Elizabeth Warren Interview: Conversations with History; Institute of International Studies, UC Berkeley

Law, Politics, and the Coming Collapse of the Middle Class: Conversation with Elizabeth Warren, Leo Gottlieb Professor of Law, Harvard University; March 8, 2007, by Harry Kreisler

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Law and Politics

So, what does it take to be a lawyer? What are the skills, what is the temperament?

Law is so multifaceted. It's almost like saying, "What does it take to be a college graduate?" Law is an advanced degree in thinking, and the practice of law can mean so many different things. There are lawyers who are transactional lawyers, they put deals together, they're energetic, they're creative, that's how they use what they've got. There are lawyers who are trial lawyers, they're argumentative and aggressive and quick, and that's how they use their talents and energies. There are lawyers who are detail oriented -- watch every last comma, every last period, and see how something fits into this slot and not that slot. There are lawyers who are just good counselors to other people. They understand law but they have that human part that lets them talk. There are lawyers who see the big policy and they want to think about how the laws should be changed or how rules should be changed, and law's the tool that lets them look in those directions. So, there's not only not one answer to that, I don't even think there are ten. Law is for people who want to make changes, at little, tiny levels or great big levels, and they're willing to use words and ideas to make those things happen.

You started in commercial law, that was what your scholarship was in, but then you moved to the public realm. Help us understand how that transition came about. Was it the limits of what the law could achieve that you came to see, and your concern about public issues?

I was happily doing my research, and you know, the nice thing about being a professor is you get to work on whatever issue you want to work on, however you want to do it. So, I did my very first empirical study, looking at the families who were going into bankruptcy, and I teamed up with a sociologist who was a good test design person who taught me an enormous amount, Dr. Terry Sullivan, who's now the provost at the University of Michigan, and we were just baby law professors, and Jay Westbrook, another law professor at the University of Texas, and we put together an empirical study of the families who were going bankrupt.

This was back in the early eighties, and I'll tell you what I set out to prove. I set out to prove they were all a bunch of cheaters. My take on this, my thrust, what I was going to do, is I was going to expose these people who were taking advantage of the rest of us by hauling off to bankruptcy and just charging debts that they really could repay, or who'd been irresponsible in running up debts.

I did the research and the data just took me to a totally different place. These were hardworking middle-class families who by and large had lost jobs, gotten sick, had family breakups, and that's what was driving them over the edge financially. Most of them were in complete economic collapse when they filed for bankruptcy. There was no option to bankruptcy except to just stay deep in debt for the rest of your life; they would never pay these debts off. It changed my vision, but it certainly didn't make me want to talk about it in any public sense. I wrote those academic articles, academic books, full footnotes, that's what it was about, and then in 1994, Congress passed a law saying they were going to have a commission on bankruptcy [staffed by] political appointees. Mike Synar, a congressman from Oklahoma, had just been voted out of office and President Clinton made him the head of the commission. Mike came to me and said, "I want you to be the one who comes up with the ideas -- " (these are not bankruptcy specialists) " -- and guides us through and helps us with the research." I said, "No, not a chance. That's political. I want to be pure. I want to be pristine, I don't want to muddy what I do with political implications. I'm going to sit here, I'm going to do my research. I'll turn out the numbers and what you do with them is your business."

And that's the academic lawyer saying that. Right?

That's right. That was the academic academic lawyer saying, "You go do what you want to do with it."

Mike said, "Come and do this so that we have good ideas to work with, and here's what I promise you: I promise I will totally insulate you from the political part. You will never be called on to talk to a reporter, you'll never be called on to get into a political fight, to make the compromise, to make those decisions. Just feed me the good ideas, feed me the good data. I want three good ideas from you and I'll take them out and sell them in Congress and sell them to my commission." And I said yes, finally. It was a hard decision for me because I really felt like I was jumping into a different pool, I was losing this protection of the ivory tower.

I said yes, that I would do it, but only on the promise that he would keep me insulated. And then he got brain cancer. He died in the space of months, just as we were getting started with this commission, and there were other people on the commission who were perfectly willing to take it over and who, frankly in my view, had a totally wrongheaded view about the families who were in bankruptcy and the changes that needed to be made.

I just looked around and said, look, either I step up or nobody does. These people are going to entirely run this commission and use this commission for what I felt were very harmful ways. And that's when I waded into the thick of it and started taking much of my research and translating it much more into public policy: here's what we need, here's why we need it, here's how it connects up with the policy decisions that we have to make.

Now if you had stayed with just this academic lawyer hat on, and these circumstances hadn't unfolded as they did, what route would your work, whether on the commission or not, have been, changing the wording in these laws, or what? Where does the law take you?

You know, that's the amazing part. The work would have been so sterile by comparison with what it turned out to be. Oh, yeah, I'd have had great ideas for how 11-USC-1326-B-2II should be modified in order to achieve a more harmonious result, but oddly enough, it was wading into the politics and beginning to understand the rest of this world that is what shapes law. It's a law and society point. The political part ultimately enriched my understanding of the scope of the problems. It took me far beyond bankruptcy and much more into questions about what's happening to the middle class. Often, in trying to explain to other people the narrow part, it was other people who would ask me the big questions. "So, why are families in so much debt?" "So, who are these people who are filing for bankruptcy?" Or sometimes it would simply be their allegations of fact. "Well, we know it's just the poor and the profligate." That would cause me to say, "Oh, I've got to go back and study this some more." And so, it enriched and in many ways transformed the work that interested me as a scholar, so I was a scholar but I moved from a one-dimensional scholar into a two-dimensional scholar.

Before we talk about this problem of the middle class, which is the subject of your lecture, I want to explore some of these elements of the political; we've gotten you into the political realm.

One thing that you mention in your book, and actually you just said that your attitude about these people who had gone bankrupt was that it was their fault, that they had failed, that they had been spenders, that they had been whatever negative values we can associate -- that serves a political purpose, to believe that, even if it's correct. Did you begin to put those two things together?

Absolutely. That's how it began to work. I began to see that there were a lot of people who really just didn't care one way of another who the people were who were in bankruptcy. They'd taken a lot of money from the banks and the banks had said, the credit card companies had said, "This is the piece of legislation we want, we find it helpful." Well, in a democratically elected Congress how on earth are you going to pass legislation to benefit two dozen already powerful multi-billion dollar corporations at the expense of all the people who are your constituents? Because this is straight wealth transfer. Is it going to go to the credit card companies or is the money going to stay with these million and a half little families that are filing for bankruptcy every year?

So, they would make these assertions about who these people were, and at first I believed these were assertions made out of ignorance because frankly, I'd made the same assertions ten years earlier, before I'd studied, before I'd worked on this. And so, I'd come in with the data and say, "Well, actually, let me show you how this works," and "Here's a random sample of 1,250 families and here's how they were chosen and here's what we know about them, and look at what happened to them." And people just didn't want to hear it.

Finally, it was senators themselves who said, "Professor, you don't understand. So-and-so over here has taken $300,000 from credit card companies and financial services industry over the last so many years and this is something that industry wants, they hire lobbyists, I see two lobbyists in here a day from the financial services industry to make this happen." And so, the reality of these families' lives had to be reshaped to tell a politically acceptable story. "We need to pass this legislation." All the arrows run the wrong way. Right? It's that the credit card companies wanted a piece of legislation to cut their losses and boost their profits. And so, the story had to be told that this is the fault of these families who are in financial trouble. And you know, I wish that story were true, but the data are not just close on this question, the data are just overwhelming on this question, that that is just simply not the truth.

It's part of a whole larger story of "we don't have to provide health insurance for folks because decent people who worked hard and got an education and therefore got good jobs already have health insurance," and there's an undertone that those who don't have it probably either made the choice not to spend the money on it or have made other bad life choices that caused them to be in a place where they don't get it. If that means they don't get much health service, or they lose their homes if they get sick, it's all their choices, it's all them. I sure don't need to tax myself to build a social safety net for things that may go wrong to any of us because it didn't happen to me, it's their fault. We all have a lot of control over this.

You're talking about narratives, and which narrative dominates. There's some irony here because especially the conservative forces in this country talk about values, they talk about preserving the family, they talk about all sorts of things that would suggest that they would want a narrative like the one that you're telling. But the end result is that the lobbyists and the financing of campaigns lead the politicians to embrace a narrative that is inconsistent with the data, and then pass laws -- and let's point this out -- the laws would then change the rules about the interest rates that would be charged on credit cards. So, it's little pieces of detail that ...

That's right. Very technical, very hard for the popular press to write about. The changes to the bankruptcy bill, to take that example (but there have been other changes) -- the bill was 1,100 pages long of impenetrable text, and it was deliberately written in a way that if you weren't a specialist -- look, I'm a professor of law at Harvard, I've taught this stuff now for more than twenty years. I couldn't read the thing! I had to keep one finger in the statute and one finger on the amendment. And the bill ultimately passed in 2005. I wrote -- adjusted, readjusted my case book, so I've written a book about the changes, and to this day I'm still finding surprises in it. Someone will call me about something and I'll pull the provision out and I'll look at it and I'll say, "Oh, my gosh, when did that one slip in?" This is a case in which literally, the lobbyists wrote the bill. I'm not being metaphoric here. They, in fact, have bragged about it in the American Bankers Association newsletter. The lobbyists wrote the bill, the credit industry paid for it, the campaign contributions then paved the highway for the bill to get passed, and ordinary families just lost out.

Next page: The Two-Income Trap

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