In my most recent Daily Beast column, I wrote that Sen. Elizabeth Warren, the Massachusetts Democrat who is the darling of progressives, was right to be pissed at the way in which last-minute changes were stuck into the #CRomnibus budget bill that covers discretionary spending by the federal government for the rest of fiscal year 2015.
Indeed, Congress and the president should be more roundly assailed for failing to follow regular budget procedures for years now. It's a failure of leadership that implicates both parties and leads precisely to the sort of stupid actions and priorities that we have now come to tolerate and expect from our politicians.
At the same time, Warren is wrong to be surprised that the ostensible goals of regulation, especially regulation as wrongly conceived as Dodd-Frank, are routinely undermined by the very industries and interests they are supposed to rein in.
How naive can a person be? If you're Elizabeth Warren, the answer is endlessly. Earlier this year, for instance, she colored herself aghast that Dodd-Frank, a truly gargantuan pile of words championed by Barack Obama and a Democratically controlled Congress, wasn't working out so well, especially when it came to dispersing concentration in the financial sector. "The four largest banks are nearly 40 percent bigger today than they were just five years ago," she observed. "These banks…are a whole lot bigger now than they were when we bailed them out in 2008 because they were too big to fail."…
Recognizing the dynamics of regulatory capture or ineffectiveness needn't lead to policy nihilism or chaos. That's especially true when it comes to markets, which are extremely good at squeezing out firms and businesses that deserve their comeuppance. The best thing the government can do when it comes to the concerns of Warren and other progressives is step down rather than step up. You want less concentration in banking—at least the type that will screw the little guy and imperil the economy? Then make it clear that there will be no bailouts, not that there will be bailouts up to this or that size.
Given the ubiquity of cronyism on both sides of the aisle, it's no easy task to say that there will be no bailouts, of course. And given the ubiquity of subsidies to favored industries or favored firms within certain industries, it's not easy to even start zeroing out government-rigged favoritism. But if policy is any way tied to intellectual clarity going in, Warren and other progressives and liberals would do well to ponder not just the stated purposes of regulatory policy but its actual outcomes and its ignominious history as a tool of the well-connected.
Related: Back in 2009, Reason TV interviewed George Mason University's Todd Zywicki about Elizabeth Warren's plan for a Consumer Financial Protection Agency. Take a look: