Eleven Propositions that Sum to Zero

2014 Democratic State Convention

Over the weekend Elizabeth Warren, the Senator from Massachusetts and a former professor at Harvard Law School, outlined eleven propositions, dubbed by the National Journal as “eleven commandments” for progressives.  Warren is a very bright leader of today’s progressivism. Her propositions provide a window on the future trajectory of the Democratic party and its approach to law, three aspects of which seem particularly notable:

1.Opposition to crony capitalism. Warren wants government to make sure the banking system and Internet are run for the benefit of the people not big corporations.

2.Use of the regulatory system rather than tax system. Nowhere does Warren expressly call for higher taxes. But she does endorse a slew of regulatory interventions—a higher minimum wage, stronger protections for unions and “equal pay” provisions for women.

3. A relentless focus on equality.  In marriage, in pay, and in access to higher education and contraceptives paid for by the government.

If these are the tenets of future progressivism, friends of liberty need to sharpen their critique.

1. They need to co-opt the attack on crony capitalism. The bailout of the large banks under George W. Bush was the single most destructive blow to the ideals of free markets for decades.  It is important to take steps to make sure that is not necessary again. That means ending the bank of regime of too-big-to-fail financial institutions. Unfortunately, as Peter Wallison noted in yesterday’s Wall Street Journal, Dodd-Frank, a bill supported by Senator Warren, entrenches the too-big-to-fail regime more deeply and widely. Any repeal, however, must be accompanied by the removal of implicit guarantees to banks and the winding down of government agencies, like Fannie Mae and Freddie Mac, that encourage excessive borrowing.

2. Intrusive regulation is generally even worse than high taxation. The Nordic nations, with flexible labor markets and high taxes, have done better than European nations with somewhat lower taxes and inflexible labor markets. Flexible labor markets comport with the variety of human needs.  Young people need training that employers are more likely to provide at lower wages. They may also may want low skill jobs to support them as they work their way through college or pursue other dreams. Artificially increasing the costs of these jobs will make employers move faster to automation. Parents too may prefer part-time work that a bureaucratic equality regime will likely discourage. More generally, regulations like those needed to enforce an equal pay regime bring with them an army of bureaucrats to create uniformity that is inimical to the ever-shifting desires of a diverse citizenry.

3. As Steven Smith observes, equality is a negative, not a positive idea. It tells one not to discriminate, which in some circumstances may be a quite proper command, but it does not create any new goods, like a job or new technology.  The  relative inertness of equality is the Achilles’ heel of today’s progressivism.

Notably missing from Warren’s tenets is any concern with innovation and economic growth. One reason for their absence may be a growing pessimism among progressives about either their possibility or desirability. For example, growth is now often portrayed as a threat to equality or to the environment. But most people do not share the pessimism of many intellectuals—a pessimism that may be self-fulfilling.

Thus, the most important component of a revival of liberty is to instill confidence in future growth and  the capacity of  innovation to benefit all.  Such confidence undermines the kind of zero-sum agenda at the heart of Warren’s progressivism because it gives people reason to believe that the future can be more bountiful than the present.

Reader Discussion

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on July 23, 2014 at 12:32:01 pm

There are three concepts that should be considered when evaluating any progressive agenda, or any other type of political agenda for that matter.

1. Does effecting that agenda require the use of state force or ruinous coercion, and if so, how much? Some use of force is legitimate and necessary in a civil society, but it should be the very rare exception. Use of force by a government against its own citizens should face at least as high a threshold as use use of military force in foreign policy.

2. Does implementation of that agenda require demonizing those who oppose it?,Do proponents of an agenda have the good sense and integrity to presume that those who oppose their agenda do so in good faith?

3. Does practical implementation of the agenda or policy require an endless stream of exceptions, hard cases and ideology driven picking of winners and losers? Exceptions, or course are inherently incompatible with the concept of equality.

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on July 24, 2014 at 13:15:04 pm

1. The To-Big-To-Fail problem reflects a fundamental problem for libertarianism, which can be summed up with the query: “Would you rather live in a world in which you can earn $2 and keep 100%, or earn $9 and keep 50%?” If all you focus on is taxes, you prefer the former world; otherwise, you prefer the latter.

Big banks do lots of stuff that make 3d parties (i.e., society) rich. And big banks impose huge costs on innocent 3d parties when they fail. A libertarian might say that we have no right to live in a world in which big banks make innocent 3d parties rich – and thus we may have no right to live in a world in which bank failures don’t harm 3d parties. That is, we could say that every person should bear these risks the same as they should bear the risks of natural disasters, famines, etc. Or we could recognize both the good and the harm that big banks do, try to shield innocent 3d parties from the harm, and strive to maintain the good to the extent that doing so is consistent with shielding 3d parties from the harm. This involves much greater government involvement, but hopefully makes everyone better off over time.

Yes, McGinnis recognizes the moral hazard of granting To Big To Fail banks special status. But he overlooks the externalities that these banks cause when they fail, with or without that special status. Letting big banks fail may punish the management and shareholders of reckless banks – but it does nothing to protect the innocent 3d parties. If you belief government’s role is to defend innocent 3d parties, rather than to preside over a morality play, then you want to go with the second option for regulation, not the first.

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on July 24, 2014 at 13:15:19 pm

2. In general, I agree with McGinnis’s preference for taxation over other kinds of regulation. Charles Murray (?) suggested a Grand Bargain by which we might trade all manner of economic regulation for a simple guaranteed minimum income. This still strikes me as the pinnacle of libertarianism: Freeing everyone from almost every compulsion except for the compulsion of taxation. Endless practical challenges, sure, but a man can dream.

In the meantime, I can’t fault Warren et al. for pursuing regulations that promote her values. Each regulation adds more incentive for doing the eventual Grand Bargain….

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on July 24, 2014 at 13:16:05 pm

3. True, Warren does not specifically speak to promoting innovation or growth – not out of some imagined pessimism per se, but because most policies designed for this purpose come to look like Crony Capitalism. That said, McGinnis links to his delightful column about possible regulatory innovations that pay actually generate more good than harm. McGinnis makes a specious contrast between innovation and inequality, but most of his examples of innovation-promoting ideas do not conflict with ideas for promoting equality. We can have intellectual property reform AND progressive taxation!

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on July 24, 2014 at 13:58:04 pm

The rhetoric of Ms.Warren,in a nutshell, smacks of populist socialism. With that said, most of her ideas require state intervention in our private lives with its inherent intrusiveness,loss of liberty and eventual lowering of productive people's standards of living. But,in the final analysis,it is best to follow the money trail to see where Ms.Warren is coming from. In essence she is being mostly financed by,and therefore captured by,the elitists and the globalists who wish for world domination. Her rhetoric smacks of the kind of talk initiated by Barack Obama before he was elected to his first term as President. Once elected nothing really changes. If it comes to the point in the future where Ms.Warren attains effective political power her ideas will benefit the Political Class,the dependency constituency and the elitists at the expense of the shrinking productive Economic Class. In the end what will be diminished is whats left of the Bill of Rights,our liberties and our individual wealth and property. Ms.Warren is a dangerous women. More so because her handlers and political gatekeepers will be the ones that benefit at the cost to the rest of us.

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libertarian jerry

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