Mike Kueber's Blog

January 13, 2012

The Sage of Omaha speaks

Filed under: Business,Economics,Issues,People,Politics — Mike Kueber @ 3:26 pm

Although Warren Buffett is a Democrat, he is one of my all-time favorite public persons.  I aspire to have a value system as sound as his.  He acquired his value system from his dad, and he calls it his “inner scorecard.”

Buffett is sometimes called the Sage of Omaha, and he made news a few weeks ago when he suggested that rich Americans should pay more taxes.  He argued that most rich Americans would accept this sacrifice as their patriotic duty to help America out of its fiscal mess.  Cynical Republicans in Washington, led by Senators John Thune of SD and Mitch McConnell of KY, responded by introducing a bill that allows the federal government to accept voluntary contributions from such patriotic Americans.  McConnell declared that he was calling Buffett’s bluff.

This week, Buffett is on the cover of Time magazine, and in the accompanying article, titled “Warren Buffett is on a Radical Track,” he calls McConnell’s bluff by declaring that he will match dollar-for-dollar any contributions to the federal government that congressional Republicans make, and in the case of McConnell, who is worth $30 million, Buffett will pay 3-1. 

Buffett’s challenge to McConnell was all over 24-hour news yesterday, but it is merely a snippet in the excellent Time article.  Although Don Imus complained on his show this morning that Buffett should get off the stage, I couldn’t disagree more.  America needs his values and wisdom more than ever.  Among his most sagacious comments were the following:    

  1. Shared sacrifice.  Shared sacrifice, to Buffett, means not just higher taxes for the rich–who often pay extremely low rates on money made by moving money around–but also curbs on short-termism. He’d like to see speculative-trading gains taxed at much higher rates. He believes CEOs of publicly bailed-out institutions should be on the hook for everything they own if their institutions go bust. He’s only half joking when he says he’d like to see private schools banned so that rich families would be forced to invest in the public K–12 system. (No Buffett in Omaha has ever gone to a private school, he notes proudly.) And he’s for a complete overhaul of health care, which he calls “a tapeworm in America,” one that cuts corporate competitiveness far more than taxes do.  It’s the opposite of the Darwinian capitalism embraced by many prominent conservatives who believe the market is the only means to distribute the economy’s assets. “The market system rewards me outlandishly for what I do,” Buffett says, “but that doesn’t mean I’m any more deserving of a good life than a teacher or a doctor or someone who fights in Afghanistan.”  He doesn’t want to stop bond traders from making their billions: “Capitalism has unleashed more human potential than any other system in history.” But, he says, “we need a tax system that essentially takes very good care of the people who just really aren’t as well adapted to the market system but are nevertheless doing useful things in society.” Bond traders and corporate raiders of the world, take note: your higher taxes should subsidize bridge builders and child-care workers.
  2. A frugal lifestyle.  Aside from his indulgence in private air travel (he named his first jet the Indefensible), he estimates his personal yearly expenses to be no more than $150,000.
  3. Income inequality.  His worry that in this era of late-stage capitalism, the next generations won’t be as lucky as he has been. The problem of inequality is likely, he says, to get worse. When people can’t climb up the ladder, it’s bad for the economy–and for his companies. He doesn’t believe that the U.S. can innovate its way quickly back to a 1950s level of shared prosperity, nor does he think education will entirely close the gap. “The truth is that there will always be a bottom 10% in terms of capacity,” he says. “Someone in America who has a 90-point IQ is qualified for many fewer jobs today than he was 100 years ago.”
  4. Income redistribution.  And his views on wealth redistribution–which are basically the opposite of the trickle-down theory–go back even further, echoing those of another Nebraskan, progressive Democrat William Jennings Bryan, who believed that “if you legislate to make the masses prosperous, their prosperity will find its way up and through every class that rests upon it.”
  5. The influence of his first wife, Susie.  She was “a great giver,” he says, “and I was a great taker.”….  Seven years on from Susie’s death, Buffett is still coming to terms with it all. When I ask if he regretted being apart from her in her final years, he insists, “We didn’t live that separately. We were as connected in the last years of her life, perhaps more connected, than we’d ever been. We had exactly the same view of the world. We just didn’t want to go about it in the same way.” He tells me about her interview with Rose, the only major one she ever granted, which was done with his encouragement, because he wanted the world to better understand the woman who was most important to him.  Then his cheerful face crumples, and he bursts into tears. “Her death is–it’s just terrible. It’s the only thing that’s really up there,” he says, his voice shaking. “I still can’t talk about it.”
  6. Future prospects for the American economy.  Buffett believes that once the housing market recovers, the U.S. economy will be back on track. “Once we get back to a million housing starts per year”–the current tally is 685,000–“I think pundits will be surprised just how fast unemployment will come down in this country.”…  But Buffett insists his optimism isn’t emotional but quantitative: he focuses not on media headlines about America’s inevitable decline or cheerleading about innovation and education but on the underlying data. Basic demographics favor the U.S. over nearly every other rich country in the world. And with corporate America so lean and inventories so low, the growth engine, in his view, has to kick in soon.
  7. Government regulation.  Unlike many liberals, he’s not a great believer in regulation as a curb for corporate excess. He doesn’t want to crush Wall Street’s animal spirits or control market volatility or cap executive pay by force; better tax policy would take care of all that, in his view. He’s not worried that rising inequality is going to result in social unrest, at least in Middle America. “I drove by Occupy Omaha, and there was maybe one guy there,” he says. “I just don’t think this is a country that has the tinder for social instability. I mean, the classic test of that was actually the 2000 election. If you think about it, half the people in America felt that they were screwed, and the next day, they all went to work.”  But on taxes and the debilitating growth of partisan politics, he doesn’t mince words. He was horrified by the debt-ceiling debacle this summer and shocked that Republicans were willing to play a game of political chicken with the goodwill and faith put in the world’s reserve currency.

Every year around this time, Buffett issues a lengthy letter to his Berkshire shareholders, of which I am one.  I look forward to reading the letter because it contains, not only Buffett’s view of what has happened and what is going to happen with the American economy, but also his wisdom on life.  The article in Time magazine serves as a perfect complement to the shareholder letter because it benefits from a skilled writer’s perspective.

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