David Warsh on Warren Buffet’s NYT op ed
David Warsh, a journalistist covering economics issues, takes a look at Warren Buffet’s op ed at Economic Principals.
The fiscal cliff negotiation is no better than a skirmish in what promises to be an epic ten-year struggle to achieve a new fiscal compact. For evidence of that, consider Warren Buffett’s entry into the debate last week, with a suggestion that negotiators seek to bring in revenues at 18.5 percent and cap spending at about 21 percent of GDP.Those were levels that had been sustained over long periods of time in the past, Buffett wrote in an op-ed column in The New York Times; they could be reached again relatively quickly.(Revenues were 15.5 percent of GDP in the fiscal year just ended, while spending was 22.4 percent.) His targets wouldn’t reduce the deficit, he wrote, but they would maintain a stable ratio of debt to output.It was the right argument, but Buffett had the wrong numbers. He apparently borrowed them from the National Commission on Fiscal Responsibility and Reform, led by Erskine Bowes and Alan Simpson, now more than two years old…
Warren Buffet needs to stop being hung up on tax revenues. We have an unemployment problem, not a tax revenue problem. Increase deficit spending on things domestic, reduce unemployment, and magically tax revenues will increase because you have more employed people paying taxes. Obama needs to use the threat of tax increases to get more spending – meaning trade not increasing any taxes in return for stimulus spending.
Right now we are looking at higher taxes, spending reductions, and killing social security and medicare all in the name of higher taxes on the rich. In the end nobody wins.
I’ll consider Buffet a hero when he does 2 things.
1. Put his money where his mouth is like the Kochs
2. Pays his secretary enough so that she no longer pays more in income taxes than he does. Better yet, pay all the help more.
“It was the right argument, but Buffett had the wrong numbers.”
Well gosh who then has the RIGHT numbers? Per Warsh it is some ‘guess’ by some wunderkind named Matt Miller:
“So what’s the right number? Miller guesses 28 percent by the time the boomers’ retirement is in full swing. That seems plausible,”
What are Miller’s credentials vis a vis Buffett?
“The first to say so was Matt Miller, a former McKinsey consultant and Clinton era advisor to the Office of Management and Budget, who has been slowly working his way into the upper ranks of the next generation of opinion-makers as a talk-show host and weekly columnist for The Washington Post,”
Leaving aside the ambiguity inherent in ‘advisor’, which at a minimum is damn far away from titles like ‘Deputy’ we have a dude that worked by industry shill McKinsey and now writes for what may be the crappiest editorial page on these issues in recent memory, the WaPO. I note too that Warsh is quick to reference Miller’s fellow WaPo poster Ezra Klein and not say Robert J Samuelson.
Beyond that does Warsh show us Miller’s calculations? Uh no, instead we get such amazing revelations from Miller as “If only because of the aging of the baby boom, Miller wrote, the future isn’t going to be like the past.”
Wow! And this fact wasn’t known to the professional actuaries who put together the Social Security and Medicare Reports.
Buffet may be wrong here, but I wouldn’t hang a dog on this evidence (not that I am in the business of canine hanging to start with). Warsh is instead passing definitive judgement based on a WaPO OP-ED??? By ‘Some Dude’? Is there some substance I missed here?
McKinsey is a reputable firm. Then too are or were some of the ratings agencies that gave AAA ratings to derivative based bonds. Consultants get paid to deliver useful advice. Useful to the people who write the checks. They are not the equivalent of the Audit Committee from Alpha Centauri with no dog in the fight.
Buffet does put much of his money where his mouth is by way of giving much of it away. Yes, he has accumulated huge wealth, but did so by investing intelligently and carefully. B-H doesn’t make its money via a trading desk.
He also has the advantage of speaking in a level headed manner. His suggestions regarding the budget and taxation are far more reasonable than too many of the current negotiators.
I do not think Buffet is unreasonable. Yes, I know how he made his money.
However, giving away his fortune that is excess earnings from other peoples labor while noting how his secretary is paying more in taxes because her earnings are less that what would give her the same tax rate is not to keen with me.
Charity for me starts with paying your help more than you think the market says they are worth because you can.
I consider what Paul Newman did with his money more appropriate for hero worshipping if we are going to look for rich people examples of good social conduct.
With that, setting up a foundation is not the same as putting his money where his mouth is when the mouth is involved in social policy and politics. The Kochs however are doing such (not that I like their methods or ideology).
Dan no matter how much Buffet pays his secretary in wages she would always pay at a higher effective rate. Until or unless he decided to compensate her with stock options or something which could be realized in a way that exposed them to top rates on capital gains as opposed to top rates on wages.
If all his non-dividend income is taxed at a maximum 20% and some of her salary is already taxed at 35% no amount of raises is going to lower that to match his rate. Instead her total effective rate will go UP while his stays the same.
I guess he could promote her to General Partner and split his stock ownership with her. Absent that I don’t see any arithmetic way to make this work.
I get it Bruce and that is my point. If he were concerned for real about the unfairness as it relates to his secretary, then he would be
1. asking for an increase in the cap gains etc to her level or
2. paying her in stock.
And, he would be spending his money to get this changed just like the Kochs are spending theirs to not change it and even make it more unequal.
He’s not.
Well he is.
At least as to 1. Buffett has been on record repeatedly since at least 2007 calling for equal or at leas more equal treatment of tax on capital.
As to 2. I suspect Warren’s Executive Secretary gets a pretty fine salary ny most people’s standard. And Buffett isn’t going to achieve systematic change by changing around compensation structure one secretary at a time.
There are echoes here of the old “if liberals care so much about the poor/deficits/whatever why don’t they go all St. Francis” and stand in the snow naked having given everything away”
Well most people aren’t saints and that turned out to be a shitty way to achieve equity anyway, within a generation of Francis’s death the Brown Friars were one of the richest monastic orders in Christiandom.
We need a little less appeal to singular personal charity and a little more attention to democratic collective action. Buffett has already agreed to give something like 90% of his estate to charity, specifically the Gates Foundation. Asking him to be the Peter G Peterson of Lefty Econ Think Tanks is asking much. Unless of course he throws some money my way in doing so.
I don’t expect Buffet to be the singular conquering hero. I expect him and all the other of his like calling for higher taxes on themselves to put their money where their mouths are in getting it changed. In other word, fight their counterparts with the same monetary hardware as their supposed tax ideologic opponents.
Otherwise, they are just talking while benefitting from the fight Koch et al are waging.
Real solid conviction there…not!
Hey Bruce on comment on why this post from Warsh, which is an op ed and not an analysis…you have not missed substance…the piece is not up to AB standards…but then, do you know anyone who has written to our standards on Buffet other than you and Dan B.?
I may have missed a mention, but shouldn’t we include the cost of global warming in figuring future budgets? There’s a piece in the Scientific American which is currently on line, saying that California is overdue for the kind of flooding which put a giant lake in the Central Valley in the mid 19th century and bankrupted the state. This would be likely to happen anyway, but warmer temps are not going to help. A rather conservative model put the cost of this at 300 billion dollars. Katrina and Irene and Sandy are going to happen again. Models predict that the Central and Western US are going to suffer long droughts in the future. (We are in a drought right now. Last I heard, the MIssissippi was so low that navigation was difficult. The levels of the Great Lakes are also down.) Flooding could easily cause coastal California to slide into the ocean, while the Central Valley fills up. Anyway plans for the future which do not include global warming are nuts.
D.B.,
Take the support from whence it comes and be satisfied with the level of support that each supporter offers. In a time when so many of the really rich are crying about their “high” taxes,even though tax rates are lower than any time in recent history, how do we criticize Buffet for agreeing with the need for higher marginal rates on very high income. No, he doesn’t hide behind the screen of a funded policy organization. He gets right out front and says the rich owe more to the country than they are asked to pay. I’ll take that much input with a smile.
Note that liberals are always squabbling with one another over minutiae. Neo-cons, right wing reactionaries, tea naggers, etc. don’t Ned to fight liberal causes. Liberals will fight that battle well enough alone. We all want tto be exactly right about the issues and more correct than our own cohorts. The best ally a reactionary has is an enemy that can’t agree amongst themselves.
Yeah Jack, I get it.
However, I don’t need to accept it especially when I have lived my life putting my money and security were my mouth is numerous times for the benefit of many people. I don’t have to accept your association of my thinking Buffet is doing little when I watch those of Walmart going on strike and the occupy people getting arrested.
I’m not fighting against Buffet and all his fans, I’m asking for Buffet to do what only a person with his kind of money can do considering what he says he is for…just like the Koch’s.
And, it’s not just Buffet. Were are the rich liberals that are using their money as the rich on the right are using theirs?