It used to be that people who couldn't pay their debts could go into personal bankruptcy and start over. Their future credit rating would suffer, of course, but at least they'd be able to come out from under compound interest charges that were eating up their paychecks and forcing them into ever deeper debt.
No longer. At the behest of banks and credit-card companies, Congress has passed and the president has just signed new legislation making it much harder for many Americans to start over.
Meanwhile, many of America's corporations are using corporate bankruptcy to stay in business while being relieved from all sorts of contractual obligations. Several major airlines, for example, are in bankruptcy, but they continue to fly. And bankruptcy judges have ruled that these and several other bankrupt companies no longer have to pay the health or pension benefits of retirees, which they once agreed to, or that they're released from paying their employees the wages they once promised.
So even as filing for personal bankruptcy becomes more difficult, corporate bankruptcy increasingly offers corporations a way to unburden their obligations. This, while more and more Americans are being forced into personal bankruptcy because they're losing the jobs or wages or health insurance they were counting on. According to recent estimates, usually it's these sorts of unexpected events concerning jobs or health that force people into bankruptcy.
Get it? Life is more precarious for many individuals in this economy, in part because the companies they work for can no longer be relied on for steady jobs, steady wages, and health insurance, as they could be relied on decades ago. And the increasing ease with which companies can rid themselves of such commitments by declaring bankruptcy or even threatening to declare bankruptcy makes employment even more precarious.
This doesn't make a lot of sense. A sane society presumably would give people somewhat more economic security against unforeseen events, while requiring that corporations fulfill their commitments to their employees before all others. But we're going in just the opposite direction.
Robert B. Reich is co-founder of The American Prospect. A version of this column originally appeared on Marketplace.
