Federation of America chair (and former Ohio senator) Howard Metzenbaum, at the time. "The cries, claims and concerns of vulnerable Americans who have suffered a financial emergency have been drowned out by the political might of the credit card industry." When it came up for a second vote in 2005, Barack Obama, Kucinich, and Dodd voted against it; Biden (who represents credit card central, the state of Delaware) voted for it. Hillary Clinton was the only member of the Senate who didn't vote on the measure.
Now, most of the presidential candidates simply are not confronting the credit card issue. For Republicans, this is a predictable state of affairs. But the top three Democrats' relationship to powerful lenders is more complicated.
Obama, who made a strong floor speech in opposition to the 2005 bankruptcy bill, nonetheless voted against a key amendment that would have put a cap of 30 percent on interest rates. Financial firms, according to Ken Silverstein's much-discussed Harper's article "Barack Obama Inc.," "constitute Obama's second biggest single bloc of donors." You'll find nary a word about the debt crisis on his campaign web site.