Senator Elizabeth Warren knows that when people trade, both sides gain. She made that clear last year, in a fascinating interview in The Atlantic. But then she went blithely on, saying that she could fix markets by creating a “level playing field.”
Markets create value, but Mrs. Warren asserts that “when the markets are not level playing fields, all that wealth is scraped in one direction.”
How? People are still trading, even in bumpy playing fields.
She turns to the crisis of 2008, when many people discovered that they had entered into unsustainable mortgages. She explains how her shiny new regulatory program leveled that playing field.
But her scheme did not even out the bumps in the mortgage industry that existed before the crash:
- the moral hazard of Fannie Mae and Freddie Mac,
- the previous congressional “fix” that pushed banks to accept poor people as good loan risks when they were not (in the name of racial justice, of course),
- the regulatory rule that created ratings agencies sans competitive market incentives, and
- the Federal Reserve policies that fed the whole housing bubble mania.
She just added another burdensome layer of government.
Politicans sure love to pile on.
Now she offers a new scheme, a child-care program that Reihan Salam, this week again in The Atlantic, says “risks increasing the federal deficit, driving up the cost of child care, and squeezing stay-at-home parents.”
And Mr. Salam says that last risk is one Warren should understand particularly well, since she had “made her reputation as a public intellectual by warning against it.”
Warren’s no socialist — she wants to “save capitalism”! Yet by only adding to government kludge, she might as well be one.
This is Common Sense. I’m Paul Jacob.