Now that Elizabeth Warren, Harvard Law Professor (Contracts) and creator of the barely born Bureau of Consumer Financial Protection, is running for Ted Kennedy's former Senate seat, she should receive the attention she deserves. Professor Warren is perhaps the most eloquent spokesperson for rebalancing 30 years of policies that tilted income and wealth from the middle class to the investor class (i.e, to producers/investors, rather than consumers) of our economy.
A recent New York Times editorial said it best:
"Ms. Warren talks about the nation's growing income inequality in a way that channels the force of the Occupy Wall Street movement but makes it palatable and understandable to a far wider swath of voters. She is provocative and assertive in her critique of corporate power and the well-paid lobbyists who protect it in Washington, and eloquent in her defense of an eroding middle class."
But really, even the New York Times misses the point. Not only has income inequality destabilized our financial system, but the economy as a whole. Don't take my word for it. Krugman, Clinton Labor Secretary Robert Reich, and many others have pointed out the results of too much inequality that puts us near the bottom of developed countries. We are 97th of the 136 countries ranked -- next to Cameroon and a handful of other African countries, according to the CIA Factbook.
The more frequent financial destabilizations of late are but a symptom, while the redistribution of wealth itself is the core illness that has in fact directly lowered economic growth by reducing overall aggregate demand -- which is the willingness of consumers, investors and government to spend or invest.
In other words, the supply-side theories implemented by Milton Friedman, Ronald Reagan, et. al., have taken away the wealth of those who create most demand -- middle class wage and salary earners. Their incomes have become stagnant, and may result in a permanent underclass, if Elizabeth Warren doesn't have her way.
The remedies are available. Bring back a more progressive tax structure that existed even as recently as the Clinton era. And re-regulate the banking and shadow banking systems as mandated by Dodd-Frank -- specifically implement the so-called Volcker Rule that won't allow banks to trade for their own profit -- as well as other measures that reduce the size of the too-big-to-fail financial sector. The bloated financial sector was the real cause of the Great Recession, and reducing it will return resources and capital taken away from the productive sectors of our economy.
Professor Warren fought this battle when creating the Consumer Financial Protection Bureau, which is within the U.S. Treasury. Her message was simple in creating the Bureau: the consumer "market" for financial products does not operate like a proper market because leading firms (bigger banks and also nonbanks, like some payday lenders) have figured out how to make a great deal of money by confusing their customers.
"If someone attempted to sell boxed cereal in the same fashion that many financial products are now sold, that person would be drummed out of the cereal business. The norms of that sector (and many other nonfinancial sectors in the United States) would not stand for this degree of deception and malpractice," said one critic of the successful Republican campaign against her nomination as first Bureau Director.
Transparency is an issue with all financial markets, not just mortgage and payday loans, of course. The multi-trillion dollar derivatives' business is controlled by a self-appointed consortium of the major banks. And they have resisted providing a record of their transactions to a central clearing house, a provision of the Dodd-Frank bill that is still being developed.
So let us listen to Elizabeth Warren for Massachusetts Senator in her campaign to reoccupy Ted Kennedy's Senate seat. The principles she espouses to restore the middle class will actually restore economic growth as well, if carried out.
Harlan Green © 2011
Follow Harlan Green on Twitter: www.twitter.com/HarlanGreen
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Then we will see who is who.
There is not a single phrase in the Constitution of the United States that even remotely suggests that the state has the right to tax private wealth for the purpose of redistributing it. In fact, the Constitution explicitly forbids this encroachment on private property.
That does not seem to trouble a Harvard professor of law such as Elizabeth Warren. Perhaps that is because her interests do not appear to include Constitutional Law. They tend more toward populist causes like "Women, the Elderly, and the Working Poor in Bankruptcy." Ms. Warren seems more concerned that the rich must be made to "pay their fair share" than just about anything else. But she didn't find that idea in the document that is the basis of our nation's laws.
To my knowledge, neither Warren nor her comrade on the left, Barack Obama, has ever spoken publicly about the Constitutional guarantee of the right to private property. Instead, they speak constantly of seizing wealth via taxation and redistributing it to their political supporters.
reward failure!"
You make great arguments that have great media and emotional appeal to people and the politicians who use such rhetoric to manipulate the uninformed which includes people like yourself.
May I suggest that you take the time to read Basic Ecnomics by Thomas Sowell before you embark on another discussion inequality of incomes and progressive taxes on the financial sector which happens to manage the retirement funds for millions of the middle and working class..
Be careful what you advocate; no matter how well intentioned it may be, it may have unintended consequences for those you seek to help...
Warm regards,
Michael Winters
Thank you for your response; I do appreciate you have taken the time to do so; the content of your response was very disappointing and unsupported with any facts. Again words of emotion do not make things so no matter how much we want them to be as we conceive it in our mind.
Your refutation of Sowell is weak at best and only serves to diminish a role you hold and the people you speak to on a daily basis. Please give me one fact that Sowell has made up anything he writes about. If he is so wrong and you are so right why are you not an editor at a more scholarly journal such as the Economist?
Warm regards,
Michael Winters
We moved from Arkansas to MA a few years ago. Now I've got someone to vote for who is the best, as opposed to the least awful.
I would add that if you cannot explain your transactions in a way that would satisfy a rational human being who has not been initiated into your aracana, you should not be permitted to make that transaction.
EW seems to transcend Democrat v. Republican, Right vs. Left,
She is about doing the right thing for the right reasons. We need more like her.