consumer credit

Conservatives and Consumer Credit
By Daniel G. Jennings
One of the great scandals facing America today is consumer credit: credit cards, car loans, college loans, payment options at stores, mortgages etc. Basically the average working or middle class American regardless of employment status, credit history education etc. has access to close to unlimited credit.
The banks, mortgage companies and credit card companies will give average Americans credit cards, car loans, student loans and mortgages of all types regardless of their income and credit history. Working-class Americans know you can be broke with no job or a dead end job with low pay and you can still have a wallet full of credit cards, a car and a house with a mortgage on it. You don’t have to work for this stuff just convince some college drop out who wears a tie and sits in a desk in the lobby of your local bank or the high school drop out who answers the phone at some company that you can make the minimum payment and you can finance it all.
Conservatives should ask themselves is this a real economy or a house of cards? Joe six pack has a new car, a house, and a wallet full of credit cards, sure it looks great but is it real? Or is Joe Six Pack making the minimum payment which convinces some corporate bureaucrat that Joe Six Pack is solvent and can keep making his payments?
We had the same economy back in the 1920s right before the Great Depression. In 1928, Joe Six Pack thought he was doing well because he had lots of credit and a few shares of stock, by 1930 Joe Six Pack, the guy who issued him the credit and the guy who sold him the stock were all standing in the bread line.
So what can conservatives do to prevent another crash of 29 style catastrophe? A great deal only it will be very painful and unpopular. We recently had legal changes which encourage individual responsibility by making bankruptcy harder and requiring people to pay their credit card debt faster.
Why not similar laws enforcing corporate responsibility by making the irresponsible corporations that issued that bad debt take responsibility for it? What about a law that makes it illegal to use the courts and legal recourse to collect credit card debt. In other words make the big corporations that issue all those credit cards rely on the good faith of consumers to pay their bills. The big corporations wouldn’t be able to garnish average citizens’ salaries or take legal action against them. Instead the irresponsible executives who give credit cards to the poor would have to rely on the good faith of the poor to pay their credit card bills.
In other words the irresponsible corporations would have to eat the bad debt they issue. We’d have to go back to the 1950s when banks and big corporations only issued credit cards to those who paid their bills. Average citizens with a history of debt, couldn’t rack up huge credit card debts because nobody would given them credit cards.
That wouldn’t be popular with the irresponsible lenders but it would reduce the level of idiotic consumer spending. Instead of using credit cards to run out and buy everything they want now, consumers would have to budget and save their money. Getting Americans into the habit of budgeting and saving by reducing the amount of consumer credit would force Americans to save for their retirement and a rainy day. We could encourage good behavior on the part of both consumers and lenders in one swoop.
Finally such a movement would reduce mindless consumption, most of which is of cheap imported goods which hurt our industry, increase the trade deficit and make other nations, mostly China, stronger at our expense. Yes, this proposal would be tough medicine but it could help the nation and average citizens.