There is plenty to criticize about Elizabeth Warren’s made-for-YouTube theatrics in the Senate Banking Committee.
Warren has some good goals shared on both sides of the aisle, such as addressing “too big to fail” and “too big to prosecute,” but unfortunately she goes about it the wrong way by belittling witnesses with questions properly addressed to other people or with questions which make no sense. It makes her a hero to the left, but it does little to advance actual economic reform.
But her performance on the Senate HELP committee with regard to a $22 minimum wage has the potential to push the narrative of her Senate agenda into pure mockery.
I addressed the $22 minimum wage, and her claim that $14 of that has gone missing, in my post Elizabeth Warren cherry-picked $22 per hour minimum wage number:
Three were many possibilities raised in the study: $9.22, $10.01, $10.52, $12.25, $15.34, and $21.72.Warren picked the absolute highest figure to make her point, a figure which makes no sense because it assumes that minimum wage worker productivity gains kept pace with worker productivity gains in the overall economy.
Unlike her Banking Committee performance, Warren’s minimum wage posturing is being met with deserved mockery. In a post at Real Clear Markets, Robert Tracinski takes apart the claim that $14 has gone missing, Elizabeth Warren’s Acquired Economic Stupidity (emphasis added):
The problem with a reductio ad absurdum argument is that sometimes your opponent accepts the absurdity and just runs with it….Leave it to an academic to be totally ignorant of the workings of the economy. So let’s clue in Senator Warren about where those productivity gains came from and where the profits went to.If we’re talking about productivity gains across the entire economy, some of those gains came from higher-level skills acquired by workers. But that’s not the case for minimum-wage workers, because they are by definition unskilled. (The possession of a skill is precisely what makes it possible for a worker to command a higher wage.) For minimum-wage workers, productivity gains are the result of investment in new technology that allows businesses to get more value out of the same amount of unskilled labor. Think of a supermarket scanner versus the old system–which people over 40 can still remember–in which all prices had to be pasted manually onto grocery packaging and entered manually into a cash register by the cashier. In that old system, it took a lot more labor for the same unskilled or low-skilled worker to check out a customer.The profits from these productivity gains went mostly to the people who created them: the businesses who adopted new technologies and the inventors and entrepreneurs who developed them. Put simply, if Senator Warren wants to know “what happened to the other $14.75,” she might start by taking a stroll around Silicon Valley. The money went (among other places) to reward the inventors of productivity-enhancing computers and software. By the same token, if we were to mandate that all productivity gains must go to unskilled workers, we would eliminate all of those profits and kill any incentive to invest in higher productivity.
Bill McMorris at The Washington Free Beacon makes a similar point, Elizabeth Warren’s Fuzzy Math (emphasis added):
Warren raised the prospect of a $45,000 annual minimum wage at a March 14 Senate Health, Education, Labor, & Pensions Committee hearing. Warren embraced tying wages to productivity during a question and answer session with radical activist-turned-University of Massachusetts Amherst economist Arin Dube….However, [Employment Policies Institute] research director Mike Saltsman says Warren and Dube oversimplify the nation’s growth in productivity.“There’s a considerable difference between what people are doing and what they’re producing—there’s only so fast you can bus a table or cook a burger,” he said.“The productivity gains don’t match the overall economy. It’s completely inaccurate to link the minimum wage to overall productivity.”Most minimum wage workers are employed in the service sector, rather than the computer and cell phone companies that experts say drove productivity gains in the latter half of the 20th century.Productivity in the food service industry, a hotbed for entry-level positions, grew by only 7 percent over the last 20 years, as opposed to nearly 60 percent gains in all businesses.“These national gains don’t translate in the service industry and the data shows that,” Saltsman said.
The $22 minimum wage may be Warren’s intellectual Waterloo.
Whereas the regulatory points made in the Senate Banking hearings are esoteric and easily abused to create YouTube moments, the $22 minimum wage issue is readily understandable to the public and understood as absurd. What small business or retail outlet could survive if the minimum salary were $45,000 per year, regardless of what the employee did or what experience the employee had?
Other aspects of Warren’s positions are coming under scrutiny, such as Senator Warren’s Inconsistent Approach to Regulatory Accountability:
Last week, at her first Senate Banking Committee Hearing, Senator Elizabeth Warren excoriated regulators for entering into settlements with big banks rather than bringing them to trial. Also last week, Ms. Warren called for a vote to confirm Richard Cordray as director of the Consumer Financial Protection Bureau, a role in which he is already serving by virtue of a recess appointment of questionable legality.Setting aside the senator’s odd emphasis on trials as the only means to punish banks, the juxtaposition of these two events is interesting. On the one hand, Ms. Warren clearly relishes her new oversight role. On the other hand, she is insisting on the enshrinement of a regulator over whom she will not be able to exert effective oversight. If Mr. Cordray doesn’t embrace the litigate-because-it-looks-tough approach–and so far he too has entered into settlements with big banks–there will be little she can do to hold him accountable besides public shaming. Under the institutional design blessed by Ms. Warren, the CFPB director has a free hand to do whatever he wants to do, even over the objections of members of Congress, the president, and the American people.
I don’t underestimate Warren’s political talents. The Native American / Cherokee controversy alone would have sunk most politicians, but she seemed to thrive on it notwithstanding the fact that her explanations of family lore did not hold up to scrutiny.
Given her political talents and solid base of true believers, Warren’s intellectual Waterloo will not be her political Waterloo.
Update: Another interesting read is Elizabeth Warren’s Unwarranted Wage.
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