Elizabeth Warren’s Attack on Firetruck Manufacturers Misses the Mark

Highlights

• Senator Warren has targeted private equity or “Wall Street” for disruptions and challenges in the fire apparatus market.
• The problem with this narrative is that, as the Times stipulated, the fundamental challenge confronting the firefighting vehicle market is the very same challenge that has seen cost growth and delivery challenges across the economy post-pandemic – supply chain disruption and excessive demand
• It is also noteworthy that only one of the three leading fire apparatus manufacturers was once backed by private equity and is no longer, but nevertheless Senator Warren points her finger at “Wall Street.”

The latest episode in Senator Warren’s misunderstanding of economics is a common theme that the senator and previous allies in the Biden administration have embraced. Specifically, whenever market forces raise the cost of a given good, it is not a function of supply and demand, but rather the ills of capitalism. In a recent comment about the costs of firefighting apparatus, Senator Warren blamed private equity for cost pressures. 

The Facts of the Firefighting Apparatus Market

This assertion appears to be based off of recent New York Times reporting on the challenge fire departments are facing in securing new firefighting vehicles. In its article, the Times stipulates a number of facts: 

1.   “Unlike the automobile industry, fire departments buy trucks every 10 to 15 years on average and have incredibly specific requests, so most trucks are bespoke vehicles.”
2. “…the pandemic caused global supply chain issues that made it difficult to acquire parts…” 
3. “…at the same time that fire departments, who were receiving an influx of federal, state and local Covid stimulus grants, started buying new trucks at a pace not seen in more than a decade.” 
4. “Together, the industry’s three largest companies — Rev Group, Oshkosh and Rosenbauer — control about 70 to 80 percent of the market.”

None of those three manufacturers is currently owned by private equity firms. Rev Group was created by a PE Fund and became a publicly traded company in 2017. 

It is simultaneously perplexing and unsurprising that Senator Warren would look at this set of facts – cost and price growth that occurred throughout the economy during the post-pandemic recovery, supply chain bottlenecks, labor shortages, historic demand, a marketplace comprised of largely non-PE owned firms – and turn around and blame private equity or “Wall Street.” But that’s exactly what Senator Warren has done. 

Greedflation: A Variation on a Theme

This is a variation on a theme that Senator Warren has echoed throughout the post-pandemic recovery, during which excessive demand created by profligate stimulus ran headlong into supply constraints. Accommodated by a multi-trillion dollar expansion in the money supply by the Federal Reserve at the same time, Americans were treated to the highest inflation in forty years – exactly what most mainstream economists predicted. To shift blame for this policy error, the Biden administration and its allies, like Senator Warren, embraced a theory that the generalized price increases were not the function of supply and demand, but rather greedy corporations. This theory has been serially debunked by economists, but that has not dissuaded some policymakers from continuing to echo the sentiment.

Anyone who has tried buying a car over the last five years probably does not need this explanation – but supply chains faced severe disruptions at a time of significant demand for vehicles. Prices went up. The same supply chain challenges confronting automakers likewise hit fire apparatus makers. Combined with surging demand, the inherent challenges of manufacturing bespoke products, and the inevitable result is rising costs and delays, as manufacturers have themselves stated.

It is unlikely that Senator Warren will pass econ 101 anytime soon, but for most observers who lived through the last five years, the “greedflation” theory still being peddled by politicians should ring hollow.