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Can Personal Debt Mobilize Voters?


Chloe Thurston (@ChloeThurstonDC) is Associate Professor of Political Science at Northwestern University and co-author of The Political Development of American Debt Relief.

Emily Zackin is Associate Professor of Political Science at Johns Hopkins University and co-author of The Political Development of American Debt Relief.

As the presidential election heats up and Biden continues to struggle with young voters, his campaign is banking on a now-familiar issue: student debt relief. In swing states such as Pennsylvania, the Biden campaign is trumpeting its commitment to over-indebted borrowers, while accusing Republicans of fighting to deprive Americans of the opportunity for upward mobility. And just last month, the administration announced that it had managed to cancel the loans of around 160,000 student borrowers. Though this strategy is familiar from Biden’s previous campaign, which featured explicit promises to provide relief, it also runs counter to a long-held view about the politics of personal debt.

For much of the late twentieth and early twenty-first centuries, conventional wisdom held that it was futile to organize voters around debt relief. In 2006, for instance, A. Mechele Dickerson observed that “as a practical matter, organizing people who are overindebted is virtually impossible.” This view reflected the politics of the period. When Congress voted to render the bankruptcy code less protective, few civil rights organizations or consumer groups devoted attention to this cause. A similar lack of debtor involvement characterized the 1978 Bankruptcy Reforms. As Eric Posner described the politics of these reforms, “debtors, considered as the class of people who are potential beneficiaries of bankruptcy law, do not compose an organized and politically influential group.”

Bankruptcy scholars generated a range of explanations for the lack of grassroots, pro-debtor politics. Some, like Kara Bruce, noted that the stigma accompanying over-indebtedness made debtors unlikely to push their issues onto the national agenda. Elizabeth Warren described a “sound bite problem,” arguing that the dry, technical nature of debt relief policies was not the stuff of rousing stump speeches. Eric Posner pointed to the natural cleavage between those who favored debt relief and those who were more interested in accessing credit at a good price, explaining that this tension precluded debtors’ collective action. The consensus was that a lack of popular mobilization was intrinsic to the politics of personal debt.

The conventional wisdom captured an important reality: the class of people who would have benefitted from debt relief were not organized around that cause at the turn of the twenty-first century. However, as we argue in our recent book, we cannot understand the political economy of debt-related law from this single snapshot. Our longer view reveals that there is nothing inevitable about the lack of debtor mobilization, and that challenges to debtors’ collective action have not always been insurmountable. Through the nineteenth and into the twentieth centuries, debtors repeatedly demanded protection in times of economic distress.

Here, the economic context is important. The nineteenth and early twentieth centuries were characterized by frequent economic crises, and in the wake of each contraction, organized farmers demanded relief. Farmers’ organizations taught farmers how to call for debt relief, drawing on their experiences of earlier crises as blueprints for how to proceed. These groups also helped to destigmatize the debts held by farmers. Rather than sweeping over-indebtedness under the rug, their publications trumpeted the issue. They insisted that governments had many tools at their disposal to determine who would bear the risks inherent in a loan, and that merely enforcing ruinous debt contracts was a political choice, not an apolitical necessity.

Three Lessons about Debtor Mobilization

There are important lessons to draw from this long history of debtor politics for our present moment. Here, we’ll highlight three. The first is that it is possible to organize people around the issue of debt, and that macroeconomic instability may actually facilitate this kind of organizing. We certainly do not wish a return to the world of boom and bust cycles, but it is notable how the new debtors’ organizations grew out of the aftermath of the 2008 financial crisis and the covid-19 pandemic, and how these organizations leveraged the crises to destigmatize debt relief by linking mounting levels of consumer debt to the larger economic forces and structures, rendering the nonpayment of debt a political possibility. As Debt Collective co-founder Astra Taylor exhorted readers of the New York Times, “Debtors, Unite! You Have Nothing to Lose but Your Shame.”

The second lesson is that states and local governments often matter. In fact, for much of the nineteenth century, states were far more active in the provision of debt relief than the federal government, and protective state-level measures sometimes found their way into federal bankruptcy law. State-level homestead exemptions, for instance, proved so popular that, beginning with the Act of 1867, Congress has allowed debtors to avail themselves of these state-level protections even when they sought a discharge of their debts through the federal bankruptcy process. In addition to specific state-level policy measures, the state-level organizations that advocated debt relief and the state-level victories they secured ensured that members of Congress considered the interests of their over-indebted constituents.

And today, just as debtors are once again organizing, states are returning to the task of debt relief. In 2020, for instance, Rhode Island instituted a program to review court-related debts as part of the State Supreme Court’s Committee on Racial and Ethnic Fairness. The committee’s work has resulted in the remission or cancellation of more than 2 million dollars of outstanding debts. And in February of this year, Connecticut Governor Ned Lamont announced a plan to purchase and then cancel $1 billion in medical debt for its residents, the first of its kind at the state level. Local governments, like New York City, have similarly purchased and cancelled debt for its resident. These are but a few examples of a growing number of state and local initiatives to respond to the needs and demands of over-indebted borrowers. Not only are these measures consequential to the debtors they assist, but the history of debtor politics suggests that these subnational developments also contribute to the process of nationwide change.

A final lesson pertains to how we measure success and our understanding of political setbacks. It’s always been difficult to determine the success or failure of a social movement, but the long view of debt relief reminds us of the incremental, back-and-forth nature of so much political development. Even after their apparent defeat, short-lived policies can nonetheless participate in long-term and large-scale policy changes.

The first three Congressional bankruptcy laws were relatively fleeting. The Act of 1841, for example, was repealed only two years later. Yet its introduction of voluntary bankruptcy, the idea that a debtor could choose to initiate the bankruptcy process, stuck. While the constitutionality of voluntary bankruptcy was fiercely debated in the halls of the antebellum Congress, this principle was easily included in the next iteration of the law a few decades later. Over time, the series of short-lived nineteenth-century statutes transformed federal bankruptcy law from a punitive method of debt collection to a set of protections that could offer the over-indebted borrower a fresh start.

Setbacks at the hands of the judiciary were also common, as states’ retrospective debt-relief measures were frequently found to run afoul of the Constitution’s Contracts Clause. Yet states continued to push the boundaries of Contracts Clause doctrine, repeatedly enacting laws for the protection of debtors that courts repeatedly nullified. Rather than a story of failure, however, we read this as a sustained movement for debt-relief, one that a skeptical judiciary failed to quash. In fact, it was the doctrine that ultimately shifted to accommodate state’s debt relief efforts, in the landmark case of Home Building & Loan Association v. Blaisdell (1934).

We can view the most recent setbacks for protective debt relief in a similar light. The CDC’s eviction moratorium and the Department of Education’s student debt relief plan were both overturned by the Supreme Court, but political demands for debt relief live on. It is far too soon to tell if today’s constitutional controversies will become tomorrow’s conventional policy recommendations. But what we can already see is that debt relief has returned to the national political agenda.

This agenda-setting is, itself, a political accomplishment, pulling questions about debt relief out from technocratic and apolitical realms and into a place where democratic accountability may be possible. Making debt political in this way was an important achievement of older debtors’ movements and a precondition of their policy victories. The fights over debt relief we are witnessing today are a revival of that process.