Over the span of many years, Senator Elizabeth Warrens books have shifted in content and tone from thoughtful and well-researched to rhetorical and boilerplate. Also notable is that her faith in government coexists with her profound and wide-ranging pessimism about how government works in practice.
When one of my sons does something unexpected, I like to joke: Who are
you, and what have you done with my son? After reading Elizabeth
Warrens three books on politics, I had the same question about her.
Warren has had a prolific writing career, including many journal articles and
academic books on her most relevant research interests in bankruptcy law and personal
finance. Her first overtly political book, The Two-Income Trap: Why Middle-Class
Mothers and Fathers Are Going Broke (New York: Perseus, 2003), coauthored with
her daughter, Amelia Warren Tyagi, is moderate politically and even conservative
socially. Beyond that, some of her arguments on public-policy consequences are so well
reasoned that it brings a tear to an economists eye. But, really, the book seems like the
sort of thing youd expect from an academicthorough work, thoughtful analysis, and
With her newfound influence and fame, Warren became a politiciana senator
and now a candidate for president. Thats not necessarily a problem. One would hope
that she would bring the best of her academic background to her new career. Unfortunately,
she has turned over a new leaf. The second and third books are a combination
of biography and political rhetoricwith notably little of the impressive
analysis she displayed in the first book. And her political career can be summarized as a stunning example of hypocrisy against her first book that I share toward the end of this
Murphys Law, Playing by the Rules, and Financial Woes
Warrens thesis in The Two-Income Trap (TT) is that when financial troubles come, life
often falls apart for average people who play by the rules. If they dont have enough
money saved, they may not have the margin to get through the difficulty. They cant
make payments; they borrow money; and they dig a hole that often ends up in
If people live responsibly, then we hope that such occasions are rare and anecdotal
rather than all too common and part of a trend. Of course, one can reasonably quibble
with Warren by noting that a refusal to save enough money to deal with common
problems is not exactly living responsibly or playing by the rules of the game of
lifeas life really works.
Warrens concerns, interests, and questions follow naturally from her research and
her assessment of the problems: Can the catalysts for financial trouble be mitigated
through public policy? Should we use policy to restrict those who lend money to people,
especially people in distress? And how can we encourage people to handle their personal
finances more effectively?
If people are struggling with debt, it can only be an income or spending problem.
Household incomes are generally higher, so there must be more spending, too. The title
of the relevant chapter is The Over-consumption Myth. But the myth is true, by
definition. People in debt have necessarily overconsumedspent more than they have.
What she really means is that the spending is not frivolous. (In a later chapter, Warren
provides evidence that the problem is not a greater reluctance to pay ones billsa drop
in morality that might lead people to renege on debts.)
Warren presents data on changes in spending over time and reports that the bulk of
the increased spending comes from housing. Houses are not much fancier, but they are
bigger. That said, a larger issue is what Warren rightly (and impressively) sees as the
connection between housing values, school quality, and neighborhood safety (TT, pp.
25, 28). This leads her to advocate greatly expanded school choicevouchers, charters,
and so onto break the link between housing and schools.
More spending and more income could leave budgets in the same place, on net.
But Warren notes the growing prevalence of two working parents. And if trouble
comesfor example, from job loss or health problems or bothfamilies have less
flexibility to fix their income or adjust their spending. (Warrens parents used this
approach when her father struggled with health issues and the job market, and her
mother slid into the workforce to help out.)
One of the ironies with housing is that it is not a frivolous cost. And as a fixed cost
in ones budget, it creates much more strain if household income is compromised. Housing is often sold as a responsible purchase, an investment, a middle-class ideal. But
with income troubles, the monthly cost of housing can be an albatross to a strained
Warren also notes other concerns. The problems increase with the instabilities of
divorce and cohabitationboth of which have become far more prevalent. If two
parents are working, its at least twice as likely that one will lose a job. And if labor
markets have more churn than in past decades, the likelihood of trouble increases
further. As such, Warren laments the two-income trap of both parents working. Shes
careful to say that this lament is not opposition to women working per se. But the
implication is that the second spouse workingusually the womandoes create much
of the problem at hand. (On women entering the labor force, Warren critiques the Left
and the Rightthe Left for assuming that it is all benefit and no cost; the Right for
underestimating the value of women at home [TT, p. 67].)
So Warren makes a compelling case that our approach to life has changed, creating
more potential for budget troubles. One implication is the need for a different, moredisciplined
approach to personal financesomething that gets a full chapter in The Two-Income Trap and a separate (nonpolitical) book from her on the topic: All Your Worth:
The Ultimate Lifetime Money Plan, with Amelia Warren Tyagi (New York: Simon and
Schuster, 2005). As an aside, its probably worth noting that these increasing woes with
personal finance have led to the popularity of Dave Ramsey and other gurus who have
stepped into this vacuum to help people handle their personal finances more wisely.
Warrens Policy Prescriptions in 2003
In terms of policy, Warrens prescriptions in The Two-Income Trap are moderate and
rather mildespecially when compared with her later two books and her proposals as a
candidate for president. This policy modesty stemmed from her relatively impressive
understanding of how markets work.
In trying to address higher housing prices, Warren critiques a usual liberal approach
such as price ceilings: We dont think the solution lies with such complex
regulations. Indeed, any effort to eliminate the fundamental forces of supply and
demand with such artificial constraints might actually worsen the situation by diminishing
the incentive to build new houses or improve older ones (TT, p. 33). Sounds
like a candidate to teach Principles of Microeconomics!
Warren continues: Nor would we argue for outright government subsidies. . . .
America simply cannot afford mass subsidies for its middle class to buy housing. Besides,
direct subsidies are likely to add more ammunition to the already ruinous bidding wars,
ultimately driving home prices even higher (TT, p. 33). She clearly understands how
subsidies distort markets and inflate prices.
Warren argues instead that we should change how schools are funded. In order to
free families from [the two-income] trap, it is necessary to go to the heart of the problem: public education. Bad schools impose indirectbut hugecosts on millions
of middle-class families. . . . The only way to take pressure off these families is to change
the schools (TT, p. 33). From there, she advocates vouchers so that tax dollars would
follow the children; she notes the need to have larger vouchers for those with disabilities;
and she wants to extend this approach into preschool (TT, pp. 35, 121).
Warren notes the claim that vouchers drain off funds but argues against it:
[T]he public-versus-private competition misses the central point. The problem is not
vouchers; the problem is [a lack of] parental choice (TT, p. 34). She acknowledges that
an all-voucher system would be a shock to the educational system, but the shakeout
might be just what the system needs (TT, p. 36). She respects the central role of choice
and competition to well-functioning markets for the benefit of consumers and society.
Warren makes similar arguments to critique subsidies for day care proposed by
some on the left. It is time for a hard look at this sacred cow. How much help would
subsidized day care really offer to middle-class families? . . . The long-term financial
implications aremore complex. . . . [N]o help for familieswith a stay-at-homemother . . .
create[s] yet another comparative disadvantage for single-income families trying to
compete in the marketplace. . . . In effect, government-subsidized daycare would add
one more indirect pressure on others to join the workforce (TT, pp. 3940). Again, she
exhibits a sophisticated understanding of why subsidies cause so much damage.
Warrens prescriptions are not universally impressive, though, and her understanding
of markets is not always so sharp. She advocates subsidized child care for single
parents (TT, pp. 122), despite the inherent incentive problems that would likely increase
the prevalence of single parenthood. She complains about inflation in higher education
(TT, p. 45), but she relies on sticker price (rather than tuition paid)a common
error. She sees an increase in demand for college but imagines that supply is somehow
fixed, leading to higher prices. And although she is clearly aware of the impact of
subsidies in other areas, she doesnt seem to see it here. (Or maybe she doesnt mind
subsidies in her own industry!)
More debatable but still reasonable: Warren advocates reform and expansion of
federal long-term disability insurance (TT, p. 9294). She also advocates subsidies for all
middle-class savings, phasing out with higher incomes (TT, pp. 6970). She doesnt
address sales taxes of various sorts, which would accomplish similar goals. But, to be fair,
the better versions of fair-tax legislation were not available until after her first book
Warren also doesnt understand the level of competition in bankingor the
connections between risk and rate of return (TT, pp. 129, 146, 148). If borrowers seem
to present more risk, lenders will (reasonably) charge them higher rates. Moreover, she
doesnt seem to catch the role of the government in distorting financial markets and
causing trouble for consumers and taxpayerswhether Fannie Mae in general (TT, pp.
133, 159) or efforts to sell homes to disadvantaged minority groups in particular (TT,
Finally, Warrens level of trust toward consumers, in particular the poor and certain
minority groups, is not very high. They didnt know they could do any better (TT, p.
135). The market hits minority homeowners with particular force, especially African
Americans and Hispanics (TT, pp. 136, 146, 147, 159). And she doesnt seeor
doesnt mindthe reduction in lending for homes and credit to the same minority
groups that would be caused by her proposed regulations (TT, pp. 147, 149).
Warren, Politics, and the Fight
Unfortunately, most of the impressive things about Warren went out the proverbial
window when she became a politician. Its easy to see when you compare The Two-Income
Trap to her other two political books: A Fighting Chance (FC) (New York: Holt, 2014)
and This Fight Is Our Fight: The Battle to Save Americas Middle Class (FF) (New York:
Holt, 2017). The two later books are as different from the first as they are similar to each
other. Fighting Chance is more biography, and This Fight is more about policy advocacy.
Warrens biographical information has always ranged from common (her
Oklahoma, lower-middle-class roots) to elite (a lawyer teaching at Harvard) to
famously strange (claiming a Native American background [FC, pp. 23940] and
ancestry [FF, p. 224]). And there has been controversy about her claim that she
was fired after getting pregnant. The principal did what I think a lot of principals did
back thenwished me good luck, didnt ask me back for the next school year, and
hired someone else for the job (FC, p. 14).
Both of the recent books move toward rhetoric and boilerplate. Her posturing and
rhetoric are probably par for an unfortunate course in politics. In both books, [t]he
game is rigged is a favored phrase for how to think about government (FC, pp. 2, 3; FF,
p. 59). She wants corporations and the wealthy to pay a little more (FC, p. 215). She
claims to be worried about loopholes but has only criticism for the tax reforms of the
1980s (FF, pp. 114, 116). She describes the Koch brothers as ultraconservative rather
than libertarian (FF, pp. 16162).
Warren gets particularly exorcised in the more recent book when talking about
President Donald Trump. She asserts that the election of Trump would deliver one
more body blow to so many working families. . . . [L]ife [is] about to get a whole lot
tougher (FF, p. 3). The middle class was already on its knees. . . . Trump could be the
punch that knocked out everyones lights and changed our country forever. . . . Trump
seemed determined to crush the last vestiges of hope (FF, p. 215). Warrens hyperbole
is strange for an academic and disturbing for a politician.
Warrens New Policy Positions
Posturing is a problem, but policy is more important. Both of the recent books move far
away from careful analysis, ignoring the economic cause and effect she identifies so ably in her first book. And her policy prescriptions have flipped, evolved, and grown appendages.
New policy preferences have emerged that seem unrelated to her expertise,
her previous views, or anything aside from what looks like a crass grab for political
power. She now emphasizes spending on infrastructure and research and is a fan of
unions (FC, p. 2; FF, pp. 102, 104). And a higher minimum wage is somehow the first
policy she discusses in her crusade to save Americas middle class (FF, pp. 710).
Other policy positions have evolved or flippedwithout analysis or explanation for
the changed views. In education, she had formerly emphasized school choice and local/state funding. But now theres no mention of choice, and her funding ideas are centralized
and federal (FF, pp. 4, 100). She applauds the GI Bills vouchers for college, but her avid
support for K12 vouchers has disappeared (FF, p. 100). She opposed broad subsidies but
now wants vast subsidies for collegepast, present, and future (FC, p. 2; FF, p. 100).
The flips go beyond education. She now advocates subsidies for child care. She
complains about food stamps as a subsidy to Walmartripping Walmart instead of the
subsidies (FF, pp. 2425). She understood the problems with price ceilings on housing but
then misses that the Affordable Care Act caused trouble with low wages and unpredictable
schedules (FF, p. 28). And her sense of cause and effect has changed: from women voluntarily
joining the workforce out of newfound cultural freedom and economic opportunity
to the coercion of growing financial pressure [to send] everyone to work (FF, pp. 3031).
To her credit, Warren lays out an implicit critique of President Barack Obamas
economic record (FF, p. 17). She doesnt mention his historically tepid economic
recovery, but she doesnt embrace the common Democrat hypocrisy of lauding
Obamas strong stock market with his rough economya record that would have been
roundly criticized by the same folks if the president had been Republican.
Given Warrens research on consumer debt and predatory finance, one can
discern an evolution toward populism, distrust of corporations, concern about market
outcomes, and faith in government solutionsall in that same arena. One can recognize
how she has too little cynicism about government regulation, given her exaggerated
sense of its benefits and a diminished sense of its costs.
Warren cites Franklin Roosevelts efforts to pass laws to make the economy safer
(FF, p. 68). She imagines him as an antitrust maven, artificially elevating the value of
regulation (FF, p. 71). She complains about market consolidation, while missing the
necessary impact of greater regulations on economies of scale and greater market
concentration (FF, p. 88). She also misses the greater competition today because of
greatly reduced transaction costs.
Given her simplistic and erroneous views on macroeconomics and macroeconomic
history, one can understand how Warren could be too optimistic about government
activism. She claims that investments in research have an immediate multiplier of 2.2
on the economy (FF, p. 132). So, of course, more government spending there would be
a glorious thing (FF, p. 82)! Warren seems unaware of the trouble caused by the Feds
inflation from the 1960s into the early 1980sfor the economy in general and for
savings and loans in particular.
Warrens views on the Great Depression are even worse. She applauds FDRs
policy experimentation, although the results of the New Deal were lousy, and the
experiments served to increase uncertainty in already-fragile markets (FF, p. 67). She
argues that the government passed strong laws during the Great Depression to help
consumers and producers, without explaining how wage-and-price floors could possibly
serve both of those masters (FF, p. 72). She conveniently skips through the length of
FDRs Great Depression to reach World War II as the solution (FF, p. 74). (See Amity
Shlaes, The Forgotten Man: A New History of the Great Depression [New York: Harper
Collins, 2007], for critiques of these claims.)
Warren sums up her view of macroeconomic activism and government regulation
with a simple graph (FF, p. 92)showing how everything was peaches and cream
between the Great Depression of 1929 and the Great Recession of 2007, both of which
were supposedly caused by deregulation.
Warren concludes: Im a deeply pro-market person. I believe that competition
delivers great value for American consumers. Thats why I also believe in enough
regulations to keep those markets honest (FF, p. 149). The good news: Warren is promarket
rather than the pro-business of crony capitalism. But she ends up in elitism
and a strain of progressivism, advocating heavy doses of regulation because she believes
in competition but not companies or consumers.
She offers reasonable stories for some of her policy evolution, I suppose. But none
of them explain her newfound, broad excitement about government subsidiesin the
face of the impressive understanding she exhibited in The Two-Income Trap. Beyond
grand plans that cant possibly be financed through wealth and income taxes, her recent
and avid embrace of wide-ranging and extensive subsidiesfor college, student-loan
forgiveness, child care, and health caremakes no sense and has no apparent cause.
Why Does Warren Have so Much Faith in Government?
The other strange thing about Warren is that her faith in government coexists with her
profound and wide-ranging pessimism about how government works in practice. In all
of her books, she frequently complains about how government functionswhether
through cronyism or ineptitude from politicians and bureaucrats to expert witnesses,
lobbyists, and lawyers. At the end of the day, this combination of faith and skepticism
may be the most difficult thing to reconcile about her views because she repeatedly
provides compelling reasons why she (and we) should not trust government.
She worries about a new financial bureaucracy being run by Tim Geithner,
someone she sees as a political hack (FC, p. 185). She notes that a small mistake in
writing successful legislation led to huge problems (FC, p. 175). She complains about
the government making huge profits in student loans (FF, pp. 12127). She informs
readers about cromnibusthe combination of continuing resolutions and giant
omnibus spending bills that Congress uses to inefficiently fund government spending (FF, p. 152). And she critiques expert witnesses in lobbying (FF, p. 193). That said,
Warren nevertheless seems comfortable knowing which experts she can trustfor
example, on climate change (FF, p. 199)!
In a word, shes well aware of the perils of governmentfrom incompetence to
crony capitalism. But she also believes that she can harness government to her liking and
doesnt trust the market left to its own devices. Peter Suderman probably understands
her political philosophy best: The economy is fundamentally fixablebut only if
Elizabeth Warren is manipulating all the levels of power (Elizabeth Warrens Plans
Dont Add Up,Reason, October 2019).
On Political Animals
So heres the most amazing story in Warrens books. She cut her teeth in academics,
advocacy, politics, and second-tier fame through her work in bankruptcy law. And for
what might seem like a dry topic, the narrative is a relatively compelling read: the
research findings, the policy implications, invitations to meet with powerful people
and to testify in front of Congress, the opposing lobbyists and various political
The highlight is Warrens opportunity to meet with First Lady Hillary Clinton.
Warren and her colleagues had come up with a good bankruptcy bill, but it had been
supplanted by a bad bill brought forward by industry lobbyists. Congress and
President Bill Clinton supported the latter bill. But Warren got the opportunity to talk
with Hillary in May 1998 after Hillary saw Warrens op-ed in the New York Times.
Warren was really impressed by Hillary: She ate fast and asked questions even
faster. I have taught bankruptcy law to thousands of studentssome of them among
the brightest in the countrybut I never saw one like Mrs. Clinton. Impatient,
lightning-quick, interested in all the nuances (TT, p. 124). And apparently open to
reason: Warren persuaded Hillary, and then Hillary persuaded Bill to veto the bill when
it finally got to his desk in October 2000.
Thats heady stuff and high dramaat least for a piece of legislation. But heres the
kicker: the bad bill was reintroduced in Congress the next spring. This time,
freshman Senator Hillary Clinton voted in favor of [that] bill. . . . The bill was essentially
the same but Hillary Rodham Clinton was not. . . . Her husband was a lame duck at the
time he vetoed the bill; he could afford to forgo future campaign contributions. As New
Yorks newest senator, however, it seems that Hillary Clinton could not afford such a
principled position (TT, pp. 12526).
Warren isnt done; she brings up the story again thirty pages later: Senator Hillary
Clinton bowed to big business. She had her chance to vote on what she had called that
awful bill. . . . Senator Clinton had taken $140,000 in campaign contributions from
the banking industry, and she proved willing to overcome her strong reservations
about the bill (TT, p. 156).
Eleven years later, Warren tells the story again in A Fighting Chance. This time, she
shares Hillarys role in persuading Bill to veto the bill but does not mention Hillarys
affirmative vote for the same bill in 2001 (FC, pp. 6566). Of course, now that Warren
is a senator, especially if she has even higher aspirations than she did in 2014, her
redacted retelling is a smart political move. But her new narrative is also indicative of her
emergence as a political animal.
We have seen her amazing flips on public policy: from one who knew better and
opposed to someone who pretends not to know better and supports. The hypocrisy is
stunning in any case, but especially because she crushed Hillary for the exact same
moveand Warrens own sins in this regard are far worse.
Fight the Power
One gets the sense that Bernie Sanders doesnt know any better. Hes not thoughtful
enough to understand how much he overstates governments ability, disciplined
enough to lay out the costs of his grand proposals, or self-reflective enough to catch the
irony of his own capitalistic practices. But based on her first book, it is patently clear that
ElizabethWarren does understand. And thats probably more troubling. Ignorance with
self-righteousness is one thing. Knowing better and then arguing otherwise is a different
sort of evil.
So what happened to Warren? My best guessand, I think, the most gracious
interpretation of her hypocritical flipsis that the fight became everything. And so
principles, wisdom, and insight became the casualties. The ends slowly began to justify
the means. Maybe losing the bankruptcy war to Hillary and the lobbyists embittered
her. Or maybe subsidizing the wrong peoplethrough the Troubled Asset Relief
Program and banks that were too big to failsent her over the edge. In any case, the
cause made it acceptable to strive for power.
We must hope that Warren will not get to force her preferred version of society and
her hypocrisies on others and that she will learn that there are things much more
important than the fight. When the ends justify the means, its never ultimately good
for those who misunderstand or those they try to influence and control.
D. Eric Schansberg is professor of economics in the School of Business at Indiana University Southeast.