Buffett Squandering His Chance
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
I am far from an iconoclast, but I am getting a little weary of Warren Buffett’s posturing as a social democrat. He is a brilliant investor and a pretty good aphorist, and his shtick as friendly, folksy Uncle Warren, the Sage of Omaha, though a tired routine, has been an effective one. But he is an extremely wealthy man because he is a relentlessly hardball operator.
His masquerade as a public-policy expert is starting to resemble nothing so much as the antics of entertainers who try to translate their renown as vocalists or actors into political influence. But most of them are airheads, oblivious to the fact that it is incongruous to opine on the exigencies of a reformed welfare state while paying below the minimum wage to the undocumented immigrants who roll their tennis courts.
No reasonable person debates Warren Buffett’s talents any more than Barbra Streisand’s, but in his case, he knows what he is saying is bunk, and he should know that most of his audience is suspicious of his motives. His comments in the New York Times this week on why he should be taxed more are spurious, and presumably just another public-relations exercise by a mega-billionaire who sees what a shambles his friends in the administration are making, and is tilting farther left to preempt public-relations problems. His years of padding around university campuses with Bill Gates in their corduroy trousers and viyella shirts explaining that they weren’t really interested in money were hard enough to take, but this next act, solo, as a slimmed-down Santa without beard, sleigh, or red uniform is wearing thin.
Though I consider the spirit of J. P. Morgan’s famous “The public be damned!” to be somewhat dated and in-egalitarian, it did — like Orson Welles’s statement as Charles Foster Kane (a parody of William Randolph Hearst) in Citizen Kane that “People will think what I tell them to think!” — at least have a ring of sincerity. As President Bush II said, in response to Buffett and others, the Treasury will deposit their checks, if they are so concerned that they want to contribute more to national revenues. They don’t have to wait for the taxman, and the legislators whom Warren (a very amiable and unpretentious man, from my very slight acquaintance with him) chastises for taking only almost 18 percent of his income.
Of course, I have no standing to debate his tax rate with him, but he knows that the way to deal with the problem he identifies as paying a lower rate of tax than the people in his office and the middle class and even most wage-earners would be a wealth tax, and not a legislative fishing expedition in search of imputable income of very wealthy people less ambitious to provoke tax increases than he is.
He might stand still while the tax-swatter approached, but most of his income peers, in so far as he has any, would not. They would fly away in tax-planning terms, and what we would get is an escalation of the cat-and-mouse game of legislators and tax experts on licit avoidance. And a wealth tax, though it would be more collectible than taxes on large and unconventional incomes, would offend the American ethos of not confiscating, at least until death, the proceeds of the legitimate successes of individual American enterprise. And it would open the gates to terrible abuse, as legislators who are afraid to cut spending, pare entitlements to those who don’t need them, raise the actuarial presumptions about Social Security 67 years after its adoption and after the average life expectancy of participants has risen by over ten years, and other steps that will have to be taken, would resort to tokenistic fiscal persecution of the most affluent.
Few living things, animal or vegetable, are more tenacious than a politician clinging to an envisioned panacea to justify the deferral of hard decisions. The country waited for the bust of the stimulus monstrosity, and then for the Simpson-Bowles report to be shelved, and for various futile and demeaning bipartisan jawbonings; if anyone took this Buffettism seriously, it would push things out into the next presidential term.
There are a number of incongruities in the Buffett Plan. If Buffett’s equity share of the taxes paid by his company, Berkshire Hathaway, were factored in, his tax rate would, I think, get to around 45%. Despite his recycled exhortation not to ask what “your country can do for you,” his lobby for TARP and the bailout of AIG, though quite justifiable, was not disinterested, as he was a preferred shareholder, as well as a new investor, in Goldman Sachs, and the pay-through from AIG saved Goldman about $20 billion, enabling Buffett to enjoy a $3.7 billion gain on that position this year. There’s nothing wrong with any of this, but designer lobbying for personal gain from official policy on that scale makes Santa look a little more versatile than a night-flying patron of the toymakers.
Warren Buffett knows the reinsurance and many other businesses, but he seems not to realize how easily politicians yield to the temptations of demagogy. President Obama is already grumbling about the “billionaires and millionaires,” and elaborating on his redistributive notions on how to “share the wealth.” Anyone who owns a family home in all but the very inner cities or outer suburbs without a lot of debt on it would probably qualify for the president’s description of being wealthy, and Warren Buffett made the point in his Times piece that most of those people are far from flush now.
More important, he knows, but did not write, that even if all his mega-billionaire comrades were soaked 50% of their imputable income, it would not lower the present and projected federal annual deficits by more than one third of one percent. This prompts the question of why he is playing to the galleries like this. The top one percent of American income-earners, as he is perfectly aware, a number that gets us pretty far down into the ranks of run-of-the-mill millionaires, pay 38% of federal personal income taxes, the lower 50% pay 3%, and nearly half of American families pay none. Of course everyone but the very rich is worried, and most would be severely threatened if their taxes were increased.
As any experienced observer can see, the answer does not lie in chasing the very rich through the tax courts; it lies in taxes on elective transactions, including gasoline (when buying it is elective), spending reductions, entitlement reform, less government, and incentivization of savings and investment. The basic problems are that too many people (including most of those in government) are addicted to government spending, and that too many employed people don’t really add any value to anything and are more of a taxation, even if they are intelligent and work hard.
The best thing that could happen in patterns of employment would be if half the country’s million lawyers, who bill over $1 trillion a year, donned blue overalls, bought metal lunchboxes, and went out to add actual value — make something or extract resources from the earth; and if half the silly laws and much of the access to courts for frivolous and vexatious litigation were ended.
Of course it won’t happen, but for the economy to be robust again, the general addictions to public-sector spending and to the excesses of the service economy will have to be reduced. Much of it is just vocational snobbery, the common ambition to work in skyscraper offices rather than in light industry, as well as the failure to employ unskilled migrant labor in low-end manufacturing jobs, and instead putting them to work in sweatshops and lettuce fields and outsourcing the manufacturing jobs abroad. At this stage, increasing supply and shrieking at the public to spend will just create more sales jobs for vendors of French and Italian luxury goods and German- and Japanese-engineered products.
Obviously, after 31 months in office, the administration and the congressional Democrats are hopeless in these terms, and one of the problems with the lackluster Republican race is that none of the declared candidates has addressed real issues either. And the vacuum is unlikely to be filled by the Texas governor who jogs with a firearm in his sweat suit and had his father-in-law perform a vasectomy on him.
Warren Buffett is one of the country’s most respected citizens, and has earned that status and held it for a long time. He should not be throwing raw meat to the soak-the-rich advocates, whether of the envious or arithmetically challenged variety. If he said what he really thinks, the country would listen, and it could make a positive difference. With so little leadership in the public sector, his time has come; he shouldn’t squander it on nostrums like mega-billionaire taxes.
This column first appeared in the National Review.