July 22, 2019
On Monday, Senator Elizabeth Warren (D-Ma.) predicted an imminent economic crisis unless President Trump takes immediate action to regulate the financial sector and reduce middle class debt.
“Warning light are flashing,” wrote Warren in a Medium article called “The Economic Crash – And how to stop it”. “Whether it’s this year or next year, the odds of another economic downturn are high – and growing.”
“I see the manufacturing sector is recession,” she continued. “I see a precarious economy that is built on debt – both household debt and corporate debt – and that is vulnerable to shocks. And I see a number of serious shocks on the horizon that could cause our economy’s shaky foundation to crumble.”
Warren has proposed student debt forgiveness and implenting her “Green Manufacturing Plan” which would empower unions, inculde universal child care, and increase the minimum wage to $15 an hour.
Under President Trump, the economy has been hitting record highs with unemployment levels at a nearly 50-year low and the Dow Jones breaking 27,000 for the first time. The majority of Americans view the economy as “good” or “excellent,” and according to Gallup, the job market is strong.
But Warren has suggested that the economy is not as good as the President says it is.
“The overall numbers about GDP or the stock market are great but they don’t reflect the lived experiences of most Americans,” she said. “Go around a room like this. For most people, wages haven’t gone up in a generation and yet the cost of housing, the cost of health care, the cost of childcare, the cost of sending a kid to college have all gone through the roof. The middle class squeeze is real and it has gotten tougher for people over the last few years.”
Warren says she found similar signs before the 2008 financial troubles.
“And when I saw the seeds of the 2008 crisis growing, I rang the alarm as loud as I could,” she wrote. “But the people with the power to stop the crisis didn’t listen – not enough of them anyway. Not hte banks, not Alan Greenspan or other federal regulators, not Congress.”
Warren noted that the highest area of potential risk wasn’t housing and mortgages but leveraged corporate loans to companies with high debt.
“The high-risk loans now make up a quarter of all American business loans, and they look a lot like the pre-2008 subprime mortgages: poorly underwritten loans with minimal protections that are then packaged and sold to investors,” Warren wrote.
“The country’s economic foundation is fragile,” she wrote. “A single shock could bring it all down. And the Trump Administration’s reckless behavior is increasing the odds of just such a shock.”
“I’m seeing serious warning signs in the economy again – and I’m calling on regulators and Congress to act before another crisis costs America’s families their homes, jobs, and savings.”
– MK. II