Debra Goldman’s Consumer Republic

Credit problems? Politicians blame you, not marketers

You would think American consumers deserved better. After all, not even Alan Greenspan can claim as much credit as consumers for the longest economic boom in history. They’re the ones who’ve been engaged in an ecstatic multiyear spending spree. They’ve been the compulsive upscalers whose demand for bigger houses, gas guzzlers and luxury everything else has kept the economy exploding.

With their negative savings rates, they have literally been giving 101 percent to the cause. And what do they get for it? The Bankruptcy Reform Act of 2001. Its virtually ensured passage means the over-extended can no longer count on a Chapter 7 bankruptcy to wipe out their credit-card obligations on the way to a fresh start.

Instead, those seeking to file for bankruptcy will be subjected to a means test. If they pass – or is it flunk? – they will find themselves in Chapter 13, where a schedule for payment of obligations will be worked out and imposed. That includes credit-card charges, whether they are incurred on a Caribbean trip or spent on food during a family illness.

For consumers, the maw of debt has grown deeper. For credit-card companies, unsecured credit has become more secure. Is this really the time to make Americans more nervous about spending money?

Spendthrift or not, contemporary Americans have enough Puritan ethic left in them to be appalled by reckless deadbeats, the supposed targets of this bill, who stiff their creditors and get off without a scratch. And the soaring number of personal bankruptcies – 1.2 million last year, up from 700,000 in 1990 – is disturbing.

Yet is it reasonable to ask what has caused this outbreak of consumer irresponsibility? Are sharpies abusing the system? Or can we trace easy

attitudes toward credit to the availability of easy credit? What about the

daily torrent of credit-card solicitations, the negotiable checks that come as bill stuffers?

This debate has a familiar ring. We once again confront the great chicken-and-egg question about the character of consumer society: Who is responsible for it? Is it consumers, who bring their innate desires and foolishness to the marketplace, which marketers are duty-bound to satisfy? Or is it marketers, who spend billions stoking the fires of desire, stuffing our hapless psyches with new and false needs in the eternal quest to sell?

The messy, unsatisfying answer is both. One cannot tease one half of the consumer-culture equation from the other without doing violence to a complex reality. But that didn’t stop the House and Senate from trying.

Besides, nothing dispels the fog of ambiguity like the hundreds of thousands of dollars in campaign contributions the credit-card companies have lavished on lawmakers over the last two years. The result in the Senate was a whopping 85-15 approval of a bill that increases the jeopardy of the overextended and reduces the risk of the overextenders, all in

the name of “personal responsibility.”

Indeed, bill sponsor Sen. Charles Grassley (R-Iowa) claims he was inspired not by credit-card company largesse but by small-business owners, a political sacred cow second only to children. They complained of being burned by deadbeats later seen driving around town in brand new cars, like the welfare queens of yore.

Apparently, none of these small- business’ customers pay their credit card bills, in which case the card issuer, not the small business, is left holding the bag. (Never mind that many owners who don’t qualify for loans, routinely use personal credit cards to pay for business expenses.)

No doubt legislators also had small-business owners in mind when they refused any attempt to address the creditors’ role in the rising tide of bankruptcies. An amendment which would have restricted credit limits for college students to $2,500 without a parental co-signer or proof of income was easily defeated.

Usually, the mention of harm to young people sets off a chorus of demagogic outrage. This time, opponents claimed such restrictions would deny consumer-citizens old enough to vote the “choices” available to every other idiot without an income who can’t control his spending.

Students of history, though, won’t be surprised. In the many attempts to pin our society’s excesses – violence, promiscuity, profligacy – on the blandishments of marketers, only one has succeeded: the attack on tobacco.

In that case, the millions politicians stood to gain through legal settlements far outweighed the generosity of liberal palm-greasers like Philip Morris. When it comes to the problem of assigning responsibility for the ills of consumer culture, money casts the deciding vote.

Debra Goldmand – goldman@adweek.com