Mr. president, I rise this morning to speak on the topic of bankruptcy reform. As many of my colleagues may know, congress is on the verge of enacting fundamental bankruptcy reform. Earlier this year, the senate passed bankruptcy reform by an overwhelming vote of 83-14. Almost all republicans voted for the bill and about one-half of democratic senators voted for it. Despite this, a tiny minority of senators are using un-democratic tactics to prevent us from going to conference with the house of representatives.
As I'm speaking now, the house and senate have informally agreed on 99 percent of all the issues and have drafted an agreement which has bicameral and bipartisan support. The remaining three issues are sort-of side shows, and I'm confident we'll be able to move from the one yard line to the end zone. My remarks this morning relate the agreement we've reached on the core bankruptcy issues and the continuing need for bankruptcy reform. As I've stated before on the senate floor, every bankruptcy filed in america creates upward pressure on interest rates and prices for goods and services. The more bankruptcies filed, the greater the upward pressure. I know that some of our more liberal colleagues are trying to stir up opposition to bankruptcy reform by denying this point and saying that tightening bankruptcy laws only helps lenders be more profitable. This just isn't true. Even the clinton administration's own treasury secretary larry summers indicated that bankruptcies tend to drive up interest rates. Mr. president, if you believe secretary summers, bankruptcies are everyone's problem.
Regular hardworking americans have to pay higher prices for goods and services as a result of bankruptcies. That's a compelling reason for us to enact bankruptcy reform during this congress.
Of course, any bankruptcy reform bill must preserve a fresh start for people who have been overwhelmed by medical debts or sudden, unforeseen emergencies. That's why the bill that passed the senate, as well as the final bicameral agreement, allows for the full, 100 percent deductibility of medical expenses. This is according to the non-partisan, unbiased general accounting office. Bankruptcy reform must be fair, and the bicameral agreement on bankruptcy preserves fair access to bankruptcy for people truly in need.
These are good times in our nation. Thanks to the fiscal discipline initiated by congress, and the hard work of the american people, we have a balanced budget and budget surplus. Unemployment is low, we have a burgeoning stock market and most americans are optimistic about the future.
But in the midst of this incredible prosperity, about one- and one-half million americans declared bankruptcy in 1998 alone. And in 1999, there were just under 1.4 million bankruptcy filings. To put this in some historical context, since 1990, the rate of personal bankruptcy filings has increased almost 100 percent.
With large numbers of bankruptcies occurring at a time when americans are earning more than ever, the only logical conclusion is that some people are using bankruptcy as an easy out. The basic policy question we have to answer is this: should people with means who declare bankruptcy be required to pay at least some of their debts or not? Right now, the current bankruptcy system is oblivious to the financial condition of someone asking to be excused from paying his debts. The richest captain of industry could walk into a bankruptcy court tomorrow and walk out with his debts erased. And, as I described earlier, the rest of america will pay higher prices for goods and services as a result.
I would ask my liberal friends to think about that for a second. If we had no bankruptcy system at all, and we were starting from scratch, would we design a system that lets the rich walk away from their debts and shift the costs to society at large, including the poor and the middle class? That wouldn't be fair. But that's exactly the system we have now. Fundamental bankruptcy reform is clearly in order.
Mr. president, I want my colleagues to know that the bicameral agreement preserves the torricelli-grassley amendment to require credit card companies to give consumers meaningful information about minimum payments on credit cards. Consumers will be warned against making only minimum payments, and there will be an example to drive this point home. As with the senate-passed bill, the bicameral agreement will give consumers a toll-free phone number to call where they can get information about how long it will take to pay off their own credit card balances if they make only the minimum payments.
This new information will truly educate consumers and improve the financial literacy of millions of american consumers. The bicameral agreement also makes chapter 12 of the bankruptcy code permanent. This means that america's family farms are guaranteed the ability to reorganize as our farm economy continues to be weak. As we all know from our recent debate on emergency farm aid, while prices have rebounded somewhat, farmers in my home state of iowa and across the nation are getting some of the lowest prices ever for pork, corn and soybeans. And fuel prices have shot through the roof. The bicameral agreement broadens the definition of "family farmer" and permits farmers in chapter 12 to avoid crushing capital gains taxes when selling farm assets to generate cash flow. It would be highly irresponsible of my liberal friends to continue blocking bankruptcy protections for our family farmers in this time of need.
The bicameral agreement is solidly bi-partisan and will pass by a huge margin when it comes up for a vote. The bill is fair and contains some of the broadest consumer protections of any legislation passed in the last decade. So, how can any person possibly argue against a bill which strengthens consumer protections while cracking down on abuses by the well-to-do?
The tiny handful of fringe radicals who oppose bankruptcy reform have waged a disinformation campaign worthy of a soviet commissar. A recent article in time magazine is a case in point. This article purports to prove that bankruptcy reform will harm low income people or people with huge medical bills. This article is simply false.
What's most interesting about this time article is what it fails to report. Time, for instance, fails to mention that the means-test, which sorts people who can repay into repayment plans, doesn't apply to families below the median income for the state in which they live. The time article then proceeds to give examples of families who would allegedly be denied the right to liquidate if bankruptcy reform were to pass. Each of these families, however, would not even be subjected to the means-test since they earn less than the median income. While this sounds technical, it's important: not even one of the examples in the time article would be affected by the means-test. For the convenience of my colleagues, I have collected the actual bankruptcy petitions of the families referred to in the time article, and I will provide them to any senator.
Time fails to mention the massive new consumer protections in our bankruptcy reform bill. Time fails to mention the new disclosure requirements on credit cards regarding interest rates and minimum payments. In short, the time article fails to tell the whole truth.
I think that the american people deserve the whole truth. The truth is that these bankruptcies represent a clear and present danger to america's small businesses. Growth among small businesses is one of the primary engines of our economic success. The truth is bankruptcies hurt real people. Sometimes that will be inevitable. But it's not fair to permit people who can repay to skip out on their debts. I think most people, including most of us in congress, have a basic sense of fairness that tells us bankruptcy reform is needed to restore balance. Let me share what my constituents are telling me.
Mr. president, bankruptcy reform will happen. Our cause is right and just. And average americans are strongly supportive of restoring fairness to the bankruptcy system. I yield the floor.
The present [bankruptcy laws] are a joke... One local man has declared bankruptcy at least four times at the expense of suppliers to him. He just laughs at it...
Citizen of Washington, Iowa — August 2, 1999
It is way too easy to avoid responsibility.
Citizen of Cedar Falls, Iowa — June 18, 1999
If one assumes debt they need to pay it off... We've got to take responsibility for our purchases!
Citizen of Independence, Iowa — June 28, 1999
Too many people use bankruptcy as an out, we need to make sure people are held accountable for all their debts.
Citizen of Harlan, Iowa — June 28, 1999
Personal responsibility is a must in our country... Sickness or loss of a job is one thing, but the majority of people just don't pay, but spend their money elsewhere knowing they can unload the debt with the help of the courts.
Citizen of Fort Madison, Iowa — July 6, 1999
I think people taking bankruptcy should have to pay the money back... They should have learned to work for and pay for what they get.
Citizen of Cedar Rapids, Iowa — May 28, 1999
It is insane that such a practice has been allowed to continue, only causing higher prices to the consumer... Debtors should be required to repay their debt.
Citizen of Des Moines — July 30, 1999
Bankruptcies are out of hand. It's time to make people responsible for their actions – do we need to say this!!!???
Citizen of Keokuk, Iowa — September 22, 1999
We need to make people more responsible for their decisions, while at the same time protecting those who fall on hard times. I realize that this is a delicate balance, but the way it is now, there is very little shame in going this route.
Citizen of Floyd, Iowa — June 20, 1999
People need to be more responsible for their debts. As a small business owner, I have had to withstand several large bills people have left with me due to poor management and bankruptcy.
Citizen of Fontanelle, Iowa — June 21, 1999
Bankruptcy reform will force the American people to become more responsible for their actions, bankruptcy does not seem to carry any degree of shame; it is almost regarded as a right or entitlement.
Citizen of Cedar Rapids, Iowa — June 18, 1999
Many don't think the business is who loses. We make it too easy now.
Citizen of Waverly, Iowa — June 22, 1999