And the Plutocrats Continue to Grasp at Staws...

Against my better judgement I continue to scour through the Yahoo homepage news-feed or as I like to call it "bobbing for turds".  This week's search led me to an article titled "Why Elizabeth Warren Is a Threat to America’s Growth" by Liz Peek at the Financial Times.  Peek's poorly written and scatterbrained editorial focuses on Elizabeth Warren and why she believes that Warren is destroying the American economy particularly entrepreneurship.

Peek begins with six paragraphs of amateur psychoanalysis in which she digs into the mind of Warren and searches for the reason Warren hates banks so much.  The conclusion she reaches:  Daddy issues.

In the 1950s, Warren relates, her parents moved back to their home town, but her grandfather said “my daddy no longer had a job in the family store.” Afterwards, Warren’s father moved “from one job to another,” hauling the growing family of four children all over Oklahoma. Warren’s parents were drinking heavily, fighting constantly. This was Elizabeth Warren’s coming of age...

...This is the root cause of Elizabeth Warren’s lifetime conviction that banks (and, more broadly, businesses) are out to trick and cheat average hard-working families. The childhood fear of poverty not only distorted Warren’s views on private enterprise, but keeps Warren from borrowing money herself. The most recent review of her finances shows that she and her husband are one percenters, holding assets of more than $5 million, but that they owe not a dollar of debt.

Without a doubt, growing up under the constant threat of financial collapse under the hands of lenders surely influences a person's opinion of lenders.  So?  You'll also notice the unrelated issue of Warren's finances.  She has done well and what exactly does that have to do with anything?  Focus on her policies unless there is something the directly calls into question a person's credibility.  I'm not sure how pointing out Warren's finances changes anything about the credibility or effectiveness of her policies.

The idea that banks aren't trying to cheat people out of money is highly suspect.  In theory, banks make profits by lending money and collecting interest.  They still do this, but the contracts are long with lots of fine print and then they charge fees for nearly everything.  I guess it depends on what you mean by screwing people out of money, but banking practices can certainly be devious and deliberately designed to obscure what you're actually agreeing to.  I have never once heard someone say, "I really love my bank" that just doesn't happen for the majority of people.

After a many wasted words, Peek actually begins to make an argument:

The drop in entrepreneurship has accelerated since 2006 – certainly as a result of the financial crisis, when lending dried up for all but those with the best credit scores – but doubtless also because of the anti-business rhethoric and regulation flowing so freely from the Obama White House.

Not all of our competitors have experienced a similar decline. According to Gallup, the U.S. now ranks 12th among developed nations in business startup activity, behind Hungary, Denmark, Finland, Sweden, Israel and Italy. It is especially alarming that for the first time in 35 years, American business deaths exceed business births. 

Ah yes the anti-business rhetoric (the above quotation is taken directly from the article, you'll notice they misspelled rhetoric) and regulation from the Obama administration is responsible for a trend that began in the late 1970s, those devious bastards.  Ironic that they blame regulations as the downward trend in entrepreneurship also coincides with the trend in deregulation, decreased unionization, free trade, and disappearance of the middle class.  If we are just going to point to correlations and assume causation why not point to those things?  Because it goes against the supply-side narrative that the free-market always produces the best possible outcomes for everyone.

I'd also like to point out that all of the countries she lists have substantial government provided social safety nets including universal health coverage whereas we do not.  I've considered going into business for myself and the key factors stopping me are as follows:

• I need to actually sell something/provide a service that people will buy.  This is pretty important, I have to figure out how to find a niche in a market or even more challenging, create a new market.  The market is made up largely of consumers with limited funds so I have to find a way to sell something to people without a whole lot of disposable income.
• Ability to raise capital.  You need to spend money to make money.
• I may have to surrender health benefits and a steady (for the time being) salary to dedicate myself to running a business.  If it doesn't work out I'll have to hope I can find a job that is comparable in salary and health benefits that I have now.  It's a gamble, and the financial stakes are high.

I can't speak for everyone, but regulations are not one of my top concerns.  Certainly depending on what and where I went into business it could become a concern, but the other factors are much more pressing. She continues:

...New regulations on financial, healthcare, insurance and energy companies have proliferated. Most recently, the president demanded that the FCC turn the telecom industry upside down.

Does all this reordering impact entrepreneurs? Of course it does. Just one data point: today some 40 percent of businesses need a license to operate, up from 5 percent a generation ago.

I would argue that above industries need to be regulated and if not for the government those industries wouldn't exist in anything resembling their current form in the first place.  Would people get insurance if it wasn't required?  Most of them probably wouldn't.  The number of people receiving  health care would be much smaller if the government wasn't involved.  Emergency rooms wouldn't be funded, Medicare and Medicaid wouldn't exist, and the vast majority of employers wouldn't provide insurance because they wouldn't be receiving tax incentives to do so.  After the last financial crises, had it not been for government intervention, the finance industry would be a fraction of what it is now (maybe that would have been a good thing).

On the second point, she's right and regulations can be onerous for start-ups, but she fails to mention that most of those licenses are required by states, not the federal government, a fact which she conveniently leaves out, but oddly enough is mentioned in the very article she links to to try and justify her argument.  So for the actions of the state she blames Obama and Warren, but not say Rick Perry for forbidding Tesla to sell their cars in the state of Texas because that could take money away from automotive dealers and from their lobbyists.

She comes to a close by warning about the coming regulation if Warren or someone like her reaches the White House (ignoring the reality that policy doesn't start at the White House, it ends there).  She cites a Bloomberg editorial:  "Recent efforts to interfere with how car dealers price auto loans 'suggest how prone to abuse this new agency may become,'".  Actually, that's a perfectly reasonable regulation.  Who benefits from car salesmen other than car salesmen?

Here's a suggestion:  If you want to make an appeal to "normal" consumers, coming in on the side of sleazy car salesmen, cable companies, and banks may not be the best way to do it.  Regulations are not always helpful, can be counter-productive, and tailored to serve entrenched lobbies, but that doesn't mean they shouldn't exist at all.  Regulations are an essential part of a market economy, without them a country will look less like America and more like Somalia.






http://finance.yahoo.com/news/why-elizabeth-warren-threat-america-081500448.html