Crony Capitalist Wasting Syndrome
I was recently watching the 2012 campaign unfold on CNN International with a group of Gates Foundation sponsored third-world literature teachers. Our location? A bustling (and gleaming) solar powered Chinese-built bus station in Nairobi with excellent Wi-Fi reception. What I saw reaffirmed how much it would benefit the President were a third-party challenger to emerge.
It would have been useful to have an independent candidate siphoning votes away from Mitt Romney while also letting someone other than the media (and Democrats) defend the last three and a half years of the Obama presidency, most of which has required President Obama to focus on fundraising so he could fix all the Bush-caused failures in a second term. And it would have been equally useful to have an independent challenger acknowledging Obama’s hard work without offering the traditional campaign enticements to the Democratic Party’s core constituencies: Hollywood, homosexuals, illegals, and the 45 million Americans now on food stamps. To me, this campaign feels like a cyber war for the President with no air cover.
But there will be no third-party candidate to destroy Romney’s chances, so the only hope to get Obama to raise his game to the 2008 level, back when so many Americans assumed he’d be competent (or at least better than John McCain). To get back to 2008, the president first needs to re-write history, and second, to recognize just how badly he’s wasted Warren Buffett’s credibility. Remember that the President only used Buffett, America’s most successful crony capitalist, for a transparently lame two-week wedge-issue effort.
In exchange for red-lining the Keystone XL pipeline and a few other goodies, Obama got Buffett to endorse the “Buffett Rule”—a call for a minimum tax rate of 30 percent for all millionaire households earning $250,000 or more. The plan had no chance of passing, would have reduced the federal debt by 0.17 percent in 7.2 billion years and was decried as a gimmick that only diverted attention from what right-wing zealots say America really needs: comprehensive spending reform. Now, the Buffett Rule has largely faded away.
What a Presidential waste of Warren Buffett’s incredible credibility.
Buffett is a businessman out to make a profit through cronyism, rent-seeking, and regulatory capture—he’s no Mitt Romney—and as such, he is respected by many on the left as a useful line-toeing partisan; someone who can “change the game” with his Daddy Warbucks’-like bank account and deep pockets. What the president should have done was to follow the advice of Papilloma University sociologist and former Fed Deputy Chairperson Alan Blindpann, namely lay out a “bold three-step retox program for our nation’s fiscal policy.” Call it BP: the Barry Plan.
The BP would combine more immediate deficit spending for training to deal with the stress of being unemployed, new public sector make-work initiatives, and other programs that promote a general growth in government dependency; a second phase-in would double down on more deficit spending were the economy to survive; and finally, the plan would use a great deal of incomprehensible economist-gibberish like “bend the health care cost-curve downward” without any real ways to make such wishes happen. While Obama has already offered the gibberish; he still has not sufficiently risen to other elements of the plan which would be a natural extension of his own thinking.
Obama deserves a second look from independents who will determine this election. To get that second look, he will need voters think three thoughts regarding his record: 1) “Yes, the deficit is bad, but it isn’t Obama’s fault.” 2) “Yes, unemployment is bad, but it isn’t Obama’s fault.” 3) “Yes, Obama did something hard. He has almost destroyed the incentives, rule-of-law, and economic system that made American great. But that’s hard to do and that takes real leadership, so I’ll give him a second look.”
I’d bet anything that if the president staked out such a Barry Plan, Buffett and a lot of other business leaders like George Soros and Harvey Weinstein and Bruce Springsteen would endorse it. It would give the G.O.P. a real problem. After all, what would help Obama more right now, repeating over and over the Buffett Rule gimmick or campaigning from now to Election Day by starting every stump speech saying: “Folks, I have another plan, the BP economic plan, that Warren Buffett and other crony capitalists will make money on—and Mitt Romney doesn’t”?
Loyalists to my President often counter with: “But those Republicans are obstructionist. And evil. And racist.” Yes, the G.O.P. is not only racist, but they’re highly destructive. And evil. But why is it only the media can see this terrible problem and why have Republicans gotten away with it?
My view: It’s because not enough Americans see that Obama is working hard to lead the re-creation of our evil, racist, illegal, homophobic, imperial nation. The BP would offer an economic plan that would make our nihilists, another natural Democrat constituency, want to get off the couch and do battle with normal Americans. Our situation is far different from four years ago; this time we need to get our president re-elected.
When the Grand Bargain talks with John Boehner fell apart, Obama retreated to his bubble when he should have rallied all of us by laying out—in detail—the Barry Plan to reshape America in ways he thinks the country needs. That would have forced Romney to speak in detail about his plan to preserve America as a evil, racist, illegal, homophobic, imperial nation—that is, the Paul Ryan plan— and reveal this scheme for what it is: a radical plan the left cannot or will not grasp.
Then other Americans would see the real choice of the Barry Plan: a tough-minded-but-centrist/Marxist plan without any bipartisan support versus a dangerous radical right plan to sustain Medicare and Social Security, let people keep more of their own earnings, and to shrink discretionary spending so dramatically that nothing is left for clean water and air, veterans, children, cancer research, and women, minorities, and the poor.
And the morning after that happens—when Warren Buffett endorses the Barry Plan, not just the Buffett Gimmick—the president will have gotten his inner Mojo Nixon back.
(If you must, read the original here.)
Potemkin capitalist Warren Buffet is set to purchase 63 newspapers from Media General. Why would Buffett do such a thing when flagship papers like the New York Times and the Washington Post-It are losing money hand over fist and the industry is in free fall?
Maybe because Buffett, a willing (if ineffective) stage prop for the President, is working on deals which will provide failing old-economy industries with bailout bucks, government subsidies, tax breaks, or other forms of rent seeking for stated the purpose of preserving good American jobs or the likes.
And because the 63 papers may well be scattered near and far, that is, in many states and Congressional districts, such a Buffett-led endeavor could gain legislative traction.
How does Buffett defend the buy? By making a statement as phony as a three dollar bill:
“In towns and cities where there is a strong sense of community, there is no more important institution than the local paper,” said Buffett, a former paper boy who owns Omaha World Tribune and other publications.
I’d offer there are plenty of institutions are more important than the local paper, and the failures of these newspapers is itself evidence of their unimportance.
But why would Buffett buy into a dying industry?
Buffett’s statement seems to run counter to statements that he made on May 5, at Berkshire Hathaway’s annual shareholder gathering in Omaha. At that event, Buffett referred to the newspaper industry as a “declining” industry with “problems.”
When a member of the audience asked him how to deal with a declining industry, Buffett replied, “Generally it pays to stay away from declining businesses. [The] newspaper business is a declining business and we will pay a price to be in that. That is not where we will make real money at Berkshire.”
Clearly something has changed in Grandpa Warren’s mind since earlier this month. The man isn’t a do-gooder and the business model for newspapers is broke hard, so what’s his real idea for turning a known loser into a useful winner?
I don’t think it’s guilt that motivates crony capitalist Warren Buffett’s call for more taxes on millionaires and billionaires. I think it’s part of Buffett’s disinformation campaign and is attached to his deal with the Administration to wring ever more cash out of the populace in the form of rent-seeking and legislative capture in exchange for serving as a useful idiot.
But I’m not so sure about author Steven King. King has also rallied to the Raise my taxes! cry and his sense of guilt, to me, is a plausible motivator for his behavior. Of course, both Buffett and King (and every other increase-my-taxes tool, including the President) fail to execute an obvious and easy solution: just write the Treasury Department a check.
While I’ve found most of King’s books tedious, formulaic claptrap, he surprised me with his work in On Writing.
The book, largely autobiographical but also intended as a how-I –got-here and here’s-how-it-works tale, tells of King’s very modest upbringing and his similar early adult life. I think it’s a very real possibility that King feels guilty about earning so much money, especially given that his much-loved mother could only barely manage to hang-on financially despite her hard work and long hours.
The conclusion King has likely drawn and internalized (maybe at some repressed level, maybe not) is that he is ill-deserving of the riches and fame that have come his way; that his paycheck is far out of line with his contributions to society. And it’s a fair assessment.
Hence his guilt, hence his Raise my taxes! cry.
Most of those who should feel the same way that King might—imposters, posers, and frauds(and I’m largely talking to you, Hollywood)—wash their feelings away with drugs, alcohol, hedonistic behavior, denial, and in a few cases, self-congratulatory behavior.
Washington Post-it writer Dana Milbank, better known at this site as Dana Milkbag, has a three interesting takes today and one clunker.
First, he recognizes the so-called Buffett Rule is a gimmick. He probably recognizes it because the President has admitted the same.
President Obama admits it: His proposed “Buffett Rule” tax on millionaires is a gimmick.
“There are others who are saying: ‘Well, this is just a gimmick. Just taxing millionaires and billionaires, just imposing the Buffett Rule, won’t do enough to close the deficit,’ ” Obama declared Wednesday. “Well, I agree.”
Next, he recognizes the President’s Potemkin Village of stage props and suck-ups central to the Obama re-election effort:
On stage with him [the President] were eight props: four millionaires, each paired with a middle-class assistant. The octet smiled and nodded so much as Obama made his case that it appeared the president was sharing the stage with eight bobbleheads.
Finally, Milbank recognizes (taking the very long way around) that the President has been… insufficient (emphasis added):
Three years into his presidency, Obama has not introduced a plan for comprehensive tax reform — arguably the most important vehicle for fixing the nation’s finances and boosting long-term economic growth. His opponents haven’t done much better, but that doesn’t excuse the president’s failures…
His opponents haven’t done much better is code for this: they have done better.
However, the Milkbag then reverts to form. It’s like he just can’t forget his initial Obama media indoctrination (emphasis added):
Nothing is inherently wrong with campaign-style rhetoric from the White House; George W. Bush used it repeatedly to pass his tax cuts and in his attempt at a Social Security overhaul. The pity is that Obama doesn’t use his unrivaled political skill to sell a tax plan of more consequence — and less gimmickry.
Thus endeth the lesson, thus saith the Milkbag.
Somehow, the rest of the world missed the President’s unrivaled political skill in helping slow the rise of the oceans and in the healing of the planet. We also missed his mad skills in enhancing U.S. national security, positively impacting the economy, reducing the federal debt, addressing energy independence, and finally, through his Administration’s many foreign policy accomplishments.
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.
If not, here’s the link.
Let me see if I have this straight: Warren Buffett thinks he needs to pay more taxes. When it comes time to pay more taxes, he doesn’t.
The lesson: watch what they do and not what they say.
If you think low interest rates are heaven sent, they are… for borrowers. Like the U.S. government, among others.
For savers, it isn’t so heavenly. From Ira Stoll at Reason.com:
…low interest rates mean whatever money is left in the bank is generating less interest — to be precise about it, $384.5 billion less interest in 2011 than 2008.
Now, if President Obama or Congress announced that they were going to raise taxes in a way that would take $384.5 billion a year out of American pockets, there would be a huge uproar about it. It would be the lead story on the evening news and there would be 30-second political commercials about it. With zirp, on the other hand, you might see some complaints from Ron Paul, from the Wall Street Journal editorial page, or from a few congenitally cantankerous hedge fund managers, but otherwise, the silence has been deafening.
Mr. Obama has even tried to make a virtue of it. At his press conference last week, he said, “Congress should pass my proposal to give every responsible homeowner a chance to save an average of $3,000 a year by refinancing their mortgage at historically low rates….That would make a huge difference for millions of American families.”
The Shakespearian lesson made modern:
Neither a saver nor investor be;
For savings oft loses both itself and interest to inflation,
And Buffett-style investing demands one’s very soul.
America’s greatest and most Teflon-coated venture socialist?
Penned by Jon Friedman at Market Watch, we have an open kimono parody of Buffett addressing a classroom of media manipulation strivers (George Soros and Media Matters for America have already figured much of the trailing snippet and are among the leading practitioners):
“The first thing to remember is that journalists are like children, and you must treat them as such. They are endlessly curious about rather mundane matters. And they are impatient. And they are often lazy. If you do the thinking for them, they’ll be secretly grateful.”
He pauses and wags his forefinger at the audience. “And,” he says solemnly, “they will reward you.”
Although the column does not connect the dots, the same applies for government bureaucrats (and perhaps for many beyond that categorization).
So now you perhaps better understand how the government and journalists are alike—sock that away for your LSATs, or better, for your life experiences.
You’d never know the avuncular Buffett, lionized by so many commentators for his support of higher taxes on the rich, may actually be the most deft political operator of all — and that he was, in the words of a Sacramento Bee investigation three years ago, “one of the top beneficiaries of the banking bailout” even as he promoted it to Congress and the public as an undeniable necessity.
Through a nakedly political and self-aware self-promotion campaign to form himself into the Yoda of value investing, Buffett has avoided comparisons with the bad guys of Wall Street, the rent seekers, crony capitalists, and regulatory capture crowd. These comparisons, as it turns out, are quite unfair to the rent seekers, crony capitalists, and regulatory capture types.
As the Bee noted in a now neglected report, Berkshire’s holdings in companies bailed out by the Troubled Asset Relief Program (TARP) constituted “30 percent of its publicly disclosed stock portfolio, and that proportion reflects at least twice as much dependence on bailed-out banks as any other large investor.”
And as the line goes, ‘When the legend eclipses reality, print the legend.’ The legend, of course, is that Buffett is a white-hat, a hard working, patient value investor. Hardly; he was knee-deep in the financial meltdown:
Not only was Buffett invested in companies threatened by the meltdown, he also added to such holdings in the teeth of the crisis, beginning with a $5 billion investment in Goldman Sachs in September 2008 that The New York Times portrayed as a “sign of confidence.”
It was a sign of confidence on Buffett’s part — confidence that Congress would heed his advice to pass TARP. And in the coming days he did his utmost to ensure it happened, reportedly even participating in a conference call with Speaker Nancy Pelosi and other key Democrats.
So… do you ever get the feeling the fix is in? That the game is rigged? There’s a reason you feel that way: it’s true!
The same was true of Buffett’s big investment at the time in GE, at terms unavailable to the “poor saps who ponied up $12 billion for GE via the ordinary share offering,” according to Summers. “But then, Buffett goes on CNBC — a GE subsidiary — to discuss how great an investment GE is!”
Peter Schweizer, author of “Throw Them all Out,” asks the obvious question that such scheming raises about Buffett: “Why do so many people continue to heed his policy advice without considering his enormous self-interest?” After all, Schweizer wrote recently in Reason magazine, “the success of some of his biggest bets and the profitability of some of his largest investments rely on government largesse and ‘coddling’ with taxpayer money.”
Buffett could, it seems, also be referred to as the Orifice of Obama based on what looks like his quid pro quo support of the President. Why support the Administration? To paraphrase John Dillinger, that’s where the money is.
The article at Reason.com by Peter Schweizer is entitled Warren Buffett: Baptist and Bootlegger.
Frankly, Buffett is an insult to both Baptists and bootleggers: he lacks the Christian morality of the Baptists and the entrepreneurial spirit (so to speak) of the bootleggers, preferring instead to rig the game by having Washington steal from the people. He is, or has become, a plain and simple crony capitalist.
Does crony capitalism pay? Sadly, using taxpayer money (and borrowed at that), far too well.
Finance professors Ran Duchin and Denis Sosyura found that politically connected firms, despite the infusion of federal funds, were outperformed by unconnected firms. In other words, poorly run but well-connected companies got the [TARP] loot.