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Thursday, April 14, 2005

The Intellectual Bankruptcy of is bent out of shape over the bankruptcy bill that just passed Congress and is assured of President Bush's signature. It's more than a little ironic that this far-left special interest group -- which was founded to defend Bill Clinton from impeachment over charges which included perjury -- is now lying to Americans about a pro-growth reform measure that will benefit consumers and businesses alike.

The Associated Press is reporting that MoveOn is preparing an advertising blitz to target lawmakers who voted for the bill, which passed the House today by a lopsided 302-126 margin:

Underscoring the political sensitivity of the issue, the liberal group MoveOn was beginning a campaign of radio ads this week against House lawmakers of both parties who support the bankruptcy legislation.

"With solid control of both houses of Congress and the White House, the Republican leadership thinks they're free to show their true colors -- taking from the middle class and giving to the wealthy and corporations,'' said Tom Matzzie, the Washington director of MoveOn's political action committee. ''But we're going to call the Republican agenda what it truly is: a war on the middle class.''

If you listen to what MoveOn is saying, you might conclude this new measure sounds like a throwback to the days of Dickens, where debtors were sent to prison and their suddenly orphaned children would have to live off of orphanage gruel. Such imagery couldn't be any further from the truth. The reality is that this measure will help cut down on fraud and in turn mean that consumers will face lower fees and greater availability of credit.

We live in an age where bankruptcy has almost become a financial planning tool. Approximately 1.6 million Americans filed for bankruptcy last year, which is double the number from a decade ago and an 8-fold increase from 27 years ago, the last time the nation's bankruptcy laws were passed. About 7 out of 10 people who filed went into Chapter 7, where all of their debts were wiped clean, as opposed to Chapter 13, where they repay a portion of their debts over 3-5 years. With the FBI estimating that 10% of all bankruptcy cases involve some form of fraud, and lenders taking annual losses estimated to be between $40-60 billion due to bankruptcy, something had to be done.

The compromise that President Bush and Congress reached is a good start. While allowing exemptions for debt due to health problems and other matters out of one's control, this soon-to-be-law simply applies a modest means test for eligibility to obtain the more lenient Chapter 7 status. Now bankruptcy filers who have an above-average income level and a court-verified ability to repay some of their debts will need to opt for Chapter 13, which means these upper income folks will likely have to repay a portion of the debts they chose to run up.

That's far from draconian, and it's certainly bad news for people like O.J. Simpson -- who used loopholes in the old code to avoid paying the civil damages awarded in the murder case of his ex-wife -- but it's good news for the rest of us. With the perverse incentive to pass the buck on your debt lessened, it means that lending money will become less risky for companies and that the rest of us won't be stuck paying someone else's bills.

This reform measure is good for business, good for consumers, and good for the economy. Unfortunately, like the liberal movement it represents, is too mentally bankrupt to understand.

Eric M. Jackson is the president of World Ahead Publishing and author of the award-winning book, The PayPal Wars: Battles with eBay, the Media, the Mafia, and the Rest of Planet Earth, which is on sale now.


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