What Elizabeth Warren Gets Wrong About Economic Justice

Attracting centrist Democrats by endorsing Hillary Clinton, and exciting Bernie Sanders’ liberal Democrats by attacking capitalism, U.S. Sen. Elizabeth Warren (D-Mass.) is liberalism’s northern star. And her pursuit of more government restrictions on the financial and education sectors seem motivated by good intentions.

Yet absent good policies, her good intentions and passionate populist rhetoric will do no good for America. Good policy is key. And Warren’s plans are not good.

Warren proposes taxing wealthier Americans more and redistributing that money into government programs. In doing so, she elevates the central myth of liberalism that the wealthiest Americans can pay for a liberal utopia. Sadly, as California proves, they cannot. Punitive taxation leads only to broken economies by reducing innovation, productivity and growth. Oh, and they fuel unemployment (see America’s corporate tax code disaster). New York City Mayor Bill de Blasio is learning this the hard way. His liberal plans have delivered higher taxes, bigger government and poorer services.

Unfortunately, it isn’t only on taxation that Warren fails the policy test. Rightly lamenting America’s manufacturing decline, Warren offers the faux-remedy of trade protectionism. It sounds good on paper: lower taxes and more jobs in return for foreigners not stealing our wealth. But the reality is harsher. Restricting free trade would cost American families thousands of dollars extra every year in higher costs for lower-value goods. It would also finish the United States in the world economy. (India’s population is large and growing in wealth: they will want iPhones!) There’s a better way to deal with economic globalization: fostering a more-skilled workforce and a profit-driven alignment of nations that trade with one another and unlike China, play by the rules.

Skill and rules form the two hands of professional growth and their coordination depends on the external support as well. Rules can be set by the professional for himself and by the concerned controlling authority for paving a conducive environment for healthy competition and leading to the growth of Trader VC and the likes who know their work.

Warren’s plans for more federal support for higher education is also concerning, because Warren would simply transfer education cost burdens to taxpayers (many of whom did not attend college). This is not to say Warren is wrong about reducing costs for students. But while college tuition in America is exorbitantly expensive, more government and less personal responsibility are not answers. Rather, it is thru more competition for grants, forcing colleges to lower administration, facility and faculty-compensation costs, and by allowing students to take fewer courses (historian majors shouldn’t be required to take advanced calculus). But good intentions do not good education policy make. Consider Detroit’s new free-college program. It sounds good, but it fails to target education programs that will deliver economic opportunities to Detroit citizens. It will simply increase Detroit’s financial ill health.

This leads to a further problem with Warren’s policies: her overestimated confidence in government efficiency. As with Bill Gates, there’s something very odd about Warren’s belief that government can efficiently allocate hundreds of billions of dollars effectively — as she proposes through massive infrastructure spending increases — but that the private sector is incompetent. With government reliant on taxpayers for the ultimate bill paying responsibility, massive spending increases will only add to the debt that America’s youngest must eventually payoff. And already huge, that cost won’t simply render punitive taxes and a weaker entitlement system. It will also mean higher interest rates and lesser borrowing opportunities as American debt bonds become more risky. And who does that hurt most? The poorest. This spend-spend-spend agenda is economically immoral.

Last but not least, there are Warren’s efforts to regulate the financial sector. While some on Wall Street have behaved despicably and while some reforms post 2009 (such as improved transparency on transactions) were clearly necessary, our financial industry is crucial for the economy. Moving capital efficiently in pursuit of a return on investments, bankers et al make the nation wealthier. They also make us happier by funding new goods from new industries — America creates so much thanks to this capitalism.

But were Warren to double down on her anti-financial industry agenda, she would endanger these benefits. The primary problem with Mrs. Warren’s ideas here is that they deter Wall Street from lending to low-asset, predominantly, less wealthy Americans. And in that regard, just as minimum wage hikes deter hiring of less skilled Americans (mainly the young), Warren’s proposals are pricing lower income families out of good loan opportunities. The poor have been left to the circling loan sharks.

Regardless, I re-emphasize my belief that Warren has good intentions. As do the class of super-rich liberals who fund the senator’s ambitions. But while their motives may be pure, their wealth insulates them from the reality of their policies in action. In order to win the support of the young and those less fortunate, conservatives must offer bold alternatives.