New America (board chair emeritus Eric Schmidt, President the aptronymic Anne-Marie Slaughter), a nominally center-left Beltway think tank (funding) “took up the mission of designing a new social contract in 2007 and was the first organization [anywhere?] to frame its vision in these terms.” On May 19, 2016, New America sponsored an annual conference (there was no 2017 iteration) entitled “The Next Social Contract.” Elizabeth Warren, presidential contender, was invited to give the opening keynote (transcript, whicn includes video). Warren shared a number of interesting ideas. I will quote portions of her speech, followed by brief commentary, much of it already familiar to NC readers, in an effort to situate her more firmly in the political landscape. But first, let me quote Warren’s opening paragraph:
It is so good to be here with all of you. And yes I will be calling on people. Mostly those of you standing in the back. I always know why people are standing in the back. That’s what teachers do.
Professional-class dominance games aside, it’s evident that Warren is comfortable here. These are her people. And I would urge that, no matter what policy position she might take on the trail, these policies and this program are her “center of gravity,” as it were. Push her left (or, to be fair, right) and, like a bobo doll, she will return to this upright position. So, to the text (all quotes from Warren from the transcript). I’ll start with two blunders, and then move on to more subtle material.
Warren Does Not Understand Uber’s Business Model
Or, in strong form, Warren fell for Uber’s propaganda. Warren says:
Thank you to the New America Foundation for inviting me here today to talk about the gig economy… You know, across the country, new companies are using the Internet to transform the way that Americans work, shop, socialize, vacation, look for love, talk to the doctor, get around, and track down ten‐foot feather boas, which is actually my latest search on Amazon….
These innovations have helped improve our lives in countless ways, reducing inefficiencies and leveraging network effects to help grow our economy. And this is real growth…. The most famous example of this is probably the ride‐sharing platforms in our cities. The taxi cab industry was riddled with monopolies, rents, inefficiencies. Cities limited the number of taxi licenses…
Uber and Lyft, two ride‐sharing platforms came onto the scene about five years ago, radically altered this model, enabling anyone with a smartphone and a car to deliver rides…. The result was more rides, cheaper rides, and shorter wait times.
The ride‐sharing story illustrates the promise of these new businesses. And the dangers. Uber and Lyft fought against local taxi cab rules that kept prices high and limited access to services….
And while their businesses provide workers with greater flexibility, companies like Lyft and Uber have often resisted efforts of those very same workers to try to access a greater share of the wealth that is generated from the work that they do. Their business model is, in part, dependent on extremely low wages for their drivers.
“In part” is doing rather a lot of work, there, even more than “the wealth that is generated,” because as NC readers know, Uber’s business model is critically dependent on massive subsidies from investors, without which it would not exist as a firm. Hubert Horan (November 30, 2016):
Published financial data shows that Uber is losing more money than any startup in history and that its ability to capture customers and drivers from incumbent operators is entirely due to $2 billion in annual investor subsidies. The vast majority of media coverage presumes Uber is following the path of prominent digitally-based startups whose large initial losses transformed into strong profits within a few years.
This presumption is contradicted by Uber’s actual financial results, which show no meaningful margin improvement through 2015 while the limited margin improvements achieved in 2016 can be entirely explained by Uber-imposed cutbacks to driver compensation. It is also contradicted by the fact that Uber lacks the major scale and network economies that allowed digitally-based startups to achieve rapid margin improvement.
As a private company, Uber is not required to publish financial statements, and financial statements disseminated privately are not required to be audited in accordance with generally accepted accounting principles (GAAP) or satisfy the SEC’s reporting standards for public companies.
The financial tables below are based on private financial statements that Uber shared with investors that were published in the financial press on three separate occasions. The first set included data for 2012, 2013 and the first half of 2014… The second set included tables of GAAP profit data for full year 2014 and the first half of 2015; the third set included summary EBITAR contribution data for the first half of 2016.….
[F]or the year ending September 2015, Uber had GAAP losses of $2 billion on revenue of $1.4 billion, a negative 143% profit margin. Thus Uber’s current operations depend on $2 billion in subsidies, funded out of the $13 billion in cash its investors have provided.
Uber passengers were paying only 41% of the actual cost of their trips; Uber was using these massive subsidies to undercut the fares and provide more capacity than the competitors who had to cover 100% of their costs out of passenger fares.
Many other tech startups lost money as they pursued growth and market share, but losses of this magnitude are unprecedented; in its worst-ever four quarters, in 2000, Amazon had a negative 50% margin, losing $1.4 billion on $2.8 billion in revenue, and the company responded by firing more than 15 percent of its workforce. 2015 was Uber’s fifth year of operations; at that point in its history Facebook was achieving 25% profit margins.
Now, in Warren’s defense, it is true that she, on May 19, 2016, could not have had the benefit of Horan’s post at Naked Capitalism, which was published only on November 30, 2016. However, I quoted Horan’s post at length to show the dates: The data was out there; it wasn’t a secret; it only needed a staffer with a some critical thinking skills and a mandate to do the research to come to the same conclusions Horan did, and Uber’s lack of profitabilty, information that is easily accessible, is a ginormous red flag for anybody who takes the idea that Uber “generates wealth” seriously. How is it that the wonkish Warren is recommending policy based on what can only be superficial research in the trade and technical press? Should not the professor have done the reading?
Warren Does Not Understand How Federal Taxation Works
The second blunder. Warren says:
First, make sure that every worker pays into Social Security, as the law has always intended. Right now, it is a challenge for someone who doesn’t have an employer that automatically deducts payroll taxes to pay into Social Security. This can affect both a worker’s ability to qualify for disability insurance after a major [injury], and it can result in much lower retirement benefits. If Social Security is to be fully funded for generations to come, and if all workers are to have adequate benefits, then electronic, automatic, mandatory withholding of payroll taxes must apply to everyone, gig workers, 1099 workers, and hourly employees.
It is laudable that Warren wants to bring all workers in the retirement system. But as NC readers know, Federal taxes do not “pay for” Federal spending, and hence Warren’s thinking that Social Security will be “fully funded” through “payroll taxes” is a nonsense (and also reinforces incredibly destructive neoliberal austerity policies). I will not tediously rehearse MMT’s approach to taxation, but will simply quote a recent tweet from Warren Mosler:
— Heterodox (@mmt_rod) January 17, 2019
And if Mosler isn’t good enough, here’s John Stuart Mill on currency issuers:
“governments…determined to…make a piece of paper issued by them pass for a pound, by merely calling it a pound, and consenting to receive it in payment of the taxes.” – John Stuart Mill, 1848, Principles of Political Economy
— Mathew Forstater (@mattybram) January 17, 2019
Again, is it too much to ask that a professor do the reading? After all, MMT gotten plenty of traction, even in 2016. The Sanders staff, for example, could have been helpful to her.
Warren Supports Medicare for All Only Nominally
As greater wealth is generated by new technology, how can we ensure that the workers who support the economy can actually share in the wealth?
(The idea that workers “support” “the” [whose?] “economy,” instead of driving or being the economy, is interesting, but let that pass.)
Warren then proceeds to lay out a number of policies to answer that question. She says:
Well, I believe we start with one simple principle. All workers, no matter where they work, no matter how they work, no matter when they work, no matter who they work for, whether they pick tomatoes or build rocket ships, all workers should have some basic protections and be able to build some economic security for themselves and their families. No worker should fall through the cracks. And here are some ideas about how to rethink and strengthen the worker’s bargain.
So, she’s not just laying out policy for the gig economy (the occasion of the speech); she’s laying out a social contract (the topic of the speech). Picking through the next sections, here is the material on health care:
We can start by strengthening our safety net so that it catches anyone who has fallen on hard times, whether they have a formal employer or not. And there are three much‐needed changes right off the bat on this.
I hate the very concept of a “safety net.” Why should life be like a tightrope walk? Who wants that, except crazypants neoliberal professors, mostly tenured? She then makes recommendations for three policies, and sums up:
These three, Social Security, catastrophic insurance, and earned leave, create a safety net for income.
Hello? Medical bankruptcy? She then moves on from the “safety net” for income to benefits, which is the aegis under which she places health care:
Now, the second area of change to make is on employee benefits, both for healthcare and retirement. To make them fully portable. They belong to the worker, no matter what company or platform generates the income, they should follow that worker wherever that worker goes. And the corollary to this is that workers without formal employers should have access to the same kinds of benefits that some employees already have.
I want to be clear here. The Affordable Care Act is a big step toward addressing this problem for healthcare. Providing access for workers who don’t have employer‐sponsored coverage and providing a long term structure for portability. We should improve on that structure, enhancing its portability, and reducing the managerial involvement of employers.
Remember, this is a Democratic audience, and what do we get? “Portability,” “access”, and reduced “managerial involvement.” That’s about as weak as tea can possibly get and and not be water, and this is a liberal Democrat audience. (“The same kinds of benefits that some employees already have.” Eeesh.) But wait, you say! This speech is in 2016, and in 2018, Warren supports #MedicareForAll! For example, “Health care: Supports the “Medicare for All” bill led by Bernie Sanders” (PBS, January 17, 2019). But notice how equivocal that support is. Quoting PBS again, Warren “called that approach ‘a goal worth fighting for.'” Rather equivocal! And following the link to that quote, we find it’s from a speech Warren gave to Families USA’s Health Action 2018 Conference. The equivocation is clear:
I endorsed Bernie Sanders’ Medicare for All bill because it lays out a way to give every single person in this country a guarantee of high-quality health care. Everybody is covered. Nobody goes broke because of a medical bill. No more fighting with insurance companies. This is a goal worth fighting for, and I’m in this fight all the way.
There are other approaches as well…I’m glad to see us put different ideas on the table.
So, we have a gesture toward #MedicareForAll. But then, Warren, instead of going straight on into detail about how #MedicareForAll would work (“You get dental!”), immediately backtracks and emits a welter of detail about
minor fixes improvements, on the order of “portability,” “access,” and reduced “managerial involvement.” (Different details from her New America speech, but details still). Then she moves on to Massachusetts. Read this, and it’s clear where Warren’s heart is:
Massachusetts has the highest rate of health insurance coverage in the nation. We are the healthiest state in the nation.
That didn’t just happen because we woke up one morning and discovered that insurance companies had just started offering great coverage at a price everyone could afford.
We demanded that insurance companies live up to their side of the bargain. Every insurer participating in our exchange is required to offer plans with standard, easy-to-compare benefits and low up-front costs for families. Last year, we had the second-lowest premiums in the ACA market of any state in the country. Massachusetts insurers pay out 92% of the dollars they bring in through premiums to cover costs for beneficiaries – not to line their own pockets.
The rules are tough in Massachusetts, but the insurance companies have shown up and done the hard work of covering families in a responsible way. We have more than double the number of insurers participating on our exchanges, compared to the average across the country. They show up, they serve the people of Massachusetts, and they still make plenty of money.
Look, we still have plenty of work to do, particularly when it comes to bring down health spending, but we’re proud of the system we have built in Massachusetts, and I think it shows that good policies can have a real impact on the health and well-being of hard working people across the country.
Never mind that Warren can say, virtually in the same breath, that insurance companies “still make plenty of money” and “we have plenty of work to do… to bring down health care spending.” RomneyCare was the beta version of ObamaCare. We tried it, as a nation, starting in 2009, and here we are. If that’s what Warren wants, fine, but why not simply advocate for it?
Warren Has No Coherent Theory of Change
Except, perhaps, one distinctly slanted toward insiders. “Work hard and play by the rules” is a Clintonite trope, but let’s search on “rules” and see what we come up with. More from the transcript:
But it is policy, rules and regulations, that will determine whether workers have a meaningful opportunity to share in the wealth that is generated.
Here, workers are passive, acted upon by rules, and those who create them. But Warren contradicts herself: “Lyft and Uber have often resisted efforts of those very same workers.” Here, workers are active. But if workers are active in the second context, they are also active in the first! Where does Warren think change comes from? The generous hearts of Uber managment and its
marks investors? More:
Antitrust laws and newly‐created public utilities addressed the new technological revolution’s tendency toward concentration and monopoly, and kept our markets competitive. Rules to prevent cheating and fraud were added to make sure that bad actors in the marketplace couldn’t get a leg up over folks who played by the rules.
Note the lack of agency in “were added.” Warren erases the entire Populist Movement! She also can’t seem to get her head round the idea that workers didn’t necessarily play by the existing ruies in order to create new ones. And:
Workers have a right to expect our government to work for them. To set the basic rules of the game. If this country is to have a strong middle class, then we need the policies that will make that possible. That’s how shared prosperity has been built in the past, and that is our way forward now. Change won’t be easy. But we don’t get what we don’t fight for. And I believe that America’s workers are worth fighting for.
Now, on the one hand, this is great. I, too, believe that “America’s workers are worth fighting for.” What Warren seems to lack, at the visceral level, is the idea that workers should be (self-)empowered to do the fighting (as opposed to having the professional classes pick their fights for them). Here is Warren on unions:
Every worker should have the right to organize, period. Full‐time, part‐time, temp workers, gig workers, contract workers, you bet.
Very good. More:
Those who provide the labor should have the right to bargain as a group with whoever controls the terms of their work….
The idea that workers themselves should control the terms of their work seems to elude Warren. This erases, for example, co-ops. More:
Government is not the only advocate on behalf of workers.
“Not the only?” Like, there are lots of others? This seems a tendentious, not to say naive, view of the role of government. More:
It was workers [here we go], bargaining through their unions [and the qualification], who helped [helped?] introduce retirement benefits, sick pay, overtime, the weekend, and a long list of other benefits, for their members and for all workers across this country. Unions helped build America’s middle class, and unions will help rebuild America’s middle class.
Here, at least, Warren grants workers (partial) agency, but only through the institutional framework of unions. That distorts the history. Granted, “helped introduce” is doing a lot of work, and who they were “helping” isn’t entirely clear, but the history is enormously complicated. (Here again, Warren needs to do the reading.) For example, the history of the weekend long predates unions. And “bargaining through their unions” isn’t the half of it. Take, for example, the Haymarket Affair. From the Illinois Labor History Society:
To understand what happened at Haymarket, it is necessary to go back to the summer of 1884 when the Federation of Organized Trades and Labor Unions, the predecessor of the American Federation of Labor, called for May 1, 1886 to be the beginning of a nationwide movement for the eight-hour day. This wasn’t a particularly radical idea since both Illinois workers and federal employees were supposed to have been covered by an eight-hour day law since 1867. The problem was that the federal government failed to enforce its own law, and in Illinois, employers forced workers to sign waivers of the law as condition of employment.
Fine, “rules.” Which weren’t being obeyed! More from the Illinois Labor History Society:
Monday, May 3, the peaceful scene turned violent when the Chicago police attacked and killed picketing workers at the McCormick Reaper Plant at Western and Blue Island Avenues. This attack by police provoked a protest meeting which was planned for Haymarket Square on the evening of Tuesday, May 4. Very few textbooks provide a thorough explanation of the events that led to Haymarket, nor do they mention that the pro-labor mayor of Chicago, Carter Harrison, gave permission for the meeting…. Most speakers failed to appear…. Instead of the expected 20,000 people, fewer than 2,500 attended…. The Haymarket meeting was almost over and only about two hundred people remained when they were attacked by 176 policemen carrying Winchester repeater rifles. Fielden was speaking; even Lucy and Albert Parsons had left because it was beginning to rain. Then someone, unknown to this day, threw the first dynamite bomb ever used in peacetime history of the United States. The next day martial law was declared, not just in Chicago but throughout the nation. Anti-labor governments around the world used the Chicago incident to crush local union movements.
This is how workers “helped introduce” the eight-hour day.
Yes, America’s workers are “worth fighting for.” But they also fight for themselves, and are fought against! Warren’s theory of change — which seems to involve people of good will “at the table” — cannot give an account of events like Haymarket or why, in the present day, it’s Uber’s drivers who are also the drivers of change, and not benevolent rulemakers. Warren’s views on the social contract are in great contrast to Sanders’ “Not me, us.”
 Warren is far stronger in areas where she has developed academic expertise than in areas where she has not.
 Google is Google, i.e., crapified, but if Warren has retracted or changed her views on Uber, I can’t find it. She was receiving good press for this speech as late as August 2017.
 Oddly, bankruptcy is where Warren made her academic bones. I’m frankly baffled at her lack of full-throated advocacy on this, especially before a friendly audience.
 Warren, by juxtaposition, suggests that Massachusetts’ health insurance coverage causes it to be “the healthiest state in the nation.” This post hoc fallacy ignores, for example, demographics and the social determinants of health.
 Warren focuses on health insurance, not health care. I’m nothing like an expert in the Massachusetts health insurance system. However, looking at this chart, I’m seeing all the usual techniques to deny access to care: Deductibles, co-pays, out-of-network costs, and (naturally) high-deductible plans. Health care should be free at the point of delivery. Why is that so hard to understand?