Debt Relief and the Multifaceted American State

Guest Blogger

For the Balkinization Symposium on Emily Zackin and Chloe Thurston, The Political Development of American Debt Relief (University of Chicago Press, 2024).

Sarah Staszak

In The Political Development of American Debt Relief, Emily Zackin and Chloe Thurston provide a multifaceted, insightful, and highly important account of the politics and political development of debt relief.  Their nuanced, historical approach—which moves seamlessly between policy development in the courts and legislatures, as well as organizational efforts at both the state and federal level—provides a methodological scope that allows them to illuminate notable differences and possibilities in those mobilizing for debt relief over time.  The authors also deftly combine their analysis of policy development with the important fractures of race and racism that both empower at times white borrowers while simultaneously denying opportunities to Black Americans.  This is most notable in the late 19^th century, with the somewhat surprising mobilization (at least by today’s standards) of white farmers, occurring simultaneously with the rise of Southern and national racial exclusions and Black agricultural indebtedness. By the time of the New Deal, however, even white borrowers—particularly more industrial wage earners—became stigmatized as immoral, reckless with their money, and undeserving of government support. Despite this early period of success, then, from the New Deal on, Zackin and Thurston point to the puzzling lack of mobilization by those with debt in legislative debates over bankruptcy law, as well as the absence of labor and civil rights advocacy organizations in prioritizing debt issues.

Zackin and Thurston convincingly argue that there are several possible explanations for the stark differences between mobilization for debtor rights in the 19^th century and the New Deal era-onward, including the limited nature of constitutional rights for debtors; collective action problems for diffuse groups (debtors) versus more concentrated interests (creditors); the changing geography of political power from state to federal; the post-New Deal political rise of corporate power and lobbyists; the ongoing role of race and racism, both in excluding Black Americans from opportunities for debt relief and undermining a broader debtor relief movement; and the lack of involvement from potential progressive partners, like the labor movement, to offer support for legislative initiatives.  Each have their moments of primacy in the book, and each contributes to what is ultimately the political marginalization of debtors.  In total, the account provided by Zackin and Thurston illuminates the long and unsteady development of these policies at the national level. Debtor relief policies seem to be given meaningful durability with the 1898 Bankruptcy Act and the establishment of a rooted administrative apparatus, but they then decline dramatically through the 20^th century. 

Importantly, the authors also clearly demonstrate that the power of 19^th century farmers fighting for debt relief indicates that the longstanding absence of success in national policy is not due to something intrinsic about American culture, constitutional law, and politics. Moments of possibility arise frequently throughout the 20^th century, but meaningful legislative reform to support the cause never materializes. Capacity for mobilization is not the problem for these groups, as they have the resources to challenge complex issues involved in bankruptcy law and politics.  Sometimes these groups are reluctant, Zackin and Thurston argue, because they do not want to bring attention—and therefore stigma—to those they are fighting to represent.  At other times, these organizations simply don’t seem to prioritize lobbying and mobilizing on debt issues.  Other factors, therefore, must also be in play. 

There are two features of the book that help to make sense of this underexamined political, legal, and policy puzzle.  Zackin and Thurston ground their analysis in the disciplinary model of American Political Development (APD), which stresses “statebuilding” as a complex, multilayered, and multi-venue process through which groups historically sought to establish social welfare protections in the absence of a strong federal administrative state.  As foundational APD scholars like Richard Bensel, Karen Orren, Theda Skocpol, and Stephen Skowronek have argued, the early American state featured what was at best a patchwork system of relatively weak institutions available for implementing robust social policy.  The 19^th century development of debt relief policy parallels other notable episodes of state building, wherein the early efforts of Progressive era movements came to provide the building blocks of federal regulatory power as it would materialize in the New Deal and Great Society.  But while debtors found success with the 1898 bankruptcy law in particular, their legislative successes would soon deteriorate—a fate common among Progressive era policies that ran headlong into the rising influence of corporations generally. The authors describe the decline of debtor protections as a “retrenchment,” a concept that has received increasing attention from APD scholars, in no small part because retrenchment has very much defined politics and law in recent decades.  As scholars like Jacob Hacker, Paul Pierson, and Kathleen Thelen describe, retrenchment occurs when barriers to overt policy and legal changes are insurmountably high.  What makes retrenchment unique, then, are the mechanisms by which it occurs; and because it happens when straightforward policy revision is unlikely, it tends to be multifaceted, targeting a wider array of policies, laws, and institutions. 

As Zackin and Thurston show, it is painfully clear that the era of successful mobilization behind debt relief itself has likely long passed.  Without such mobilization, overt legislative success like that of the late 19^th century bankruptcy laws has become a thing of the past as well.  While the authors approach these changes from the lens of state building and development, I wondered what a fuller conception of the state would mean for how we understand this phenomenon.  There is understandably some ambiguity in what constitutes a policy that deals, even directly, with debt relief.  At times, the analysis casts a wide net—including, for example, land reforms in the 1840s and during Reconstruction as policies impacting those who held onto land through debt or squatting.  At other times, the empirical focus on bankruptcy laws specifically might limit the scope of what constitutes debt relief, as well as the reasons for why debt relief is so frequently overlooked by policy makers and social advocates alike.

The New Deal is exemplary here. In their chapter on the period, they emphasize the degree to which debtors and their interests were largely absent from debates about debt relief and bankruptcy laws.  Further, they find that bankruptcy policy divided in its treatment of farmers and industrial wage-earners and consumers, protecting farmers as they had done for decades but treating wage-earners as “morally suspect” and undeserving of help.  But given the expansion of the American regulatory state, is it possible that strands of debt relief advocacy may have been dispersed and subsumed into other areas of politics and law?  As Katherine Rader has recently argued, labor groups, farm interests, and civil rights advocates during the same period often found themselves spread across different policy areas and legislative committees when lobbying in Congress, desiring the same ultimate outcome but having to promote it in different policy spheres.  For example, while farmers were notably absent when it came to organizing on behalf of bankruptcy protections, the passage of the Agricultural Adjustment Act in 1938 included the establishment of the Farm Security Administration within the U.S. Department of Agriculture to help farmers escape poverty and debt.  Similarly, labor and civil rights groups were active across many legislative terrains; civil rights organizations like the NAACP and Urban League did mobilize on behalf of Black tenant farmers losing their land, but they directed their efforts toward larger capitalist and racist structures that underlie a variety of statutory debates, ranging from matters of agriculture to labor to civil rights.  Debt relief, then, was both its own enormous problem and simultaneously a piece of a much bigger project of empowering politically, socially, and economically-disadvantaged communities that had been subjected to racism and a vast array of structural inequalities. 

More recently, laws like the Americans with Disabilities Act and the Affordable Care Act also included provisions that offer legal protections against creditors.  The recent Biden Administration’s efforts to combat medical debt involved a multitude of federal agencies and policies from veterans’ affairs to housing regulation to specific opportunities for small business.  Vice President Harris recently put forth a proposal to prohibit medical debt from being included on credit reports.  To use the language of state building and institutional change, have we more so witnessed a “layering” of protections onto other policy areas?  But this isn’t simply a matter of language, as casting a wide net when it comes to conceptualizing debtor protections may also have implications for how we understand and advocate for debt relief today.  This is also not to deny the dire reality for those in debt, as well as the ongoing retrenchment of the social welfare state; but perhaps turning our attention to bankruptcy-adjacent policies could also provide an opportunity for advocates. 

Zackin and Thurston’s excellent and highly important new book joins a thriving literature in American political economy and APD that points to the intricacies of political change over time. Such intricacies in turn remind us, as Zackin and Thurston do well, that no outcome is preordained, and a future revival of debt relief is possible even in an era of retrenchment, conservativism, and cultural polarization. With the rise of movements like Occupy Wall Street in the 21^st century and efforts like the Biden Administration’s approach to eliminating college student debt for tens of millions of Americans, Zackin and Thurston conclude with an essential reminder that the contingencies of history and development mean that opportunities remain for a renewed commitment to debt relief.

Sarah Staszak is Research Scholar, School of Public and International Affairs, Princeton University. You can reach her by e-mail at sstaszak@princeton.edu.