The United States was born in debt, and in debt it remains.
Most students of American Politics and Political Economy will be familiar with founding-era debates about federal assumption of state debt, and with the significance of debt to post-war foreign relations: in 1787, the debt the US owed France amounted to 20 percent of the total receipts of the French state [Potofsky 2006, 493], while some states simply refused British creditors access to the courts to collect pre-war debt [Jensen 1969, 121]. Likely all would know about Shay’s Rebellion and its significance, though we might not appreciate the scale of indebtedness at the time – in Westmoreland County, PA, over 6,000 writs of foreclosure were issued to forty-three percent of the population between 1782 and 1792 [Bouton 2009, 92] – nor how it was an engine of upwards wealth redistribution. But the basic image is familiar: Needing access to international credit, eager to establish a class of wealthy merchants and planters who might lend the government its support, and troubled by the politics of debt and inflation roiling the states, the founders drafted a constitution with explicit prohibitions against debt relief and protections for creditors (with personal indebtedness being a source of opposition in some ratifying conventions [McGuire 2003, 183]).
We surely all recognize the significance of debt for contemporary US politics: from what was forgiven and unforgiven during the mortgage and financial crises, and the class and race-skewed priorities this reproduced; the massive increase in the national debt that followed successive tax cuts and emergency spending; and the social movement for, and the halting policy advances of, relief for student loans, what had been a promised engine of social mobility that has become for many an impossible-to-dispose liability. Federal policy has been central to each, but the ability or willingness of the federal government to relieve these debtors has been limited: proposals during the foreclosure crisis to reduce mortgage rates and allow bankruptcy judges to write down mortgage principle and interest went nowhere, the Federal Housing Finance Agency refused to write down the principle of loans in its own portfolio, and the creditor-backed Home Affordable Modification Policy failed to meaningfully relieve debtors; student loans, on which interest accrues daily, are singled out by law as difficult (though not impossible) to discharge through bankruptcy; and recent efforts to relieve these loans through emergency or executive action have been curtailed by the courts.
Knowing how central the repression of debtors was to the founding, and observing the contemporary landscape, we might be forgiven for thinking that not much had changed: a constitutional order designed to keep credit flowing, in part by securing creditors’ ability to squeeze debtors, seems, however updated, to remain firmly in place.
We would be wrong. Emily Zackin and Chloe Thurston’s brilliantly illuminating The Political Development of American Debt Relief traces the at-times contradictory history of federal and state debt relief, the movements that did or did not demand it, the state/society functionaries who emerged to administer, discipline, and advocate, and the constitutional reinterpretations that this politics produced. They show how, between the founding and today, a quite different and more generous world of debtor relief was constructed, with more recent policy advantages given to creditors layered atop these older policies.
The book is an invaluable complement to the growing focus on the relative significance of credit to America’s political economy. Works by Greta Krippner, Monica Prasad, Sarah Quinn, Mallory SoRelle, Patricia Posey, Thurston, and others have significantly expanded our understanding of why credit has come to play such a critical role in the US economy, how Americans have fought for and gained access to it, the predatory practices that operate at its fringes, and the ways in which its expansion has been underwritten by a federal policy that has often failed to regulate its most egregious practices or broader social costs.
Zackin and Thurston call our attention to the other side of the ledger, how the state has, at times, protected certain categories of debtors. The book describes how social movements, rooted in the experiences of farmers with successive periods of deflation and taking advantage of federalism’s multiple avenues for policymaking, built a landscape of debtor protections and alternative constitutional interpretations to sustain them. These interpretations forced a profound revision to constitutional intentions. The insolvent were not morally bankrupt, but victims of economic forces beyond their control. A higher constitutional purpose than the protection of creditors’ property was the renewal of the debtor as productive, republican citizens, freed from the personal dependency that insolvency imposed. The US Constitution’s uniform bankruptcy provision was reinterpreted as authorizing policy that had this purpose in mind: What had been a provision intended to facilitate creditor actions – securing their ability to hound a debtor, regardless of local opinion or how far they might flee – was made more flexible, able to authorize and recognize measures protective of debtor interests. Constitutional skepticism remained: federal courts repeatedly struck down retrospective debt laws until Home Building & Loan Association v. Blaisdell in 1934. But faced with successive crises, states pushed or defied constitutional limits until federal law and constitutional understandings gradually fell in line. By 1898, a relatively protective state for debtors was enshrined across the states and in federal policy.
This was an ambivalent achievement. Zackin and Thurston pay close attention to the racist and gendered inequalities that emerge from debt policy. These were the result less of the language of pro-debtor legislation than of its reference to other civic statuses upon which property rights were often conditioned and the assumptions about which categories of debt should be protected and why. But the effect was to exclude a large portion of the population from its protections or, even worse. Most prominent here is how federal debtor protections during Reconstruction helped reconstitute the white planter class, at the same time as Black freed-persons were being denied land that could have been made available through foreclosures. And while white farmers got relief, the recently emancipated got lectures from the Freedmen’s Bureau about the sanctity of contracts. Hectoring instead of hectares. These inequalities – not least this juxtaposition of moralizing condescension and laudatory forgiveness – would continue as debtor protections were institutionalized in the 20th century.
Subsequent policy change continued to be responsive to farmers, but also to new federal bankruptcy judges and administrators. Their views reflected their administrative experiences, their professional expertise, and the social milieux of judges, lawyers, employers (as creditors, since an expanding source of wage earner debt was manufacturers’ underwriting loans for their products, and wage garnishers) in which they operated. These administrators were critical drivers of policy development in the 20th century, as their investment in the federal system led them to sustain, revise, and expand it. They were especially important in calling attention to the changing nature of debt relative to the premises of federal policy, which had opened policy space for wage earners with few assets. Debtor protections were updated in the 1930s and afterward, not least to better get at the wage-earners who slipped in through the cracks: federal policy was revised to encourage wage garnishments as an alternative to the more attractive system of wage earners discharging their debt through the sale of their relatively meager assets.
A core puzzle in Zackin and Thurston’s account is why there was so little pushback to these 20th century restrictions from those organized groups that sought to represent wage earners’ interests, whether labor, civil rights, or women’s organizations. The first was focused more on the shop-floor, while the latter two were concerned more with securing access to credit and were reluctant to advocate for protections that might undermine that goal. By the late 20th century, moreover, the business of credit had been transformed, as had the politics of business. Creditors are organized, while small farm organizations were in decline and wage earner organizations were still relatively quiescent (whether because they had not suffered the cycles of deflation that educated the farmer, or because they still prioritized access to credit). When the reaction of creditors came, in successive restrictions culminating in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, there were few effective social movement advocates for debtors on the scene, and the professionals who had defended the system were sidelined. The current world of unequal and reduced protection for debtors was in place.
The Political Development of American Debt Relief is ambitious in its historical and conceptual scope. It generates new insights across multiple areas of APE and APD. It pulls this off in no small part because of its laser-focus on individual or household debt. “Commercial” debt appears marginally, insofar as households are the productive commercial units in 19th century agriculture. Corporate debt is largely absent, as is public debt. By juxtaposing homestead protections, which secured the social and economic position of settlers and former enslavers, to the denial of treaty and moral obligations, readers can glean insights about the debts that might be owed by the US for expropriation or legally sustained coercive exploitation – whether as reparations for slavery, in its cascading forms, or the restitution of Indigenous nations’ territories. But this is not usually foregrounded in the text, and Zackin and Thurston quite reasonably keep the focus on debtors as individuals or households.
I wondered to what extent ideas about obligation and the economy were shaped by debates that crossed these divisions. Did arguments about reconstituting the independent citizen reinforce efforts to alter the terms of public debt, or vice versa? Had the Readjusters, who sought to alter the post-Civil War state debt of Virginia, learned from federal debtor policy? Alternatively, the drafting of policies across types of debt might invite lawmakers and advocates to artificially sharpen distinctions between them. Those who wrote into the Constitution that the “validity of the public debt of the United States … shall not be questioned” did not stop to consider that this might cover the formerly enslaved. For the drafters, a moral and legal gulf seems to have separated these concepts. But when Congress, a few years late,r asserted an authority to unilaterally abrogate treaties with indigenous nations, did members pause to consider that these obligations were a public debt, the same as that which had won the war?
Even within the domain of household and individual debt, it was not always clear what other actors might be operating in the background to the narrative. The history of the founding and 19th century suggests that the politics of public debt and individual debt were closely entwined. The creditors of the state were often creditors for the individual, and since public debt was paid for by taxes, individual debtors could be paying both bills. For 19th century farming, there isn’t an obvious distinction between household/individual and commercial debt. When state and federal debtor policy was being debated, were other interests – corporations, commercial ventures – shaping the protections or disabilities while invoking the noble farmer?
Expanding the book’s coverage to other types of debt would have forced it to operate at too high a level of abstraction and would have come at the expense of showing how specific public policy debates and developments shaped the country’s statebuilding and political economy. This is reason enough to limit the scope.
The focus on individual and household debt is also a reflection of the authors’ conceptualization of debtor protection as a form of social welfare policy. Works on credit’s significance to the American political economy have had two reinforcing emphases, some paying more attention to how the state has shaped financial markets as well as the larger political-economic factors behind the US’s embrace of credit [e.g., Prasad 2012, Quinn 2019, Bensel 1991] and others paying more attention to how the US’s “credit-welfare state” operates as a substitute for what might have been social welfare provisions [e.g., Wiedemann 2021; Thurston 2021; SoRelle 2023].
Zackin and Thurston’s approach to debtor relief places the accent on the second. They conceive of the social policy function of the welfare state as “collectiviz[ing] risk and thereby cushion[ing] individuals against the effects of economic shocks” [Zackin and Thurston 2024, 13]. In the case of bankruptcy, this has a clear redistributive dimension – from creditors to debtors – and Zackin and Thurston’s account of farmer organizing makes clear that a (largely geographically structured) class conflict drove policymaking. Federal policymakers were pushed by conflicting demands to structure protections in a way that coordinated their distinct interests, keeping credit flowing while providing some measure of security for debtors. Debtor relief became a protection against risk whose social insurance function was more important than its redistributive one.
Like many serviceable definitions, this understanding of social policy works best when one already has a rough sense of the scope of things that are being defined. The state provides many protections against risk, not all of which fit easily within our understanding of social welfare policy. It might be useful to ask what other types of policies most resemble debtor relief. Especially where this involves property exemptions and the ability to discharge a debt, it seems to have more in common with the LLC (limited liability corporation) than with the SSA. Just as limited liability freed capital owners to pool their resources in risky ventures (the legal privilege justified by the vague promise of socially beneficial dividends), debt relief freed farmers (and, with them, society) from some of the most extreme consequences of failure.
As Zackin and Thurston show, farmer insolvency was geographically and temporally concentrated. Debt relief for farmers had a systemic importance, because what farmers supplied the economy was the exploitation of land that they owned. Foreclosure would result in some delay before the land and implements were again put to productive use. Indebted wage earners, even those who might own their home or car, have a different systemic importance. What they supply the economy is labor, and, if anything, debt and insolvency should lead them to increase this. It is perhaps telling that the most prominent way to be forgiven student loan debt, for example, is by committing to labor in a given industry for a term of years.
Zackin and Thurston are entirely convincing that, no matter any systemic importance of the farmer, it was their organizing that won them their protections and which changed social understandings of how debt and farming related to morality and the economy. It was the different concerns of organizations that might have represented consumers and wage earners that led them not to engage in a similar politics. Without a reconstructing of the social valuation of this class of debtors, moralizing, sexist, and racist constructions were reproduced by creditors and their advocates. The gendered and racist exclusions Zackin and Thurston document might have been in part a consequence of the limitation of debt relief to that primary civic status of capitalism – the owner of productive property – and the ideologies of and resource endowments that condition access to this status. But those ideologies clearly shaped how policymakers conceived of wage earners, freed-persons, and “homemakers,” and the protections or disabilities they were willing to extend.
Nonetheless, all this politics takes place within an underlying context in which farmers and wage earners were–despite their similarities–very different. For all the incipient redistributive class-conflict between debtors and creditors, for farmers this occurred within the broader family of owners of productive resources in a way it did not for wage earners. For farmers, debt relief reproduced the underlying class and economic relations; cracking down on “abuse” and requiring garnishment did the same for wage earners.
This is no different than much social policy. This does not make American debt relief any less significant. But it does raise the question of the limits of a politics of debt. A debtor-focused politics can no longer piggyback on regional resentments and federalism: before the mid-20th century there was a marked regional and sectional pattern to the debtor/creditor cleavage that facilitated state-level responses. Today’s more integrated financial and organizational landscape means Kansas legislators no longer have as strong an incentive to stick it to eastern bankers. As with tenant protections, fights to relieve contemporary debtors are going to pit different classes living in more-or-less the same place. That’s fine, but it does mean that the well-known biases in the institutions and practices of political representation – in which representatives at all levels are more responsive to the wealthy – might be more of an obstacle than in the past.
More fundamentally, if debtor protections are a complement to the political economy of credit, then they are as likely to inherit its disparities and limits as to reduce these. They are as much an alternative to the welfare state and social provision as a form of it.
Consider one of the most promising debt-focused political movements today: that demanding student loan forgiveness. My sense is that there has been more movement on student debt relief than on making college and university more broadly affordable. If the movement succeeds, could it sustain an organizational capacity it could bring to bear on fringe economy credit practices, or wage garnishment, or to protect indebted consumers? Could it reconstruct how society thinks about debtors more generally, from those saddled with credit card interest to those who cannot pay back the payday loans? Could it effectively advocate for an end to for-profit colleges or for free college? Or would the relief it secures its constituency, the removal of a burden that limited their ability to accumulate wealth, loosen the bonds that held them together? Restored to the status of free and independent citizens, owing nothing to nobody.
The example of the farmers suggests an alternative: That the investment in organizing, and the educating of its members about the nature of the modern economy, might produce dividends in a broader political horizon. There is a reason that Zackin and Thurston find the 19th century farmers so instructive: they became one of the great progressive forces advocating for the US welfare state, including its orientation towards credit, but going well beyond this.
Modern day debtors will have to overcome the changed geography of debt, as well as the revised debt moralism that creditors have encouraged since the 1970s. But the degree to which Americans are now reliant on credit rivals that of the farmers in their heyday; and as the foreclosure crisis taught us, it is now of clear systemic importance. If and when a repayment crisis comes, I suspect it is unlikely that there will be a reorientation of the US economy away from credit. Debtor protections, by contrast, will be well-positioned to patch the holes, and debtors might – if organized on the farmers’ model – be able to envision a new future where such protections are more institutionalized and broadly available.
Zackin and Thurston show us not just how central debt was related to our political past but also how this past was shaped by the debtors themselves. In addition to its many other virtues, I suspect The Political Development of American Debt Relief will become even more relevant in the coming years as a rough model for the future. All the more reason why it will be essential reading for anyone interested in American Political Economy.
