Bankruptcy Bill: Last Hurrah for Bipartisanship?

Posted February 28, 2005 at 6:27pm

While tackling moral bankruptcy in the nation remains high on Congressional Republicans’ to-do list, the Senate this week is taking on a less-titillating variety of bankruptcy — the financial kind — in what could be one of the last major bipartisan projects for the GOP following the 2004 elections.

[IMGCAP(1)]Yes, the new 55-seat majority enjoyed by Republicans in the Senate already made it easier to pass a class-action overhaul bill this year, and the same dynamic appears to be pushing the bankruptcy-law changes through the chamber, where it could, potentially, move swiftly to the president’s desk.

But according to one well-placed GOP lobbyist, the expected success of the bankruptcy bill may be the end of the line for bipartisan cooperation in the Senate, especially on business-backed legislation.

Wide partisan rifts exist over a bill to limit medical malpractice awards, and organized labor is pushing to increase compensation for asbestos victims. Both developments threaten to doom these legislative priorities for the business lobby this year.

Democrats acknowledge that those two issues, among others, harken rough going for the chamber, especially once the fighting over the budget resolution begins later this month. It would worsen greatly if the Senate GOP leadership follows through on its threats to use the “nuclear option” to end filibusters of judicial nominees.

“At some point, the natural rhythms take over,” noted one Democratic operative.

However, for now, the more robust Republican force in the Senate is likely to prevent many controversial bankruptcy amendments from being adopted, particularly a proposal by Sen. Charles Schumer (D-N.Y.) to make sure that anti-abortion protesters can’t declare bankruptcy to avoid paying court judgments to abortion clinics. The amendment was resoundingly rejected by House GOP conservatives in the 107th Congress, ultimately preventing the bill from making it into law.

Senate Republicans are confident they can send a relatively clean bill to the House this year, particularly without what the U.S. Chamber of Commerce is calling Schumer’s “poison pill.” Indeed, one senior Senate GOP aide said Schumer’s staff would be “exaggerating were they to claim they were winning right now.”

While Schumer, a member of the Banking, Housing and Urban Affairs Committee, still plans on making a push for the amendment, a spokesman was cagey about whether he would oppose the bill if his amendment or other Democratic amendments he supports were defeated on the floor. Schumer, despite his liberal stance on many issues, has been a longtime ally of industries pushing for bankruptcy changes.

Indeed, Schumer has consistently supported the bankruptcy rewrite, which would make it harder for debtors to erase most of their debt through Chapter 7 bankruptcy. Instead, those who owe would have to pay back most of their bills — especially for credit cards, alimony and child support — under Chapter 13 bankruptcy.

And Schumer isn’t alone. The last time the Senate voted on the measure in 2001, 36 Democrats voted for it, albeit with the Schumer amendment attached. While some of those Democrats have since lost election to more conservative Republicans, 29 of them are still in the Senate.

Still, Sen. Edward Kennedy (D-Mass.) contends that “people are taking a harder look at this,” now that the measure actually has a chance of becoming law.

Kennedy argued in a conference call Monday that the original reason for pushing the bankruptcy bill was to save credit card companies from projected losses because of irresponsible consumers. But with credit card companies posting record profits these days, the bill is no longer needed, he said.

Still, even Democratic operatives acknowledge that Democrats who supported previous versions of the bill will be hard-pressed to explain a vote in opposition this time around, especially since the House has indicated it may simply take the Senate’s version, pass it and send it on to the president.

Add to that a U.S. Chamber of Commerce missive sent to all 100 Senators this week warning them not to vote for the Schumer amendment or any other “weakening amendments,” lest they be forced to brand Members as uncooperative on the Chamber’s annual “How They Voted” ratings.

Still, Kennedy, who is among the handful of Democrats who actually voted against the bill in the past, plans to make a last stand on the floor that will likely drag debate into next week.

It’s going to be an uphill battle to convince enough Senators to protect military veterans and those with unmanageable health care bills from the more stringent bankruptcy rules required under the legislation.

Even so, Senate Minority Leader Harry Reid (D-Nev.) will be urging Democrats to support as many Democratic amendments as possible, said Reid spokesman Jim Manley.

Given the pressure being put on Republicans to send a clean bill to the House, it remains unclear whether Kennedy’s various amendments will receive any GOP support. Kennedy acknowledged that he does not yet have “any hard counts on any of the amendments.”

But on the issue of health care costs causing some bankruptcies, Kennedy said he hoped to win over some Republicans and Democrats who have pushed measures to reduce skyrocketing health care bills, either by allowing the government to negotiate lower drug prices for Medicare beneficiaries or allowing drugs to be reimported from Canada.

Kennedy also hopes to tug at some heartstrings with stories of National Guard and reserve soldiers returning from the Iraq war to find their small businesses driven into bankruptcy.

Using recent corporate scandals as a backdrop, Democrats also will seek to protect employee pension plans from being eviscerated by a company’s bankruptcy proceedings.

Then there’s the old favorite that never goes anywhere: homestead exemptions. Many critics will decry the ability of debtors in Texas and Florida to own million-dollar homes while filing for bankruptcy. But as in past years, the chances of closing that particular loophole appear remote.