Dec. 22, 2021

413: THROWBACK: Elizabeth Warren's Economics of Magical Thinking (November, 2019)

413: THROWBACK: Elizabeth Warren's Economics of Magical Thinking (November, 2019)

Economist Max Gulker on Warren's tax plans, anti-billionaire rhetoric, wealth tax, and plan to rule the American economy through the force of government regulatory agencies.


On this THROWBACK episode, I'm joined once again by economist Max Gulker!

 

Listen as we go back to the end of 2019 (right when the Democratic primaries were kicking off) when Elizabeth Warren was one of the leading voices on the Democratic stage, where we discussed Warren's tax plans, anti-billionaire rhetoric, wealth tax, and plan to rule the American economy through the force of government regulatory agencies.

 

Original Show Notes:

 

If you have friends who are Elizabeth Warren fans, then this most definitely is the episode you should send their way, as today I am joined once again by Max Gulker from the American Institute for Economic Research!

 

Max joins the show to help me break down Elizabeth Warrens tax plans (one of her many plans), her anti-billionaire rhetoric, he proposed wealth tax, and outline her plan to rule the American economy through the force of government regulatory agencies.

 

Max's Article- "Elizabeth Warren and the Economics of Magical Thinking"

https://www.aier.org/article/elizabeth-warren-and-the-economics-of-magical-thinking/

 

Find Max Online-

Twitter: https://twitter.com/maxgAIER

Email: Max.Gulker@aier.org

Website: https://www.aier.org/staff/max-gulker-phd

 

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Transcript

Brian Nichols  
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Victor Antonio  
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Brian Nichols  
Welcome to The Brian Nichols Show your source for common sense politics on the we are libertarians network as a sales and marketing executive in the greater telecommunications cybersecurity industry. Brian works with C level executives to help them future proof their company's infrastructure for an uncertain future. And in each episode, Brian takes that experience and applies it's the liberty movement. And this is why we talk about being the trusted advisor you should be able to help us that expert guidance and all the opinions that I'm sure that you have and help lead them towards not just a decision but the right decision. Instead of focusing on simply winning arguments or being right. We're teaching the basic fundamentals of sales and their application in the world of politics, showing you how to ask better questions, tell better stories and ultimately change people's minds. And now, your host, Brian Nichols. On the show NASSCO returning to The Brian Nichols Show.

Max Gulker  
Hello, Brian, thank you for having me.

Brian Nichols  
Well, it's great to have you back on max. We're here today to talk about some of these running presidential candidates on the left, namely the the likes of Elizabeth Warren and an Andrew Yang because I think of the candidates we've seen out there, those two have really been promoting two very distinct, unique forms of economic policy. And you being the The Economist you are over AI er, which is the American Institute for Economic Research, which is a fantastic organization have been doing a lot of great work to really kind of explain what it is that they believe, to the audience. So what I want to do first and foremost is kind of dissect Elizabeth Warren's her different tax policies. And then what we'll do is dig into Andrew Yang, and we'll break this into two episodes. So it's easier for people to digest, you know, be able to actually separate the the policies I know it gets, it can get really confusing, comparing, you know, side by side, liberal policies. So let's kind of start off with Elizabeth Warren. Now Elizabeth Warren, she has really become the the new Bernie Sanders, if you will, and that's not really saying too much, because she's just, you know, over the age of 70 herself. So she's been promoting this this, you know, Bernie plan, essentially, but it's the the Warren version, and it seems even more insane than it was for the Bernie Sanders plan. So how about this max, I'll defer to you being the economist, let's kind of lay the foundation. What is it that that Elizabeth Warren is promoting as her vision for the economy going forward? Right, so

Max Gulker  
So on paper, Sanders and Warren look fairly similar in terms of Medicare for All big green New Deal type of response to climate change, really aggressive anti trust against tech companies, those kinds of things, high taxes, obviously, um, the difference that I see is in overall philosophy, and it's sort of ironic because in terms of rhetoric, Bernie is to the left of Elizabeth Warren. And I think deep down that that bears itself out, I think Bernie would love nothing more than to dismantle the private sector. But he knows he's not going to be able to do it. And he kind of loses interest in it. Whereas Elizabeth Warren wants to run the private sector. And that manifests itself in these conversations, as she's the capitalist, right? She's the, but in the end, I actually think that makes her more dangerous, I think she has a capacity to micromanage and have faith in her ability to do that, that lead is very much in keeping with with being a lawyer, I'll just say that, um, and also, is really just goes against a lot of, you know, the economics that I've learned, which, which say, you can't be telling these firms what to do, you can't be saying, Oh, if you have, you know, one of our plants is accountable capitalism, and she says, if you have over a billion dollars in assets, you have to apply for a special charter, and you have to look out for the interest of all your stakeholders, workers, and in addition to shareholders, in addition to consumers, and, you know, I think those things to people who aren't maybe as well informed, those things sound like, oh, that's common sense.

Brian Nichols  
They sound like nice things. Yeah, they sound like that, oh, this makes sense. Like, she's just trying to make sure that everybody who's, you know, possibly building up this, you know, let's just say a company that they should have, quote, unquote, the fair share that they deserve based on you know, what the company is doing? So I think, you know, when you look at what exactly what she's promoting to the populace, by and large, to them, it makes sense and that they kind of can you feel that that sentiment, I'm almost guaranteed themselves in do their own daily lives?

Max Gulker  
Yeah, I agree. And I think that's what makes her so dangerous, more dangerous than then Bernie in some ways, I think she's more electable. And I think she's more likely to get some of this stuff passed. But when you look at what that stuff is, um, it really has a pretty phenomenal faith in the ability of the government to, to really centrally plan. I mean, let's call it let's call it what it is. Right? It and so. So this is, you know, I'll make no bones about it. This is my least favorite of all of the presidential candidates.

Brian Nichols  
Okay, how about this, let's kind of explain to the audience because it's one thing to say, you know, we are not fans of, you know, the left in general, or we're not fans of Bernie or, or, or Elizabeth Warren, or go down the list of the Democratic presidential candidate. But it really comes down to not just not liking them. And I think that's one thing that people need to realize when they're listening to this episode is that it's not about not liking them. And as we do our Andrew Yang episode, you know, there's a lot of things about Andrew Yang, personally, that I like, and I find endearing. However, when we look at their policies and their principles, when you when you look number number one, a historical context, but also number two, based on that historical context, what it would mean for you a future where these policies are enacted, it yields nothing but destruction. And I don't think people realize that just because something makes you feel good inside doesn't mean it actually is a good policy to to embrace,

Max Gulker  
right. And, you know, we see on both sides of the aisle that, that giving people a good story about who they are, and making them feel good is really, really a path to election, um, you know, in terms of her policies, where should I start? So, so we, one of one of the key contributions to kind of libertarian economic thinking that came from Friedrich Hayek, the, you know, Nobel winning economist, is this idea of information that's out there in the economy. And the idea that that knowledge is dispersed is what he said, Now, what does that mean? It means that you, Brian Nichols, know yourself, your abilities, your wants, your needs, your capabilities, to do various things, and that makes you able to, using all of that information go out and find the most, the people to cooperate with that will, that will create the most value IE, you know, purchasing products, doing work, those kinds of things. Now, if there's somebody centrally kind of moving about that, you know, planning a lot of that economy, right? Think about trying think about that person trying to absorb all of that knowledge from from, you know, hundreds of millions of people and it can't be done. And so you're you're essentially a central planner is essentially blindfolded. And you know, that carries over to not just, you know, the most strict central planning on you know, communism, whatever but it also just in these these kinds of these ideas of, we're gonna have an office that tells you what, you know, that makes a judgment about whether you're looking at for all your stakeholders, or we're gonna issue a blanket rule for everybody that, you know, is going to work way worse for some than others. And, you know, she has I think at my last count 48 plans on her weapons.

Brian Nichols  
Well, she's the one obviously I know she has a plan, right? That's a lot

Max Gulker  
of plans. Yep, that's her thing. And I think to some people that that looks like, Oh, she's doing her homework. She's serious about it. And she obviously is, and she's obviously a formidable, smart person. But I think she really has a very flawed and problematic understanding of the way something as complex as our economy. Well,

Brian Nichols  
you know what, and let me let me jump in here, because this is the part that really makes me uneasy, because I don't know if she is naive, more so that she's manipulative. And she is very calculated what she's doing. Because Elizabeth Warren from 20, some odd years ago, she was seeing a completely different tuna, but she's singing today. And that shows me that she knows better she knows what she's promoting, isn't what it is, like, it's almost like she, she knows what she has to say right now, in order to win the Democratic nomination. And she's She seems very Machiavellian almost max, where she's like, you know, I'm gonna say things that are entirely against what I truly believe. But damn it all, if it gets me into the White House. So be it. And I think that's the most scary part of the entire Elizabeth Warren candidacy is that she she truly is dishonest in what she actually believes. And there's a lot of people in the in the left, who who are not only parroting back what she says. But they're embracing these ideas as truth. Because I mean, when they when they talk about Elizabeth Warren to their friends, like you mentioned, she's the one who has a plan. And that's kind of been what she's been promoting, as you know, her her vision for America is all these plans. So I think there's a really big disconnect in terms of what she's actually promoting, versus what she's actually in the past said she believes. And I think she probably still believes in some way, shape or form.

Max Gulker  
So you know, I think that so for all the lawyers listening out there, we love you don't worry. But she does really bring a mentality to this that reminds me of, in my old career, I did consulting work in big litigation in New York. And I She reminds me of sort of the New York law partners that were my clients in a way. And I think that I, my guess is that in her mind, she is going to save the country, she thinks, and she will do what she needs to do to get elected. And I agree with you that that. I think that that she that she does have sort of a Machiavellian streak. But I think she also, she also sees the economy. So adversarially and that's something that's true of her and Sanders too, right? Just if you listen to her, give speeches or in debates just count the number of times she uses the word fight. Yep, right. Yep, this is all a fight. And that's really miss diagnosing the problem. That's, that's thinking about our economy, like, there's 20 people in it. And if something bad happens, and one of those 20 people must have done something bad. When we have millions of people all interacting with each other, we can get bad outcomes without somebody specifically without somebody to fight. And, and I think that she, at least in the way she talks and the plan she puts forward doesn't really understand that and and there are so many of these plans that we could, you know, break up big tech, she she the other day, she was saying, Oh, Mark Zuckerberg is complaining that I'm an existential threat. It's like, well, you did say you were going to break up his company. Right. So you're kind of an existential threat. But it so the other part of it, the other sort of naivete, if you want to call it or, you know, sort of willful disregard is that that she wants to create so much more of a regulatory apparatus in government that what happens then is that only increases the points of contact between big business and big government. And we know from literally every administration ever that um, that regulators get co opted by, by big companies. And again, that may not be because two people are sitting there in a back room being corrupt and I think that's her vision of it. But rather, it's it's, you know, these people cross paths these people know each other these people went to school together. And and, you know, the more that you have people, you know, this office saying, geez, well, you have over a billion dollars in assets we're gonna give you this specialty charter, you know, those, those little connections and those little moments of pads crossing sort of add up into something a lot larger. And so I think, you know, you could be looking at something, if she implemented a lot of this, that's really, you end up with kind of preferred big companies kind of national champions getting really preferential treatment. And then, you know, I think the worst case scenario of a Warren presidency doesn't even happen with Warren but but happens down the road that she starts us on, which is towards more of this kind of, you know, for lack of a better term state capitalist model that you see in China, or kind of in Russia, or where you have a very powerful centralized government, and they're sort of collaborating with and casting favor to various companies. Yeah, and it's really a short drive from the type of hands on regulation, she wants to that.

Brian Nichols  
So what would you say, Max, just based on your analysis of pretty much all of her, you know, what 3000 plans? What do you find to be like the top three most troubling aspects of her plan? Are there anything that really stuck out for you?

Max Gulker  
Like, this is like the the reverse of desert island? So, so Okay, well, I think three to really point out, are one is the wealth tax. And let me put in a plug for the wonderful work that my colleague Phil Magnus has been doing. And he's like a one man, sort of, like defense force against, against outrageous claims from both the left and the right, and sort of keeping them on sale. And her economists have gone out there. Now she wants to basically say, if you have over a certain amount of wealth, we're going to tax that wealth every year, which is something that's not really ever been tried, at least in the United States. And it's very controversial as to how much money this would raise as to what kind of distortions this would, you know, enter in, you know, imagine if does this make a wealthy person just go out and buy a bunch of nice stealth Fitbit, you know, on April 14, or something like that, but and her economists have, had done some academic work on this, they're there, they run in the same circles as Thomas Piketty who wrote the very famous book about inequality capital in the 21st century. So she's got some people who are also pointed out big flaws in

Brian Nichols  
assessing people on our show, or on our economic team, who I think are also big proponents of the the modern monetary theory to correct me if I'm wrong.

Max Gulker  
No, I think that's more Sanders. Okay. Gotcha. And I think I think her economic team is like one step more mainstream than that. Okay. See where it would look awfully close. Yeah. And no, they're actually even like one step more kind of reading. And then guys like size and Zachman, who who are, but they went out and they did something that you're not supposed to do as an academic, which is they, they went out and estimated what Elizabeth Warren's wealth tax is, what kind of money it's going to raise and some various results about how much money the rich should been paying in taxes. And they went to the New York Times with it, instead of getting it peer reviewed, which is is never a great idea. And because then your your peers are going to review it anyway. And, you know, and Phil has really done a good job of poking some big holes, in the estimates of how much money this is going to raise is going to be great. Um, I wish I had some of his work in front of me right now. But I would say go to our site, and it won't be hard to find. Um, so that wealth tax, I think, is potentially very distortionary. Um, it also, you know, we have to unpack what they mean, when they say, you know, billionaires are rigging the system. This is what we hear all the time. Now, billionaires are rigging the system. Now. Um, you know, how are they rigging the system is my next question. What are they doing? Well, you know, maybe they'll say, Well, they're not paying enough in taxes, they're dodging paying their taxes. Okay, well, let's, you know, make them pay their fair, you know, tax rate that's out there. Okay, fine. So that gives the government more money now, what are you going to do with it? And how does this actually help people who are struggling? And I think there's kind of a chasm there that they need to get over that they haven't, that they haven't been able to. And so, you know, this this kind of anti billionaire rhetoric, I think is sort of potent. I think it actually works in a similar way to on the other side, like Trump's anti immigrant rhetoric. Um, it's sort of this is the other group that I mean, very different groups, but still, this is the other group that is responsible for you struggling right for you. Having problems seeing or scapegoating is one of obviously the oldest boys all day. But, but but again, you kind of peel the layers back and you're left with kind of, you know, okay, there, you know, we that's is this going to do anything other than make the rich poor? And they will sometimes say, well, that's fine in and of itself because these people have so much influence, so we should make them poorer. So they don't have as much influence and I want to be like, I mean, there's, there's 100 things you can say about that, but one of them is just, they're still going to be the richest people in the country. Right? They're still

Brian Nichols  
gonna be influenced, right? And then the question becomes, who's the one getting the influence and it's not going to be the billionaires so much, now, it's gonna be people who are in positions of authority in government, and then government becomes even more so the abuse of power structure that's in place. And now because it has the strong arm of the state behind it, it really has free rein, whereas, you know, for all their their their sins that he may have the billionaires out there have to be responded in some way, shape or form to a market if they want to be able to continue to either a grow their their wealth, or be, you know, secure their wealth. But there there seems to be this disconnect and people that they're looking at the billionaires as being that scapegoat, not realizing that when you're given the power to take down these billionaires just from, you know, on a whim, and you're giving that power to the government is so easily then able to be manipulated to be used to really enforce anything that they see. And that kind of goes to your point about, you know, a scary world 20, maybe 20 years down the road, where we'll end up with Elizabeth Warren opposed Elizabeth Warren presidency.

Max Gulker  
Exactly. And I and, you know, yeah, let's be clear, right? Plenty of billionaires do bad things do corrupt things that nobody is disputing that. What I am disputing is that an administration can sort of scrub that clean without while leaving the rest of the economy in tact where this is all way too interconnected. And so, you know, we have to find better ways, better ways to do that. Let me you know, speaking of speaking of billionaires, we can we can move on to Jeff Bezos and Mark Zuckerberg is, so um, she has a plan, that's something it's called something like we can break up big tech. So we're gonna break up big tech. And this is basically, this is sort of the pet project of a new young group of antitrust attorneys and economists, who are basically saying, you know, for the last several decades, we've been, we've been using something called the consumer harm standard, which says, if two companies are going to merge, or if we're worried about a company's market power, it should be because they have the power to charge, you know, higher prices, monopoly kind of prices, or specifically stifle innovation, or something like that direct harm to consumers. And is that a perfect standard? Of course, that's not a perfect standard, but it is a very sort of tangible standard that that, you know, doesn't allow for too much discretion by antitrust authorities. These folks are saying basically, no, we should be using antitrust powers to make companies do what we want them to do. Right, which is, which is sort of the theme with Senator Warren. And you capitalism is great, as long as everybody does what I wanted to write. Um, and so so they're sort of aggressively going after really Amazon, Google Facebook, to some extent, Apple, almost as kind of poster children for this, this, they're the example theory, and you know, there and you read her plan, and it's vague in some places, and in fairness, you know, these these things are not, you know, 50 page white papers, these are like three page, things intended for, you know, everybody to read on our website. But um, your your, it'll say things like, Well, Google ads and Google Search have to be separated. And they can't share data with each other. And it's, I'm thinking, then how is Google going to make money, there's no sign of races since since what they do is they bring all these people together for their search, that helps the search algorithm because they use the data for that, but that also feeds into the ads. That's how they create value. And, you know, these break up big tech is a really weird idea. Because unlike some of the famous antitrust cases in the past, you know, Ma Bell Standard Oil, that kind of thing. You know, these are high tech companies with platforms that have network effects that right, their value increases as they get bigger. Now, again, that's not to say that these companies aren't raising issues that we should be concerned about and talking about, and that they do have power over our data, the information they give to us, you know, these are things that as a society we need to be talking about and reckoning with personally, I think we need to be informed individual's a lot better about that stuff. And then right then, you know, we can let kind of the evolutionary force of the market takeover. And, and, and, you know, learn things and do things that we wouldn't otherwise know. But, um, but no, instead she's basically written down. Um, you know, this, we need to split this from this from this. And then and then she says, Oh, but you're still going to be able to search on Google and you're still going to be able to, and I'm not entirely convinced that it doesn't lead to, essentially forced Google or somebody like that into a model where you're like, paying them per search or something. You know, and so, so I, you know, I just think that we need to, we need to be very careful. And we need to really watch how things change and evolve and thinking about what, what our response is to these companies. It's not something where I'm going to be like, you know, this is all great. This is all beautiful. But, but but, but sitting there sort of beforehand and chopping them up, sort of forecloses a lot of different directions that they could go in. And with innovation, that's not something weekend's especially not something we want to do.

Brian Nichols  
Well, I mean, Max, all she has to do is just copy and paste the whole thing in her comment section on Facebook that says tonight at midnight, Facebook will take ownership of all my data, almost like copy and paste this text is my status, because he's a boomer. So obviously, you know, that's, that's the smart thing to do. But anyway, so what we're gonna do, folks is we're going to break the analysis of Elizabeth Warren, and enter Yang into two different episodes. So what I want to do is, is kind of leave things here, you know, as we get towards the end this episode, and I'll leave things for max here to kind of conclude what's kind of the biggest takeaway that people should have, as they're examining in Elizabeth Warren, not only just tax plans, but also kind of her vision of how she's going to structure an economy going forward.

Max Gulker  
So we associate with the left economic ideas that are let's charge high taxes, and let's have big government programs. Okay. Yes, that's true of Elizabeth Warren. But it's that and more and you use the word unique in the beginning and I agree, she is fairly unique in what we've seen, in my lifetime, at least in terms of its it's sort of this technocratic on steroids type of thing where, where a lot of her ideas are really oriented towards a sort of micromanagement that I think is particularly dangerous. That gives the presidency a particularly dangerous amount of power that interferes and distorts the signals in our economy more, and she has this very combative attitude to go along with it that that all together I think adds up to I'm not somebody I want to see as president,

Brian Nichols  
right there with Dr. Andrew Wilson until we get to talking about our conversation about Andrew Yang. Thanks very much for joining The Brian Nichols Show again.

Max Gulker  
Absolutely, Brian. Thank you.

Brian Nichols  
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