S en.Elizabeth Warren has offered many terrible plans in her bid for the presidency and has attempted to combine an expansive and socializing economic policy with the nationalist rhetoric that honored the electoral college for President Trump. But while their numerous plans, ranging from "corporate patriotism" to "green production," smell of opportunism, their warning today of an economic crash is actually diagnosing the very real, unpolitical, and often ignored issues that surge up among us.
The perseverance of the Trump economy is by all standards an exception to historical trends. We maintained the longest bull market in American history despite a remarkably slow recovery from the Great Recession. Although our unemployment rate has reached half a century of low, our inflation rate has not exceeded 2.0% in any month of 201
But even if the fundamental economic data has defied adversity, Warren rightly diagnoses the underlying blisters that threaten our status quo.
The key to Warren's warnings is the corporate debt created by leveraged loans that package the debts of lower-rated companies. She rightly notes that the US $ 1 trillion corporate credit market "looks worrying like the pre-2008 subprime mortgages: poorly-designed loans with minimal protection, which are then packaged and sold to investors."
Warren also correctly diagnoses household debt as an impending issue – though she does not admit that the student loan bubble is actually a bubble – and recognizes that our shrinking manufacturing market is leaving huge parts of the country behind. But as always, Warren dictates the wrong solutions to the right problems.
Like Trump, Warren lapses into the same error of blaming politics on automation of automation rather than automation. In reality, several studies have shown that more than 80% of job losses in manufacturing were caused by automation. McKinsey estimates that in the future, the technology can automate nearly half of all activities that people are currently paying for. The solution to creative destruction in the context of technological progress is not to stop progress, but to invest in the reorientation of workers with the skills required in our increasingly information-oriented economy.
And this of course contradicts Warren's preferred solutions to a major component of the household debt crisis, the student loans. At present, the Federal Government is subsidizing the expansion of the university bureaucracy by promising unlimited and almost unconditional student loans. Warren's dreams of free college and widespread debt relief for student loans would only enable colleges to raise prices so taxpayers could pay the bill themselves. More importantly, Warren's plan ignores the growing skills gap created by a political class that has been increasingly over-graduating and hindering the expansion of vocational training.
Warren's solution to the leveraged loan bubble, increased regulation, could be justified. And their plan to spend money on retaining construction contracts is deceptive, but it probably would not work.
However, if you adopt a number of personal debt categories and then nationalize them, you run the risk of creating a systemic bladder problem that could undermine the economy.