Senators Bernie Sanders and Elizabeth Warren have kicked up quite the commotion within the Democratic Party in the past couple of weeks. I’ve mentioned before how Sanders’ presidential campaign has pushed fellow candidate Hillary Clinton into adopting more substantive promises to the liberal base, particularly when it comes to affordable access to education. More than a few observers have noted how this has stoked the less obvious competition within the Democratic Party over what economic policies the leaders of the party will advance.
That’s just what’s happening within the presidential primary, however, as Elizabeth Warren is similarly galvanizing the Democrats’ economic left in the Senate. Even while Sanders’ defense of reinstating Glass-Steagall regulations on banks has captured the media’s attention, it’s easy to see Warren’s less eye-catching work on those and other issues. In a traditional legislative dynamic, her criticisms and suggestions to the financial industry and the broader economic system both suggest she might block financial deregulation in the Senate and help inspire left-leaning Democrats in the House to directly oppose it.
Beyond opposing a conservative vision for the economy, Warren and like-minded congressional representatives have begun presenting the type of reforms that are anathema for Republicans and distasteful to the more corporate-friendly Democratic circles. She began a speech last week by deflating the calls for lowering corporate taxes, and from there moved to a progressive tax proposal arguing that “revenue generated from corporate taxes is far too low.”
As a part of that, she delivered deeply topical response to the economic conversations being had among both conservatives and centrist Democrats about lowering the taxes collected on international companies to encourage them to remain in or return to the US. As Warren explained, “Fortune500 companies proudly proclaim that they are making record-breaking profits, and then they hire armies of lawyers to make sure they don’t pay taxes on those record-breaking profits.” With Carl Icahn having openly done this, she seems to have a point. She wasn’t kidding about the armies, either, as she noted-
“In just the past ten years, the amount of untaxed, off-shore profit has increased nearly five-fold. In other words, one of the hottest investments in America in the past decade hasn’t been biotech or big oil, it’s been tax lawyers. The money sheltered overseas is now about the same as the combined total earnings of all US corporations in 2013.”
“The Big Short” is, according to Warren, actually the big siphon.
She points out that the push for lowering taxes in the US to be competitive is being driven by other country’s somewhat collective efforts to “shut down tax dodges”. The main companies keeping their money perpetually between countries to avoid taxes in either are looking for a deal competitive with their current set-up that can replace the looming risk of tax litigation.
Centrists like Senator Chuck Schumer (D-NY) and business-centered Republicans like Senator Rob Portman (R-OH) have been happy to offer that kind of a deal, including deemed repatriation (one-time giveaways on sheltered companies that keeps them from paying the full cost of back taxes).
As I’ve noted before, one of the most salient differences between the parties in the coming election appears to be their distinct understandings of economics and capitalism. What Sanders and Warren seem to have done is created that, not only by pushing some centrists like Clinton further to the left, but also by making others like Schumer into obvious examples of the centrist wing, rather than just another Democrat.
It’s become common to argue that the two parties are essentially indistinguishable on economics. It’s true that they are both offering, for the most part, fundamentally modern capitalist economics. That said, the specific prescriptions within that type of economic thought have begun to notably diverge. Their common worldview isn’t as shared as one might suspect.