The Politics of the Credit Welfare State: Access, Inequality, and Democracy

Session Submission Type: Full Paper Panel

Session Description

Consumer credit markets are a prominent feature of the U.S. political economy and function as a necessary safety net in an era marked by welfare retrenchment and a massive shift of financial risk from firms to households. This panel explores the administrative and legislative processes that structure access to the “credit welfare state,” considers how credit markets shape attitudes towards redistribution among both legislators and constituents, and maps the political challenges inherent in protecting vulnerable consumers. Discussion of these papers will generate broad questions to guide future research on the relationship between consumer credit markets, the U.S. welfare state, economic and racial inequality, and democratic politics.

The first two papers outline political dynamics associated with regulating credit in administrative agencies and state legislatures. Mallory SoRelle’s contribution explores the puzzling lack of political mobilization against efforts to weaken the CFPB given high public support for the agency. Using original, experimental data, she finds that low information motivates these seemingly conflicting trends, and shows that while counteracting myths of ineffective bureaucracy can promote some mobilization in defense of the agency, significant challenges for consumer protection mandates remain. Rhea Myerscough’s paper tests the credit-as-welfare hypothesis by measuring the effect of authorizing payday or auto-title lending on the size of state-level welfare programs. The paper finds a larger substitution effect in states with larger racially marginalized populations.

The second two papers build on innovative fieldwork in a variety of U.S. locations to illuminate relationships between the credit welfare state and political behavior. Patricia Posey leverages evidence from qualitative interviews in Philadelphia and Chicago to investigate how use of fringe financial institutions shapes individuals' perceptions of government, relative to those who do not use these institutions. Tess Wise’s paper argues that personal bankruptcy is a fundamental part of the U.S. social safety net, and one that generates a larger economic transfer than any other aspect of the welfare state. Drawing from ethnographic research at a bankruptcy court, she outlines the “micro-politics” governing consumers’ use of and attitudes towards debt in the contemporary United States.

Sub Unit

• DIVISION 55: Class and Inequality

Individual Presentations

• The Subprime Welfare State? Payday Lending, PRWORA, and State Politics - Rhea Myerscough, University of California, Berkeley

• The Relationship Between Financial Services and Perceptions of Government - Patricia Posey, University of Chicago

• The Social Meaning of Credit - Tess Elizabeth Wise, Amherst College

• What Do Debtors Deserve? - Serena Laws, Trinity College, Hartford CT

Chair

• Kimberly J. Morgan George Washington University

Discussants

• Chloe Thurston Northwestern University

• Mallory E. SoRelle Lafayette College