All federal lending will accept this credit agency and require that this agency be used. This includes, but would not be limited to federal home lending, PLUS loans (parent loans backed by the U.S. government), other loans that are guaranteed by the U.S. government, as well as any employment through federal agencies or for federal contracts.
The private agencies will also be required to provide their data to the federal credit agency.
The federal credit agency will also ensure the algorithms used for credit scoring don’t have discriminatory impacts, including accepting non-traditional sources of data like rental history and utility bills to ensure credit.12
Are credit algorithms discriminatory if they don’t yield the financial results the Biden-Sanders team wants?
In July, Jaret Seiberg of the Cowen Washington Research Group reported: “Democrats are advancing a financial policy agenda that is heavy on social justice and reversing years of discrimination.” He added that this “will make it harder to stop these policies” because opponents “may fear being labeled as racist.”
If Biden wins, Senator Elizabeth Warren of Massachusetts “will have enormous policy influence even if she stays in the Senate,” says Seiberg.13 This likely means new federal regulation of all large corporations, not just financial firms. Today businesses are created under state law. But in an August 2018 op-ed in the Wall Street Journal, Senator Warren introduced a plan to require all corporations with more than $1 billion in annual revenue to get a federal corporate charter. “The new charter requires corporate directors to consider the interests of all major corporate stakeholders—not only shareholders—in company decisions,” wrote Senator Warren.14
“Stakeholders” are people who don’t actually own the business but would like to have a say in how it is run. Senator Warren claims that running a business for the actual owners shortchanges workers, customers, and the surrounding community. But of course people who run companies already know they won’t be in business very long if they alienate everyone on whom their businesses rely. Serving the long-term interests of shareholders necessarily requires executives to attract and retain a talented workforce, to provide good value for consumers, to deal fairly with suppliers, and to respect the laws and customs wherever a business operates.
Typically the alleged responsibilities of a company to its “stakeholders” who don’t own stakes in the business are defined vaguely and often intended to get businesses to push policies that voters have declined to endorse. “The discussions of the ‘social responsibilities of business’ are notable for their analytical looseness and lack of rigor,” wrote Milton Friedman in 1970. “… The first step toward clarity in examining the doctrine of the social responsibility of business is to ask precisely what it implies for whom.”15
The future Nobel Prize–winning economist elaborated: “What does it mean to say that the corporate executive has a ‘social responsibility’ in his capacity as businessman? If this statement is not pure rhetoric, it must mean that he is to act in some way that is not in the interest of his employers. For example… that he is to make expenditures on reducing pollution beyond the amount that is in the best interests of the corporation or that is required by law in order to contribute to the social objective of improving the environment.”16
The idea of corporate “stakeholders” who don’t have a direct stake in the business has been popular for some years at many companies, and various nonprofit organizations are eager to wield influence over other people’s property. But given that they are neither owners of the business, nor elected officials, nor regulators, why should such organizations be elevated to the level of the consumer or employee?
Such organizations may soon be given much more power, because Joe Biden is lately sounding a lot more like Elizabeth Warren. In a July speech in Pennsylvania, the former vice president said: “It’s way past time to put an end to the era of shareholder capitalism—the idea that the only responsibility a corporation has is to its shareholders.”17 Investors may now wonder how Biden plans to define the new responsibilities of the businesses they own.
Team Biden may believe that the response to the coronavirus is changing our politics. Is the campaign betting that the lockdown wrecking ball hurled at the foundations of the U.S. economy this year is making government activism more popular? Many unemployed Americans are surely hoping that lockdowns are becoming less popular. As we write this, the economy appears to be on the mend, but the damage has been historic. In April the U.S. unemployment rate hit a post–World War II high of 14.7 percent. What’s particularly striking about the Biden candidacy is that the former vice president continues to insist that a historic economic calamity should be addressed with a historically large tax increase.
When Joe Biden announced his campaign for the presidency in 2019, he presented himself as a nonideological defender of the status quo, a leader to prevent President Trump from altering “the character of this nation.” A July 2020 tweet from the former vice president suggests that Biden now has something much more ambitious in mind: “We’re going to beat Donald Trump. And when we do, we won’t just rebuild this nation—we’ll transform it.”18
What would it cost to transform the nation? Biden has already proposed roughly $4 trillion in tax hikes—more than twice as large as the tax increase promoted by Hillary Clinton in 2016. But the Biden tax surge won’t be nearly enough to cover the more than $9 trillion in new spending he’s proposed, or all of the policies promoted by his “task force” collaborators. The new taxes and regulations will
