She may not run, but she’s already exerting a gravitational pull
Elizabeth Warren, the famously anti–Wall Street Senator from Massachusetts, has become the lunar goddess of liberal politics. Just as the moon pulls the tides, Warren is slowly but steadily towing the economic conversation in the Democratic Party to the left. Witness the barn-burning speech she gave on the Senate floor in December, railing against the fact that lobbyists from Citigroup and other big banks had been allowed to squeeze a rider into the latest congressional budget bill that would make it easier for federally insured banks to keep trading derivatives, which Warren Buffett once described as the “financial weapons of mass destruction” that sparked the 2008 crisis. Then there was her opposition to President Obama’s most recent Treasury nominee, Antonio Weiss, a banker who Warren told me “has no background to justify his nomination other than working for a big Wall Street firm.” (Weiss dropped out shortly after Warren began denouncing him.) Couple that with her continued calls to break up the big banks and criticism of policies espoused by longtime Democratic economic advisers like Bob Rubin and Larry Summers, and you’ve the makings of a consequential gravitational pull.
Warren is more than just a dogged critic. The former Harvard law professor’s influence comes in large part because she’s tapped into an existential crisis on the left: namely, liberals’ belated anxiety over the capture of the Democratic Party by high finance, which began two decades ago. Ronald Reagan might be the President most closely associated with laissez-faire economics, but both Republicans and Democrats have frequently turned to finance to generate quick-hit growth in tough times, deregulating markets or loosening monetary policy rather than focusing on underlying fixes for the real economy. Shrugging and citing a market-knows-best philosophy to avoid difficult political decisions has been a bipartisan exercise for quite a long time now.
And the anxiety is deepened because democrats, like Republicans, bear blame for the financial crisis of 2008. Jimmy Carter deregulated interest rates in 1980, a move that pacified consumers and financiers grappling with stagflation but also helped set the stage for the home-mortgage implosion. In 1999, as President Bill Clinton’s Treasury Secretary, Rubin signed off on the Glass-Steagall banking-regulation death certificate, a move that many, Warren included, believe was a key factor in worsening the crisis. Loose accounting standards supported by many Democrats during the Clinton years also encouraged the growth of stock options as the main form of corporate compensation, a trend that French academic Thomas Piketty, Nobel laureate Joseph Stiglitz and many other economists believe exacerbated the staggering gap between rich and poor in the U.S. today. I asked Warren whether she blamed such policies for our current wage stagnation, which has persisted despite robust economic growth. “I’d lay it right at the feet of trickle-down economics, yes,” she says. “We’ve tried that experiment for 35 years, and it hasn’t worked.”
Speculation has been rife that Warren might consider a presidential run of her own, taking on front runner Hillary Clinton just to make sure the same trickle-down team doesn’t end up in office again. When I ask her flatly if she’d run if she thought a Rubin or Summers would be making economic policy for the next four years, she paused. “I tell you … I’m going to do everything I can. I’m going to fight as hard as I have to. This has to change.”
Change won’t come easily. Resetting the economic table is not just about breaking up big banks or raising the minimum wage. Real change would mean grappling with a deep, multidecade shift from a society in which the state, the private sector and the individual all shared responsibility for economic risks to one in which individuals are now increasingly left on their own to pay for the trappings of a middle-class life–health care, education and retirement–while corporations capture a record share of the country’s prosperity without necessarily reinvesting in the common good. Complaining about too-big-to-fail banks, sleazy lobbyists and the 1% is easier than crafting an entirely new, inclusive growth policy.
Warren is likely to conjure more change by being a progressive foil to Clinton than by running herself. Her sway has old economists scrambling to learn new tricks. The Center for American Progress, a think tank with close ties to the Clintons, is releasing a new report on wages and the plight of the middle classes on Jan. 15. Its chief author: none other than Summers. Meanwhile, Clinton recently took an ideas meeting with Stiglitz, once considered too far left to touch. In politics, stars may rise, but the moon is constant.
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