Elizabeth Warren Is Trying to Stop “The Dumbest Financial Crisis Ever”
“Elizabeth Warren criticizes Trump’s economic policies, particularly his tariffs, as detrimental to the U.S. economy. She argues that Trump’s erratic approach to tariffs, coupled with his deregulatory efforts and proposed tax cuts, creates uncertainty and hinders economic growth. Warren believes Congress has the power to roll back Trump’s tariff authority and urges Republicans to exercise independent judgment in protecting the economy.
The Massachusetts Democrat argues that Trumponomics is wrecking the American economy.
Source photograph by Kent Nishimura / Bloomberg / Getty
When I caught up with Elizabeth Warren, the senior Democratic senator from Massachusetts, by telephone on Wednesday evening, it seemed like she didn’t know whether to laugh or scream. Hours earlier, Donald Trump had caved to pressure from the financial markets and announced, via social media, a ninety-day pause on many of his tariffs. On Wall Street, stocks shot up. Later in the afternoon, Warren, who sits on the Senate finance and banking committees, had spoken from the floor of the upper chamber, where she demanded an independent investigation into whether Trump had manipulated the markets to benefit Wall Street donors. (Anybody who had known about the policy pivot in advance could have made a fortune buying stocks or stock futures.) But while, in her floor speech, Warren had bristled with righteous anger at the idea of Trump, or anyone else at the White House, tipping off rich friends, during our conversation she couldn’t stop herself from chortling at the Administration’s claim that the President’s reversal had been the product of an artful negotiation strategy. “No serious person believes that, and I can’t even find an unserious person who believes it,” she joked. “The tariffs are on; the tariffs are off. The tariffs are on; the tariffs are off. Donald Trump is playing the biggest game of Red Light Green Light since ‘Squid Game.’ ”
Since Trump’s return to the White House, his chaotic style of governing has often seemed to catch Democrats off balance, and deprived them of a stationary target. Warren, however, has been on the offensive throughout. Unlike Bernie Sanders and Alexandria Ocasio-Cortez, who have joined forces for a “Fighting Oligarchy” tour, she hasn’t been barnstorming around the country. (Although, as part of the mass “Hands Off!” protests last weekend, she did speak to a large crowd in Nashville.) But Warren has been busy in Washington. In February, when a team from Elon Musk’s DOGE gutted the Consumer Financial Protection Bureau (C.F.P.B.), which she was the primary figure in founding, she denounced the attack as illegal and joined a street protest by the agency’s staff. More recently, Warren has broadened her critique of Trump’s policies to encompass other areas, including trade, taxes, financial regulation, and the debilitating effect of his over-all blitzkrieg. “Chaos is its own tax on the economy,” she said to me. “No business wants to plunk down the millions of dollars it takes to build something, or assemble a team, if they don’t know what the rules will be next week, much less next year. The only consistent theme is chaos, and no one can plan against chaos.”
Warren, who has long been a leading voice on the progressive left, is part firebrand and part policy wonk. During the run-up to the great financial crisis of 2008, when she was a professor at Harvard Law School, she cautioned, in speeches and blog posts, about the dangers of financial deregulation and Wall Street greed. After becoming a senator, in 2012, she focussed on soaring inequality, and, in 2020, when she ran for President, she proposed an annual wealth tax on the top 0.01 per cent. Even before last week, when Trump announced his blanket tariffs and brought the United States to the brink of another financial crisis, Warren was warning about the dangers that Trumponomics posed, including the likelihood that it would plunge the U.S. economy into a recession. “Look, this is the dumbest financial crisis in U.S. history,” she told me in an interview on Wednesday morning, shortly before Trump did his about-face. “Unlike earlier crises caused by viruses or subprime mortgages, this is one man who woke up with a crazy idea and imposed it on the world. But the tariff crisis is layered onto other ways in which he is weakening the economy.”
On a new Substack newsletter that Warren launched on Friday, in conjunction with other Democrats on the Senate Banking Committee, she highlights some of the Trump policies that she sees as particularly pernicious, including efforts to weaken financial deregulation, Musk’s slash-and-burn tactics at key federal agencies, and the pursuit by Republicans in Congress of a highly regressive tax policy that could well force spending cuts which could rip up the social safety net. “Lights are flashing red, but it is not too late,” Warren writes. “We still have time to prevent economic calamity for American families if we act quickly.”
Since coming to office, Trump has appointed new regulators—or, rather, deregulators—at many of the nation’s oversight agencies: the Securities and Exchange Commission, the Federal Reserve, the Office of the Comptroller of the Currency, the Commodity Futures Trading Commission, the Federal Trade Commission, and the C.F.P.B. To Warren, this is a recipe for disaster. “The lesson we should have learned from 2008 is that if the regulatory players don’t do their jobs in enforcing the laws and overseeing large financial institutions, these institutions will go for profit every time and load risk into the system,” she told me. In February and March, the shell of the C.F.P.B., where Treasury Secretary Scott Bessent is now the acting director, dropped more than half a dozen enforcement cases. In one of them, the agency had accused the bank Capital One of cheating customers out of two billion dollars by misleading them about interest rates offered on its savings accounts. In another, it had accused three big banks—JPMorgan Chase, Wells Fargo, and Bank of America—of failing to protect their customers from rampant fraud on Zelle, a payments platform in which they have ownership stakes.
In our conversation, Warren underscored that the Republican desire for tax cuts seems to know no bounds. “Even in the middle of this chaos, they are moving forward on a bill that has trillions of dollars in giveaways to corporations and billionaires, and cuts the underlying investment in working families,” she said. “That’s a terrible idea in the best of economic times, but it will be a complete disaster at a time when more American families are coming under financial stress.”
The struggle over taxes and spending seems set to dominate the legislative agenda on Capitol Hill until the end of the year. But, for the moment, Warren is focussed on Trump’s tariffs. Even though some are now lower than they were at the start of the week, they are all still very much in place. (For most goods from China, the import duty is now a hundred and forty-five per cent. Autos, auto parts, steel, and aluminum face rates of twenty-five per cent, as do many other goods from Canada and Mexico. Items from most other countries are subject to a rate of ten per cent.) The policy debate about how far the federal government should go to protect manufacturing jobs remains heated. Even as elected Democrats have lambasted Trump for panicking investors and tanking the markets, some of them, particularly in industrial states such as Michigan and Pennsylvania, have joined the United Auto Workers union in expressing support for at least some of Trump’s tariffs.
When I asked Warren what stance Democrats should adopt on tariffs, she marked out a middle ground, describing them as “an important tool in the economic toolbox,” but arguing that they should be introduced only in certain situations and industries. “If you get sick, and fill your prescription in America, there’s a ninety-per-cent chance that the drug was manufactured overseas, probably in Asia, and the materials for it probably came from China,” she said. “That’s a dangerous place for our country. If we got into a back-and-forth with a couple of countries, suddenly there’s no antibiotics for heart medication.” Warren argued that the keys to employing tariffs successfully are targeting them on goods that have strategic value, using them in conjunction with other policies designed to encourage production in the United States, such as subsidies, and introducing them gradually so that businesses and investors can plan for them. This was the approach of the Biden Administration, and Warren pointed out that it is very different from what Trump is doing. “Imposing tariffs on virtually every country for virtually every product sent to the United States, at rates that seem to be randomly pulled from a bingo cage, is not a way to strengthen America’s economy,” she said. “And it is certainly not a way to attract long-term investment and good jobs to the United States.”
But with Trump and the Republicans holding power in Washington, what can the Democrats do? Warren insists that, at least when it comes to Trump’s blanket tariffs, they are far from powerless. In introducing these levies, which it falsely described as “reciprocal,” the White House invoked the International Emergency Economic Powers Act, of 1977, which gave the President the authority to introduce broad tariffs during a national emergency. “But we are not in an emergency right now with Belgium or South Korea,” Warren pointed out. “That same law gives Congress the power to pass a resolution and say, ‘Nope. No emergency here,’ and roll back the entire tariff authority that Trump is using.”
On Thursday, as the stock markets fell again, Warren, together with her colleague Ron Wyden, of Oregon, introduced a piece of legislation that would do just that. Four Democrats and one Republican—Rand Paul, of Kentucky—joined them. With only forty-seven seats, Democrats seem unlikely to get the votes that they need for the bill to make it out of the Senate, especially now that Trump has announced his timeout. But Warren insists that bringing the legislation to the floor is still worthwhile because Republicans will be forced to vote on it. She said, “They will have to declare for everyone to see: Are they still simply Donald Trump’s suck-ups? Or are they legislators who will exercise independent judgment to protect the people and the economy of the United States?”
Warren surely knows the answer to her questions, which may explain, in part, her enthusiasm for the bill. When I spoke with her for a second time, after Trump’s reversal, she insisted that it was now more important than ever. “Trump demonstrated again that his whims will determine tariff policy for the entire world,” she said. “That will be true right up until Congress says no. Our resolution is the no.” ♦“
No comments:
Post a Comment