New Article: The Folly of Credit as Pandemic Relief

New Article: Pamela Foohey, Dalié Jiménez, and Christopher K. Odinet, The Folly of Credit as Pandemic Relief, 68 UCLA L. Rev. Disc. 126 (2020). Abstract below:

Within weeks of the coronavirus pandemic appearing in the United States, the American economy came to a grinding halt. The unprecedented modern health crisis and the collapsing economy forced Congress to make a critical choice about how to help families survive financially. Congress had two basic options. It could enact policies that provided direct and meaningful financial support to people, without the necessity of later repayment. Or it could pursue policies that temporarily relieved people from their financial obligations but required that they eventually pay amounts subject to payment moratoria later.

In passing the CARES Act, Congress primarily chose the second option. This option reflects a belief that offering people credit can bring them meaningful relief because it assumes that people will have the ability to pay back the loan as it becomes due. The assumption that people will be able to repay credit masquerading as “relief” in the wake of the pandemic is a serious error that will have enduring negative consequences.

In short, Congress got the balance between providing true money versus what amount to credit products to people fundamentally backwards. But given that, unfortunately, the effects of the pandemic likely will continue for months, if not years, it is not too late for Congress to adopt a family financial well-being approach to relief that provides meaningful, widespread, and expanded direct payments to households in distress.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s