It shouldn’t come as a surprise to most that Sen. Elizabeth Warren isn’t fond of choice and competition. The Massachusetts Democrat seems to view any successful enterprise with suspicion and regularly uses economic boogeymen and fearmongering to advance her extreme progressive agenda. For example, her Stop Wall Street Looting Act, introduced in 2019, would punish companies for buying other companies with an astounding 100% tax on certain private equity transactions. Far more surprising, however, is that some center-right voices are parroting Warren’s talking points – even if they don’t share her policy agenda.
Whether coming from the right or left, arguments for onerous, top-down management of the economy fail to survive scrutiny, and, if translated to public policy, will only delay an economic recovery. Serious scholars and policymakers from across the ideological spectrum must reject this reckless rhetoric.
In a renewed climate of economic populism and indignation over free markets, it has become more difficult than ever to tell the “right” from the “left.” Take, for instance, the following dismissal of market mechanisms in private equity: “The buying and selling of companies, the mergers and divestments, the hedging and leveraging, are not themselves valuable activity. They invent, create, build, and provide nothing.” This strident dismissal of markets could easily be found in “A Fighting Chance” (written byWarren) or in a Vox article.
But, in fact, the quote comes from American Compass, an organization founded by former Manhattan Institute senior fellow Oren Cass and ostensibly dedicated to a conservative economic agenda.
These left-sounding criticisms of capitalism aren’t confined to erudite policy shops. Conservative media hosts such as Tucker Carlson have also attacked the idea of companies buying other companies, claiming that “vulture capitalism” prioritizes “ruthless economic efficiency” over American households, families, and communities.
These thinkers’ skepticism of market forces is not in doubt. But in contrast to the likes of Warren, “conservative” detractors of the market face a genuine policy dilemma. They can take their skepticism of private equity to its logical conclusion and embrace Warrenesque calls for heavy-handed federal regulation.
Or, they can try to duck the policy implications at the expense of weakening the strength of their criticisms. If company buyouts result in desolate towns, collapsing property values, and the destruction of community (as claimed by Carlson), it stands to reason that something must be done. Right-of-center detractors are a dime a dozen, but these critical voices usually stop short of supporting disastrous pieces of legislation such as the Stop Wall Street Looting Act. Sure, there are some calls for beefed-up anti-trust enforcement, reshoring manufacturing, and having “smarter” regulation. That still doesn’t add up, however, to Warren-style interventionism.
The reason for this odd discrepancy, perhaps, is that the policy prescriptions are far worse than the disease discussed by capitalism’s conservative critics. For example, intellectually serious commentators must grapple with the unintended consequences of 100% transaction taxes, which are bound to fall on workers and consumers caught up in a buyout. One analysis of Warren’s Stop Wall Street Looting Act found that it would result in up to 26 million lost jobs, hundreds of billions of dollars in lost tax revenue, and up to $1.7 billion in lost returns for public pension funds. Similarly, advocates of a friendlier (i.e. not vulture) capitalism are likely to take issue with strict Dodd-Frank regulations which have been anything but friendly toward small banks.
In addition, the optics of conservatives supporting government action are generally abysmal. Take, for example, the recent move by the Labor Department to allow workers holding 401(k)s access to private equity investments. Allowing 401(k) investments into private equity seems like a reasonable policy that allows for greater choice and flexibility in retirement planning, unless you believe that private equity is a large net negative for the economy. Believers in the “coin-flip capitalism” thesis that buyouts can misdirect talent and resources in the economy should logically be opposing this recent regulatory reform, but there’s precious little discussion of policy from conservative critics of private enterprise.
Now, it’s absolutely possible in the future that the populists’ claims will prove correct and buyouts will be destructive. But for now, there’s simply no evidence to support this confident dismissal of buyouts and private equity. In fact, prominent consultancies such as McKinsey & Company suggest that equity has and continues to outperform public markets. If the market’s conservative naysayers so fervently believe the opposite, they should be willing to support Warrenesque “solutions” to these “problems.” Let’s hope that these thinkers come to their senses and reject the tired arguments of the anti-market left.
Ross Marchand is the vice president of policy for the Taxpayers Protection Alliance.