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If Trump really wanted to stick it to Elizabeth Warren, here’s who he’d nominate for CFPB Director

If Trump really wanted to stick it to Elizabeth Warren, here’s who he’d nominate for CFPB Director

George Mason law professor Todd Zywicki has eviscerated Elizabeth Warren’s academic research methodology and validity.

Because of her Twitter fights with Donald Trump, much attention has been focused for the past year on Elizabeth Warren’s claim, while climbing the law school ladder to Harvard, to be Native American. I addressed this recently in It’s time for Elizabeth Warren to apologize for her Native American deception.

Warren’s claim to be Native American for employment purposes is not the only scandal that has surrounded her academic career. At we documented Warren’s Academic Research Controversies.

Warren rose to academic stardom on the basis of her consumer-related research and writings. It was her claim to fame both academically and in the popular press. Warren’s 2004 book, The Two-Income Trap: Why Middle-Class Parents are Going Broke, co-authored with her daughter, put Warren squarely on the public radar as a consumer protection hero.

Yet Warren’s academic research even before that book has come under withering criticism, as mentioned in our 2012 post, The Vetting of Elizabeth Warren’s Academic Background Begins. That post details a withering attack on Warren’s academic research by Professor Philip Shuchman in the 1990-1991 edition of the Rutgers Law Review

Megyn McArdle also has been a fierce critic of Warren’s research, including in these posts at The Atlantic in 2009-2010:

But no one has been more fierce a critic of Warren’s academic research methodology and validity than George Mason Law School professor Todd Zywicki, an expert in bankruptcy and consumer lending issues.

Zywicki, in an August 14, 2007, op-ed in The Wall Street Journal, eviscerated Warren’s research, The Two-Income Tax Trap

In fact, using their own numbers, it is evident that they have overlooked the most important contributor to the purported household budget crunch — taxes.

Ms. Warren and Ms. Tyagi compare two middle-class families: an average family in the 1970s versus the 2000s (all dollar values are inflation-adjusted). The typical 1970s family is headed by a working father and a stay-at-home mother with two children. The father’s income is $38,700, out of which came $5,310 in mortgage payments, $5,140 a year on car expenses, $1,030 on health insurance, and income taxes “which claim 24% of [the father’s] income,” leaving $17,834, or about $1,500 per month in “discretionary income” for all other expenses, such as food, clothing, utilities and savings.

The typical 2000s family has two working parents and a higher income of $67,800, an increase of 75% over the 1970s family. But their expenses have also risen: The mortgage payment increases to $9,000, the additional car raises the family obligation to $8,000, and more expensive health insurance premiums cost $1,650. A new expense of full-time daycare so the mother can work is estimated at $9,670. Mother’s income bumps the family into a higher tax bracket, so that “the government takes 33% of the family’s money.” In the end, despite the dramatic increase in family income, the family is left with $17,045 in “discretionary income,” less than the earlier generation.

The authors present no explanation for why they present only the tax data in their two examples as percentages instead of dollars. Nor do they ever present the actual dollar value for taxes anywhere in the book. So to conduct an “apples to apples” comparison of all expenses, I converted the tax obligations in the example from percentages to actual dollars.

In fact, for the typical 1970s family, paying 24% of its income in taxes works out to be $9,288. And for the 2000s family, paying 33% of its income is $22,374.

Although income only rose 75%, and expenditures for the mortgage, car and health insurance rose by even less than that, the tax bill increased by $13,086 — a whopping 140% increase. The percentage of family income dedicated to health insurance, mortgage and automobiles actually declined between the two periods.

In a September 30, 2010, Op-Ed in The Wall Street Journal regarding Warren’s appointment as a consumer Czar (later withdrawn), Zywicki wrote, In Elizabeth Warren We Trust?

…. by appointing an individual with a track record of using questionable research to advance policy ends, it has jeopardized the second goal as well.

Consider Ms. Warren’s much-ballyhooed study on the alleged link among health problems, medical expenses and personal bankruptcy filings. Published in the February 2005 issue of Health Affairs, the report was timed to head off bipartisan bankruptcy legislation that was enacted later that year. Ms. Warren and her co-authors claimed that “at least” 46% of personal bankruptcy filings in 2001 (the year from they collected the data) were the result of “medical causes,” and that this represented a 23-fold increase over 20 years.

Equally dubious, the authors classified a bankruptcy as having a “major medical cause” if the individual had accumulated more than $1,000 in out-of-pocket medical expenses (uncovered by insurance) over the course of two years prior to filing—regardless of income, and even if the debtor did not cite illness or injury among the reasons for bankruptcy.

In 2001, average per capita out-of-pocket medical expenses were $683. During the two-year period Ms. Warren and her co-authors studied, in other words, Americans spent an average of $1,366 on uninsured medical expenses, or 30% more than their threshold definition of a “major medical cause.” There was no larger context for their threshold figure: A debtor with $1,001 in uncovered medical expenses and $50,000 on a Saks card would constitute a “medical bankruptcy” in their study.

The claim of a 23-fold increase in medical bankruptcies was based on a comparison of their 2001 data with Ms. Warren’s research in a 1981 study—which appears to count only those who self-reported as having filed bankruptcy for medical reasons. This is a completely different and much narrower definition of “medical bankruptcy” than the one she used 20 years later, and obviously inflates the increase.

In contrast to Ms. Warren’s studies, a battery of analysis, including research done by the Department of Justice’s Executive Office of the United States Trustee (which oversees the administration of bankruptcy cases), and by David Dranove and Michael Millenson of Northwestern University, concluded that fewer than 20% of bankruptcies are caused by health problems or medical expenses.

Last year Ms. Warren and her co-authors were back with an even more dramatic study, in the American Journal of Medicine, timed to promote President Obama’s health-care reform law. Drawing on 2007 filings, the authors concluded that 62% of bankruptcy filings were the result of medical issues and that the odds that a bankruptcy had a medical cause had doubled between just 2001 and 2007. This study was also flawed.

After Congress made it harder for people to skip out on their debts in 2005, the number of bankruptcy filings plummeted. In 2001, the year Ms. Warren used for the first study, there were 1,452,030 personal bankruptcy filings; in 2007 there were 822,590. Even if we are to accept the methodologies of the two studies for the sake of argument, there were 670,838 “medical bankruptcies” in 2001 and 510,828 medical bankruptcies in 2007—a drop of 160,000 per year. Yet Ms. Warren’s article nowhere acknowledges that the absolute number of bankruptcies and purported medical bankruptcies declined.

Concerns about Ms. Warren’s presentation and interpretation of data have been longstanding. As I wrote in these pages in August 2007, her book “The Two-Income Trap” willfully ignores the obvious in her own data: that spiraling taxes—and not living expenses—were a major cause of middle class financial woes….

Zywicki explained his concerns with Warren in this interview:

“The studies that she has done, are studies that I’ve not been able to find independent analysts who’ve agreed with how data has been handled in those studies.”

Zywicki was not done taking aim at the heart of Warren’s academic credibility. On October 10, 2014, in Forbes, Zywicki wrote, Why Everything Elizabeth Warren Told You About Consumer Credit Is Wrong:

Why do people borrow? To hear law professor turned Senator Elizabeth Warren, it is because they are seduced by rapacious lenders and a consumerist culture into living beyond their means, buying big-screen televisions, new cars, and expensive vacations. And before you know it, you are under the thumb of the big banks—or, even worse, of the street corner payday lender.

But as we show in our new book, Consumer Credit and the American Economy, economists have long understood why consumers borrow. Although there are exceptions to any rule, for most it bears little resemblance to Senator Warren’s picture of hapless victims goaded into debt by rapacious credit card issuers….

But aren’t people today different—more prone to living beyond their means? As then-Professor Warren herself put it in a 2004 interview with PBS, “The [credit card] industry has no evidence that people were being turned down for loans in the early 1980s. What they have is evidence that people more often in the early 1980s preferred to pay cash than to pay on credit.” Yet hand-wringing about how other people use consumer debt is as old as debt itself. For example, the New York Times warned in the 70s that American consumers were “borrowing trouble”—the 1870s, that is….

A sound understanding of the history and economics of consumer credit can provide a warning about the dangers to consumer and the economy of poorly-conceived regulation. Yet there are too many, including Senator Warren, who romanticize the past and fail to understand the true benefits of consumer access to credit and the potential unintended consequences of paternalistic regulation. As Dodd-Frank, the Consumer Financial Protection Bureau, and other regulations pile their weight upon the economy, consumers have been systematically driven out of the mainstream financial system and into high-cost alternatives or lose credit altogether. We’ve seen this movie before—let’s hope that Washington can write a different ending this time.

Zywicki has been a critic of the entire concept of the CFPB as conceieved by Warren:

With that as background, guess who reportedly is on the short list of people under consideration for nomination to the now-empty position of Director of the CFPB?

With the legal skirmish quieted, Trump is close to placing a permanent leader at the agency, a senior administration official told POLITICO. The president’s short list of candidates includes House Financial Services Chairman Jeb Hensarling (R-Texas), George Mason University law professor Todd Zywicki, and former acting Comptroller of the Currency Keith Noreika. All are fierce critics of the bureau, which they have accused of overstepping its authority and running roughshod over industry. [emphasis added]

Zywicki did not respond to an email requesting confirmation or denial that he is being considered, whether he would accept the position if offered, or whether he thought his past criticisms of Warren’s research would be a problem.


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Warren’s work on bankruptcy is a dirty joke.

Her own history of working for high-level bankrupts and flipping houses is an under-told story.

Oooh, excellent choice. Nominate him today, start hearings on Monday, and have him confirmed by Xmas.

    I’m not sure if I’d go for him as Director, because he hasn’t been through the baptism of fire that ex-senators and ex-representatives have. Besides, most of the work a Director does is social/political back-and-forth, testifying, and interacting with other agencies and regulatory targets. The actual policy work, the number grinding and policy analysis, is done at the staff level. The Director does give direction to the staff, so they’re not a puppet by any means, but when you have a somebody with good technical skills and you put them into a position that is nearly all social, it’s a recipe for Peter Principle results.

    Now, having him as Deputy Director would seem to be a perfect fit. And the employee there seems to be on the way out…

American Human | November 29, 2017 at 1:38 pm

To think that Warren is/was a tenured Professor at Harvard, an institution considered the top of the top in academia, and that she turned out research like that boggles the mind. It shows just how low the bar is.
I’ve been a critic of Affirmative Action in the past but here is a person who seemingly pushed the bar way down all by herself. I used to think that “one” needed to be sort of a default highly intelligent person in order to teach at an institution such as Harvard.
I only have a simple BS in Electrical Engineering but, WOW, if I turned out stuff like that, I’d be driving a bus now (and not even an electric bus”!!

Who’s appropriate for the job depends on what the President has in mind for the Bureau.

Does he intend to eliminate or castrate/nobble/hamstring it? Does he want to simply reign it in a bit and bring it under reasonable Executive control? Does he want to transform it into a genuinely useful bureau? Or will he be content to let it continue in “business as usual” fashion? (Probably not, or he’d have most likely allowed English’s power grab.)

If he wants to let it die, Zywicki would probably be wasted there.

    Strangely (or maybe not so, thinking strategically) you don’t actually want to kill the CFPB. If you do, you just invite some future Progressive administration to resurrect it later.

    What you really want to do is to put a person in charge that will rewrite the internal regulations to straight-jacket the organization to play by specific rules, and then make those rules fully and completely public and transparent, so that the public gets used to the Bureau behaving in a particular manner. Once THAT happens, institutional inertia takes over and it becomes impossible to change course.

      I really don’t think it matters what you do. Once Democrats get involved they will always find a way of turning an institution in to what ever it is they want it to do. So in reality the ONLY way to stop the CFPB from ever being weaponised again by Democrats is to totally destroy it so that they can’t bring it back to life!

      Bear in mind the willingness people turned a blind eye to the black baby jesus’s criminal ways. Not even the constitution could stop him!

Oh oh. I’m going to get myself in trouble.

I agree that Warren is over the foul line in left field. I agree that she dishonestly profited from the Affirmative Action machine. I’m ready to believe that Warren’s statistics are flawed.

However, having read “The Two Income Trap”, I found that at least one of her main arguments rings true. And it’s the kind of argument a conservative would make. Stopped clock. Irony. Etc.

She correctly notes that the fact that you can’t send your children to a “public” school across district lines results in bidding wars for houses in “good” school districts. This can cause young parents to take on mortgages which they can afford only if both of them are working. If one of them gets sick or unemployed, they are in trouble. I think this logic is unassailable.

Of course, there are relevant points which Warren would never make:

o The “public” schools are not really “public” if you can use them only if you live in the proper neighborhood.

o “Good” is a word which mostly doesn’t apply to “public” schools.

o Parents would be better off locating in a less expensive neighborhood and homeschooling their children or sending them to a private school.

I think it’s important to recognize a good argument even when you don’t like where it came from.

    gmac124 in reply to gibbie. | November 30, 2017 at 3:42 pm

    I can’t speak for everywhere but I do know that my state has changed the rules in this area. Where I live you can option your kids into other school districts and some of them will run transportation to your house.

Well, ok, but:

Repeal Dodd / Frank, abolish the CFPB

It is Un-Constitutional, unnecessary, and Un-American.