Taxes, Money, Control, and Power
Let’s take a John Kennedy line (A rising tide lifts all boats) and modernize it for our current president. How about this? All boats need government intervention regarding the threat of rising tides.
Warren Buffet has served as a useful tool for the President for some time. However, Buffett’s aw-shucks demeanor clashes with the reality that he’s the great crony capitalist (that’s no compliment) of our age. Want to see a not-great example of a crony capitalist? Look no further than the bad $3 billion bet Phil Falcone placed with the government.
Similarly, the President has served as a useful tool for Warren Buffett, America’s most beloved venture socialist, by providing him access to the government’s economic level-pullers. The result? Mo’ money via the socialization of risk and the privatization of profits. However, deep-down, even Buffett must be concerned by Obama’s record of economic destruction which clashes not only with the will of the American people but also reveals a toxic combination of aloofness and ineptness not seen since the Carter Administration.
So as we near our tax filing deadline, it useful to remind ourselves that both Buffett and Obama are in favor of the so-called Buffett Rule, which increases the government’s take on America’s most successful—as determined by income—citizens. You see, Warren already has all his wealth (not income) squirreled away where it’s well-insulated from being subjected to the President’s great economic ideas.
Significantly, a Buffett Rule is likely to be a part of tax increases on all tax payers. Since half our citizenry pays no federal income taxes (and because the rule is proposed as an issue of fairness), how one views the reality of its usefulness would probably depend on who is paying the bill.
The most obvious flaw with the Buffett Rule is that it simply raises taxes. It constrains runaway spending, the source of our ills, in no way, shape, or form. It’s aspirin as a cancer treatment.
From the Wall Street Journal:
The Obama Treasury’s own numbers confirm that the tax would raise at most $5 billion a year—or less than 0.5% of the $1.2 trillion fiscal 2012 budget deficit and over the next decade a mere 0.1% of the $45.43 trillion the federal government will spend. When asked about those revenue projections, White House aide Jason Furman backpedaled from Mr. Obama’s rationale by explaining that the tax was never intended “to bring the deficit down and the debt under control.”
If the tax was never intended to reduce the debt/deficit, what’s the point? Oh, right: fairness. More:
The Buffett rule is really nothing more than a sneaky way for Mr. Obama to justify doubling the capital gains and dividend tax rate to 30% from 15% today. That’s the real spread-the-wealth target. The problem is that this is a tax on capital that is needed for firms to grow and hire more workers. Mr. Obama says he wants an investment-led recovery, not one led by consumption, but how will investment be spurred by doubling the tax on it?
Of course, the monies used to create capital gains and dividends have also already been taxed once as ordinary income, before they were ever invested (with a few minor exceptions like retirement investment accounts). Is that an issue of fairness in anyway?
Another issue regarding Obamanomics is the tension between an investment-driven recovery and a consumption-led recovery. Unfortunately, the reality is we’ve already zoomed far past mere consumption and are neck-deep in a debt driven economy. Future consumption will be limited by servicing accumulated debt.
Successful weight-loss programs understand you can’t out-train a terrible diet. Similarly, the United States can’t tax its way into a meaningful and enduring economic recovery. Both the President and Warren Buffett need to set their economic crack pipes down and walk away.
In case that doesn’t happen, I’m also hopeful our national economic detox will begin in November.