Democratic presidential candidate Elizabeth Warren on Monday warned that the U.S. could see an “economic crash” coming, and urged the regulators and Congress to take a series of steps to minimize the risk.
“When I look at the economy today, I see a lot to worry about again,” the Massachusetts senator wrote in an essay.
Manufacturing sector recession accompanies increasing debt
“I see a manufacturing sector in recession. 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,” she added.
Warren said that in the lead-up to the 2008 recession, she “rang the alarm as loud as” she could, but “the people with the power to stop the crisis didn’t listen.”
The senator listed a number of trends indicating what she considered to be a “precarious economy.” They include rising household and corporate debt, a decline in manufacturing production for two consecutive quarters, a possible default on the nation’s debt by early September.
The White House and the Congress reached an agreement on Monday to suspend the debt ceiling for two years, thus avoiding the default. The deal, however, still awaits congressional voting procedure and has to be signed by the president before becoming law.
U.S-China trade war and no-deal Brexit harmful to U.S. businesses
She also said the trade dispute with China threatens American manufacturing and has already hurt American companies, adding that a no-deal Brexit – which she said the Trump administration is seeking – will have a spillover effect on the U.S. economy.
According to Warren, the financial markets agree that there is a serious risk of a downturn in the near future.
Measures to be taken to stop economic downturn
Warren highlighted a number of proposals to cope with the situation, including canceling up to 50,000 dollars in student loan debt for 95 percent of people who have it, bringing down rent costs, providing universal, affordable childcare, offering tuition-free public college education, and investing in green manufacturing.
To address the corporate debt issue, the senator argued that federal regulators should enforce leveraged lending guidance that is intended to stop banks from issuing risky loans.
On the debt ceiling, she called for either eliminating the borrowing limit or automatically raising the ceiling to accommodate spending and revenue decisions authorized by the Congress.
“Warning lights are flashing. Whether it’s this year or next year, the odds of another economic downturn are high – and growing,” Warren wrote. “Congress and regulators should act immediately to tamp down these threats before it’s too late.”