A few minutes after MA-Sen candidate Elizabeth Warren finished her podcast with our colleagues at Left Ahead (which has been made infamous by her and host Mike Ball’s scandalous “hick” comments), she sat down with Charley and me to talk about her run for Senate. I was pleasantly surprised to find that there was relatively little overlap between the two conversations – crucially, the word “hick” did not arise in BMG’s interview.
I thought that some of Warren’s most interesting comments arose from my asking her to respond to Scott Brown’s contention that over-regulation and over-taxation constitute a “wet blanket” that government is draping over the economy, and if we can just take off that wet blanket, things will start looking up. First, Warren responded to the claim that there is “too much” regulation.
So wait a minute. The reason we had a financial crash in 2008 was because we had too much regulation over the banks and the hedge funds? How counterfactual can we be here? I mean, he can say it. He can also say that up is down, in is out. It’s just wrong.
Then she went on to explain the difference between too much regulation and the wrong kind of regulation. And here, Warren set forth what I suspect will be a key element of the basic case that she wants to make for why Scott Brown’s argument (and, really, the argument that has been central to the Republican party for a number of years) is fundamentally incorrect.
The conversation is often described as regulation/no regulation – we need less regulation, we need fewer regulations. And that gets small business owners, who say “I’m being crushed by these regulations,” on their side. It gets the community banks on their side. That’s not the true divider. The true divider here is between the very large, who can hire the army of lobbyists and lawyers, and the rest of us, whether it’s small business, small banks, family. Think of it this way. GE isn’t looking for an easy-to-understand tax code. They like a tax code that is literally thousands and thousands of pages long, for which little benefits can be hidden back on page 694 and 1222 paragraph 3. They have the lobbyists to get those in, they have the lawyers then to come through and exploit them. Small businesses don’t get to take advantage of those. My daughter was talking about, in her small business, these tax breaks to hire people and do other things. And she just said “I can’t afford to figure out whether or not I’m even eligible for any of those tax breaks.”
Much later in the conversation, Charley asked Warren to comment on an issue that is extremely important locally, namely, fisheries. He noted that Scott Brown had recently filed a bill on fisheries (Brown has also just called for the head of NOAA to be fired, though that call came after our interview), and he wondered whether Warren (a) supported Brown’s bill, and more broadly (b) “what do you know about fisheries?” Warren responded that she has been working with Ann-Margaret Ferrante (D-Gloucester) and Barney Frank to learn about issues around the fisheries. She said that it was clear that there must be changes in the way NOAA manages the fisheries, and she noted that there are problems both in enforcement and in the science being used. But more broadly, she said:
This is what’s so interesting: how it connects up to the heart of what I’ve been working on. The fishermen want regulations. No one is saying, “whoa, take off the wet blanket of regulation, and take it away from us” because they know the consequence would be that the big fleets would come in, suck out all the resources, and leave us with sterile fishing beds. Nobody wants that. The only question is what’s the best way to manage an ongoing viable fishing industry while we’re trying to let the waters recover…. So here’s what’s so interesting about it. The rules, right now, have been written to favor the largest fishing operations, and they really are operations, these fishing factories. And they’re not written for the day boats. And why this matters is not just some sort of romantic attachment to the notion of the “yeoman fisherman.” It matters for two reasons. One is, that’s what keeps jobs in the United States. If the fishing factories can come in from Norway or from Iceland and stay for seven days out in the waters, we can manage them to make sure they don’t take out all the fish, that’s fine, but they will bring nothing into our economy here in the United States. They’ll take our resource, but they’ll do it without spending one red cent here. They bring their own groceries with them, stay on their own ships, and go back home, and that’s their floating factory. The way the industry is set up right now, all those jobs are in the United States, and it’s the boat and the boat repair folks and the crews that you hire and the groceries they buy when they go out to sea, that’s what keeps us vital as a nation. The second part of it is that it actually produces more value. When the guys come in on the big fleets, they’re out away from port for at least seven to ten days, which means all the fish has to be frozen. And so this idea of having this fresh-caught fish, which is why there’s a premium paid for the fish out of Gloucester because it’s fresh, and they’re air-shipping a lot of it to Chicago, to San Francisco, because we have this fabulous value-creating business that’s going here.
So the reason I find this so interesting is how it links back into the same notion. Those who are rich and powerful can get the lobbyists, can get the lawyers, can exploit the rules and get the rules pushed in the direction that works for them. And the little guy, who is really doing the hard work for this economy and for our future, just doesn’t have anybody out there to represent him…. Boy, how this keeps connecting up with the same narrative right now. The fishing industry is one that is just straight at the heart of this.
This strikes me as an important and powerful theme. Wherever you look, the basic story is the same: powerful interests are able to bend the rules to their benefit, and in the process are killing the small businesses that are really at the heart of a healthy local economy. (One is tempted to see a connection to casinos – which Warren opposes – but we didn’t get into that.) The problem isn’t “too much” regulation. It’s that the regulations tend to be written to favor the powerful and disfavor the little guy.
I also asked Warren for her basic case against Scott Brown, since to some extent a race against an incumbent is inevitably a referendum on the incumbent. She parried my observation that Brown ultimately voted in favor of Dodd-Frank, and then linked the election back to the basic economic point I described above. Here’s how she did it:
Scott Brown had the deciding vote on financial reform. I had no vote. I used every ounce of energy I had to get a consumer agency. Scott Brown had the maximum amount of leverage to create whatever he wanted to create at that moment. You know what he spent it on? A $20 billion break for the banks that have $50 billion in assets and above, and $10 billion and above hedge funds. Wow….
This election will be a choice. And it goes right to what we were talking about earlier. If you believe that the appropriate role for the United States government is to be responsive to those who hire the most lobbyists and the most lawyers, those who’ve already made it, and to create those thick regulations that have just the right loopholes for the big guys, then you can pick your candidate. If you think the right role of government is to help create opportunity for all of us, for the middle, for working folks, for the poor, to have a chance – to have something that they may get to participate in – those good schools and good roads and bridges and mass transit give them the opportunities. If you believe that’s what our government should be doing, then I’m the right candidate.
Just for the record, here is an article describing the break that Brown pushed through.
I’ll close with Warren’s comments on a now-infamous column by George Will, which has been thoroughly and hilariously refuted by numerous commentators, that Will wrote in an apoplectic response to Warren’s viral video (which, by the way, has now logged over three quarters of a million views).
I sometimes read George Will’s column and think, that’s a fair shot…. But [in this case] Will starts out completely conceding the point that no one ever got rich on his own. He says, “well, we all know that.” And then he builds from that into this crazy, “well, but you know, the book that [John Kenneth Galbraith] wrote 53 years ago, who also was at Harvard, indicates a kind of collectivism,” and he just goes off into crazy…. What I find interesting is how really, really mad I make people.
It’s true. From Rush Limbaugh to George Will to Tim Buckley over at MA GOP headquarters, Warren does seem to have the ability to send Republicans into such a blind rage that they cannot speak coherently, instead sputtering gibberish into their radio mikes, columns, and press releases. If she can keep that up, this should be a very entertaining campaign indeed.
Great questions fleshing out the money/politics confluence! (And I’m loath to use exclamation points.) I’m sure the BMGers will appreciate your newspaper-style recap.
Elizabeth Warren is light-years smarter than Scott Brown and she knows how to talk plainly and intelligently at the same time. She may teach at Harvard but she is no egghead. She will mop up the floor with the pin-up in a debate.
In 80’s congress ‘de-regulated’ the Savings and Loan industry. Between 1989 and 1995 we had bailed out some 350 Billion dollars worth of failed Savings and Loan institutions.
In the late 90’s California ‘partially de-regulated’ their energy industry (much in the manner that prof Warren describes: thousands of pages with a bunch of loopholes). In the early 00’s ‘rolling blackouts’ and ‘brownouts’ were a regular summer feature of California life. Some energy companies, including Enron, were found to be manipulating markets.
Also in the late 90’s Congress de-regulated the telecommunications industry. Shortly thereafter, WorldCom imploded in what was, then, the worlds largest bankruptcy.
Then we removed the last vestiges of Glass-Steagall, allowing banks to eat each other up wholesale, trade off customers equity, bank across state lines and generally indulge in every greedy little whim their wizened pea-sized brains could devise. As a side benefit, the manner in which mortgages were regulated was also changed.
Near. Total. Collapse. Globally.
Also in the 90’s, The “Private Securities Litigation Reform Act”, another little slice of deregulation that not only aided, if not encouraged, most of the above listed malfeasance, carved out liability exceptions for the accountants allowing greater leverage for the scandals. Firecrackers became hand grenades, hand grenades became howitzers and howitzers became nuclear bombs.
Of course, when the five largest investment banks approached the SEC in 2005 asking for ‘permission’ to carry more debt beyond the 12 to 1 rule, they were so granted this permission. What could it hurt to get rid of another regulation? Bear Stearns, when it lay dying, was estimated to be holding something on the order of 40 to 1 debt to equity. Lehman Brothers was estimated to be above 60 to 1, possibly much more… Only one of those banks, Goldman Sachs, is still standing and it is no longer an ‘investment’ bank but a regular bank and that only at the benifice of taxpayers largesse (sic). That one simple rule change did not create the crisis, but it was the sole item responsible for making the crisis many orders of magnitude larger than it otherwise would have been.
Let us not mince words here: the history of de-regulation in the ’80’s, 90’s and 00’s is a history of unmitigated failure. No defense can be made for them. Do we have to wait until people are actually killed or maimed before we do something?
… of the story….
So, we’ve gone over ‘de-regulation’ and ‘partial regulation’. What about just plain old regulation?
There used to be lead in paint, asbestos in the home, PCBs in the water, acid in the rain and lead in your gasoline. The reason we don’t have to live with lead in paint, asbestos in the home, PCBs in the water, acid in the rain and lead in your gasoline? That’s right, regulations!!
Each of these materials share a similar story: use, impact, resistance, regulation. Asbestos was once thought to be a miracle material. Light, cheap, good insulating properties. When it was found to be unhealthy in the extreme the science was challenged. When the science was found to be impeccable the economics were challenged: regulations would kill jobs. Some tough old politicos nutted up and said “To bad for you. Use safer products or get out of business!” Acid rain was a direct result of sulfur emissions from power plants. When this was pointed out to the owners of the power plants they scoffed at the science and resisted the regulations. Thirty years later the acidity of the rain is markedly decreased in direct correlation to the stringency of regulations. Problem solved. Oh, and nobody went bankrupt either…
Lead paint is the same story. PCBs and dioxins in the water. Lead in the gasoline. CFCs (aerosols). Halon. I could go on.
But let’s get back to banks and the economy:
That’s right: under regulations that Scott Brown would consider onerous this country moved from the deepest depression to the strongest superpower. Taxes were higher also, but that’s a different post. The point is, no thinking person can deny the efficacy and protection of proper regulations.
Let us, again, not mince words: regulation in America prior to 1980 has been a history of unmitigated success… Success the Koch brothers wouldn’t enjoy if their father hadn’t built a fortune under exactly those rules.