Let's Choose Economic Growth Over the Rule of Sen. Warren
For progressive judges and politicians - the Occupy-Wall-Street-Movement advocates - capitalism and commerce are the bogeymen. Free enterprise is unfair. The facts are for losers and the Rule of Law can be - indeed, must be - clarified or re-interpreted because business rewards some at the expense of others.
Progressives make their policy arguments in moral terms. They believe that government is best and most trustworthy to manage our economic lives. For these reasons, progressives seek to control negative externalities - what they consider market failures - with government action. So, if they determine capitalism hurts the poor and favors the wealthy, progressives then have the moral obligation to change the rules.
To achieve their political goals, the Left's preference is to use the power of the State. A court, for instance, will reconsider 75 years of black letter law to establish, what the Left considers, a more equitable outcome. Such is the case with an activist judge on the Federal District Court who nullified seven decades of settled law and business practices. Judge Shira Scheindlin has determined that the Trust Indenture Act (TIA) of 1939 does not mean what it clearly expresses in its text.
Most people are unaware of the TIA, however it is the underlying statute governing the rules for bond markets. It provides the structure for bondholders and debtors to negotiate obligations should business and market conditions change. Key to this structure is the TIA's provision that a majority must rule in negotiations to reorganize debt arrangements. TIA's majority rule requirement typifies corporate stewardship and protects against a minority interest from holding a negotiation hostage. It was enacted to protect investors and was designed to prevent abuses. The TIA was also meant to protect holders of minority positions from insiders of a company who may acquire majority positions.
Judge Shira Scheindlin has issued a ruling in direct contradiction to the law's meaning. The judge declared that there must be unanimity among bondholders before a debt can be restructured. Long-established, effective rules have been dismissed on an ideological whim of judicial activism. This decision, if left to stand, will invite financial havoc to the bond market. In other words, a single judge with a history of putting preferred outcomes over the Rule of Law is threatening our economic security.
If unchecked, such moral and legal relativism will lead us to what T.S. Eliot called "an age which advances progressively backwards." Whereas the Left has claimed the moral high ground when it comes to the economy, free-market advocates must recapture that ground.
As social scientist Charles Murray has articulated, everywhere that free enterprise takes hold, national wealth increases and poverty declines. Everywhere that capitalism is rejected, people remain impoverished and poverty increases. However, the Judge Scheindlin ruling overturns decades of an unchallenged, valuable market practice - in practical terms it's a repudiation of capitalism. The result will be market mayhem which in turn will stifle economic growth. The long-term impact will be that economic inequality increases.
Some in Congress are attempting to undo the damage done by the Federal District Court. However, Senator Elizabeth Warren (D-MA) is leveraging her power and her celebrity to derail the fix. Just this week a group of professors "spontaneously" circulated a letter to the House and Senate Leadership opposing Congressional action on the Trust Indenture Act. Professor Adam Leviton, the lead signer, failed to acknowledge that he was her student from 2002-2005 at Harvard. And at least half a dozen of the other signers, like Prof. Leviton, are listed on FEC reports as contributors to Warren's Senate campaign.
Senator Warren rose to power and fame in Washington in the 2000s as an anti-market advocate focused on income inequality. Warren earned praise from progressives and the mainstream media for her criticism of America's financial sector, and her conviction that government was being hijacked by Wall Street. Among academics and Statists, she's become a policy pop-star for making it vogue to challenge and correct the negative outcomes of a market economy. Warren was anti-free market before it was cool, before Bernie "Bern Baby Bern" Sanders ran for President and Hillary flipped flopped and flipped back again on her Wall Street friends.
If Senator Warren gets her way on the TIA, the economy will continue to sputter, and sustained weak economic growth means an end of the opportunity society in America. The stakes are that high. Weak economic growth disproportionately hurts the poor - those in most need for new economic opportunities, and those the Left claims to champion.
Unless the TIA is fixed, activists will use the new regime created by the Court to disrupt the market in ways that will sacrifice growth and opportunity for a political agenda. The legislative fix being considered, what Warren and her Occupy allies seek to block, is the Solvency and Restructuring Efficiency Act of 2015. The proposal is simple. Restore the market rules that have effectively worked for 75 years.
The Congress must reject Senator Warren's attempts to "advance progressively backwards." Let's choose economic growth and opportunity over continued decline and economic uncertainty.