On Wednesday, I put to Sen. Elizabeth Warren (D-Mass.) policy questions about the economy, free markets and regulation. Unprompted, she composed and sent to me detailed responses. “Thanks for raising these questions — they’re good ones and go to the heart of some of the biggest economic problems facing our country,” she wrote back. ” I took a stab at answering them below.”

Cynics will say, “She’s running!” If so, we should welcome some serious discussion of major issues. At the onset, I will make three observations.

First, it’s refreshing to get substantive, thoughtful answers from someone who may have presidential aspirations. It is easy to forget what serious public servants should sound like.

Second, Warren is clearly on the progressive end of the scale, championing tariffs if needed, an increase in the minimum wage and more financial regulations. What is intriguing, however, is that she presents these as correctives to market failure. We can debate whether her prescriptions are appropriate. But she’s not attacking capitalism per se, nor the importance of functioning markets.

And third, her emphasis on market concentration and monopolies has been echoed by conservatives and moderates. (“In recent years, large technology companies have been investigated for colluding with a secret agreement not to hire one another’s best workers; fined billions of dollars for unfairly favoring certain services on their platforms over other rivals; and been accused of mishandling sensitive consumer information or of obtaining new customers under false pretenses,” wrote Bill Kristol and Bill Galston in their New Center policy proposals. “Government can’t be expected to sit idly by if the size and power of certain companies begin threatening the vigorous competition and innovation upon which any healthy economy depends.”)

Here are her answers in full. Below I then discuss her responses in greater detail.

Question 1: What constitutes “theft’ and “cheating”? Are we talking about insider trading or something more endemic to markets?

Sure, it includes insider trading — but it’s a lot more than that. In a well-functioning market, companies compete by providing better products, better service, or better prices. That kind of competition benefits customers and rewards businesses that out-innovate or out-work their competitors.

But when companies can deceive their customers about the quality or price of their products, that’s cheating — and the market stops working. Companies that are willing to deceive their customers are rewarded with more business, while honest companies struggle to keep up. That’s bad for customers and bad for the companies that just want to do the right thing.

In order to reap the benefits of competitive markets it is critical to crack down on cheating. That was the idea behind the Consumer Financial Protection Bureau. Before the financial crisis, the market for financial products was broken. To take just one of many examples, lenders could sell teaser-rate mortgages deliberately designed to obscure both the risks and the costs for borrowers. The CFPB created new rules for mortgages that forced companies to compete more visibly on products and service, instead of competing on which company could mislead customers most effectively. Consumers could make more informed choices and the market began to work better, which benefited both the customers and the businesses that were willing to compete straight up.

Question 2: If markets produce wealth, shouldn’t we be opening markets internationally, increasing free trade and creating new opportunities?

I’m all for trade deals that work for the American people. But for decades, our system for negotiating and enforcing trade deals has been rigged in favor of massive corporations. Our negotiators hear about what giant companies want, while advocates for workers, for the environment, and for the health of the American people are drowned out. A rigged process produces a rigged outcome, and that’s what’s happened.

Consider one example: Because CEOs and giant corporations have outsized influence crafting trade agreements, most of our trade deals include provisions that give giant multinational corporations special rights to challenge new foreign laws that they don’t like. When a country like Canada decides to ban a chemical that it doesn’t want in its rivers and streams, our trade deals give a multinational corporation the right to sue Canada and get a quick hearing in an arbitration proceeding run by friendly corporate lawyers — with no appeals process. Canada is stuck: either pay a huge fine with taxpayer money or change the law to suit the giant corporation. That process gives big multinationals massive leverage to fight against any new public-health or safety regulation that could possibly hurt their bottom line.

Meanwhile, the same agreements make fancy promises to American workers that they will never have to compete with low-paid foreign labor. But when foreign governments don’t follow through and giant multinational corporations move jobs overseas precisely to pay those impossibly low wages, workers have no friendly arbitration board to help them out – no speedy resolution, no ability to bring their own lawsuits. Instead, they must go through the political system to beg the U.S. government to bring actions in trade courts, which rarely works.  In 2014, my staff reviewed America’s record of enforcing labor standards and found that “the United States repeatedly fails to enforce or adopts unenforceable labor standards in free trade agreements.” The same problem undercuts enforcement of environmental protection promises and human rights promises.

This doesn’t mean we should indiscriminately raise tariffs without a coherent strategy. But it also doesn’t mean we should be afraid to use all of our tools, including tariffs, to advance America’s goals through trade. We should be smart and systematic. We should work with our allies to magnify the pressure on our targets. We should sequence our fights with a coherent strategy in mind. We should work harder to protect American IT and to prevent American-developed innovations from being stolen. We should consider when start-up industries here in America need extra protection so they can take root. We should focus on problems that are specific to particular countries or groups of countries, such as the non-monetary restrictions China uses to keep its markets closed to outside businesses. There is so much more we could do to make trade work for American workers and businesses right here in America.

Most of the world wants access to American markets. That’s an enormous advantage for us, and with a smart trade policy, we could help American workers, grow jobs here in America, boost the American economy, and advance our foreign policy interests around the world.

Question 3: What new market rules are needed? (She’s talked sensibly about excess concentration in certain markets but we’d be curious to hear what other systemic problems she sees.)

Too big to fail is hiding in plain sight all over our economy. In market after market, competition is dying: financial services, airlines, health insurance, drug stores, telecommunications, beef and poultry. A century ago, our leaders understood that competition was the lifeblood of functioning markets. As competition has withered in one market after another, giant corporations increasingly call the shots, resulting in less consumer choice, less innovation, depressed wages, the destruction of small businesses, the capture of government, and the decline of the middle class.

Competition should be a central goal of federal policy again – starting with strong new antitrust rules and tougher enforcement to break the grip that a handful of giant companies have over markets.  For example, along with Senators McCain, Cantwell, and King, I’ve introduced a bipartisan 21st Century Glass Steagall Act, which would separate commercial banking and investment banking, breaking up the biggest banks and reducing the risk of another financial crisis and taxpayer bailout while also giving community banks and credit unions a better competitive environment and a chance to attract more customers and grow.

Another market problem is the disconnect between worker productivity and wages. From 1948 to 1973, American worker productivity went up 97 percent and wages went up 91 percent — roughly equal.  But from 1973 to 2016, productivity went up 74 percent and wages went up only 12 percent. Workers aren’t getting what they’ve earned. Workers will get more of what they deserve if anti-competitive practices like non-compete and no-poach agreements that artificially restrict the labor market are eliminated. A higher minimum wage, stronger labor unions, restrictions on stock buybacks, and a host of other changes would also help reverse this trend and let workers once again capture the economic growth they help create.

Then there are many other examples of market failure — environmental pollution and climate change, for example — where new rules would better internalize costs and make markets work better. And there are more systemic problems we need to fix.

Question 4: At what point do new market rules undo the benefits of capitalism?

Rules undermine the benefits of capitalism when they insulate big companies from competition. There are a lot of rules that do that! Big business lobbyists swear up and down that they hate rules — but they spend half their time trying to layer on rules to protect their clients from competition, and they fight tooth-and-nail if anyone tries to take those protections away.

Here’s one example: About 48 million Americans have hearing loss, but only a very small share — about one in seven — uses hearing aids, in large part because of the cost. Hearing aids are expensive because FDA regulations let a few large companies control the market and put up artificial barriers that keep consumers from accessing products that can be safely used over the counter — or, to put it in your terms, there are market rules that are undermining the benefits of capitalism.

So I worked with Republican Senator [Charles E.] Grassley to get rid of those rules. We passed a law that eliminates the regulatory thicket and will allow safe hearing aids to be sold directly to most consumers. Over-the-counter sales will open up the market to innovation, giving consumers a lot more choice and bringing down prices.

But here’s the part to remember: The big hearing aid companies waged a huge campaign against our bill because they didn’t want competition from companies that could make better, cheaper products. They wanted to keep controlling the market and charging thousands of dollars per hearing aid, even if they only served a tiny share of the people who needed one. Competition was something they believed in wholeheartedly — for other industries.

Question 5: What’s the right balance of taxes, expenditures and debt?

It depends on the economic circumstances. In 2008, President Obama and the Democratic Congress did the right thing by increasing government spending and increasing the debt in response to a devastating financial crisis and recession. That’s what governments should do: try to stimulate the economy with new spending to help avoid or minimize the impact of a recession. In that case, given the depth of the problem, with millions of people out of work and millions losing their homes, Congress should have had an even stronger and faster response to help struggling families and get the economy back on track more quickly.

By contrast, the Trump administration and the Republican Congress have done exactly the wrong thing since gaining control. With a growing economy and record corporate profits, they slashed taxes for millionaires and big corporations — and then used the skyrocketing national debt as an excuse to push for deep cuts to Medicare and Social Security for working people.


Right Turn’s response to Warren: Again, full credit is due to Warren for choosing to respond (without prompting) to important questions about the role of government, markets and fiscal policy. Coming from a center-right perspective, I am surprised that several of her points would, I think, find some resonance among thoughtful moderates and conservatives. Her emphasis on resisting market concentration (i.e., ensuring we have functioning, competitive markets), her recognition that crony capitalism harms consumers and her criticism of a tax plan that exacerbated income inequality and piled on more debt are all well taken.

However, I have some significant substantive differences — as, I suspect, will moderate Democrats and thoughtful independents and Republicans looking for an alternative to the GOP’s current policy incoherence.

First, it’s not just crony capitalistic regulations that can impair growth, distort markets and produce unintended consequences. Well-meaning but excessive regulations can impair innovation, keep small competitors out of the market and add unnecessary cost to consumers. The question becomes how much regulation is too much, and that is best tested by examining the cost and the utility of government interference. The Trump team likely has swung too far, for example, in attacking fuel efficiency standards or basic consumer protections, but progressives will rightly be accused of trying to micromanage the economy to the detriment of consumers and workers if they seek to centralize economic decision-making in the federal government (like Trump’s tariffs!).

Second, we find her willingness to consider tariffs to be troubling. There are a raft of remedies to address specific issues like intellectual property under the existing World Trade Organization. Like protectionists on the right, progressives who cry wolf about job losses due to trade deals will lose credibility. Rather than block trade deals or impose provisions that make them untenable to trading partners, we’d suggest dealing with the downsides separately as a matter of domestic legislation (e.g., use of the earned-income tax credit — EITC — to supplement wages, policies to encourage geographic mobility, promotion of higher education alternatives to four-year college). In short, eschewing major, multilateral trade deals like the Trans-Pacific Partnership is self-defeating; instead of inhibiting them, we should deal with the downside effects.

Third, there is a large body of data showing that increases in the minimum wage impair job growth. As my colleague Charles Lane has suggested, at the very least, regional minimum wage rates and waivers from localities should be kept in mind. Rather than burden employers with higher costs, we should, I would suggest, be making it cheaper to hire workers and encouraging full-time work by, for example, expansion of the EITC and payroll tax relief. The real solution to low, stagnant wages is increased investment in workers and technology to increase productivity.

Fourth, while I deplored the nonsensical Trump tax plan (and would support real 1986-style reform and reworking it to provide real middle-class relief, via the payroll tax, for example), there has to be some reckoning with the explosion in health-care and retirement costs. Proposals such as the Simpson-Bowles plan recommended slowing the rate of benefit increases, gradually raising the retirement age and increasing the cap on salary. Without attention to entitlement spending (which benefits the elderly and higher-income Americans), we will shortchange younger, poorer Americans who need assistance. What we shouldn’t do is cut entitlements in order to make up for lost revenue from a foolish, unnecessary and ineffective tax cut for the wealthy and for corporations.

Finally, I’d recommend the 12 proposals set forth by the Third Way, a center-left group, which address some of these issues, and the New Center proposals that address a bevy of issues from intellectual property theft to immigration to income inequality to taxes. These avoid some of the pitfalls I discuss above while attempting to address wages, income inequality and innovation.

In sum, if Democratic contenders for 2020 and Republicans think they can paint Warren as a wide-eyed socialist and write her off, they should pay more attention to what she’s saying. There are critiques to be made, most certainly, but it behooves centrists and conservatives to respond with serious, substantive arguments — and their own policy ideas.

That normal debate, of course, can only happen once Trump is in the rearview mirror. And that cannot happen fast enough.

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