NEWS: Warren Buffett Is Not An Asshole

Ah, the delights of reading economic analysis in the porn threads. Where to begin...?

Firstly, jpaul256 if you truly desire dialog and debate as described in your opine; you can begin by ingesting a strong dose of intellectual honesty and integrity, because without it, even your good points are hidden by the festering ideology of fiscal conservatism and long abandoned unproven economic principles.

Let's begin with Mr. Buffet, whom the right have always enjoyed criticizing because he achieves what they cannot; producing insane results from his investments while living a socially responsible life and avoiding the need to shake one's bling in everyone's face as a form of self worth.

Yes, Warren has bling, but he keeps it very low key and it does not approach the levels embraced by those with similar wealth.

Mr. Buffet takes a salary of $100K, which hasn't changed in more than 2 decades. He earns another $115K in director's fees, deferred income, and carried interest from personal investments in BH holdings. This past year, he earned another $100K from a bonus plan extended to all BH employees. His effective tax rate on those earnings is about average for the range.

We all know Warren has other sources of "wealth" and "income." His point is quite straight forward and one that is shared by other socially responsible investors including Bill Gates on the left and Steven Forbes on the right. The tax structure in this country needs reform because it favors the wealthiest Americans in such a way as to reward those who figured out how to produce income outside of the "conventional" process with lower rates of taxation. Warren speaks specifically to capital gains, deferred income, carried interest, incentivized investment, offshore-diversified capital participation, and similar passive and active investments. I can attest to having had this face-to-face conversation with one of those names mentioned above on more than one occasion.

However, Warren goes one step farther, which I am going to assume that you ignore due to ignorance rather than some dishonorable motive.

Warren's point (and Bill's too) is that the concept of tickle down economics works when applied to corporate incentives and unravels when applied to individual incentives. Individuals use their capital to purchase land, homes, electronics, airplanes, and personal security. These are not volume purchases that generate jobs and/or predictable sources of retail tax incomes that naturally extend benefit to the broader working national community. As a percentage of spending, even the wealthiest in this country rarely hold more than 30% of their gross assets in the capital market invested in stocks (read: invested in companies). Warren, Bill, and Steve are exceptions to this rule - by a wide margin.

The last decade has witnessed two stunning examples of failed economic policy as measured by broad improvement in American life.

Firstly, everyone knows about interest rates - except most only consider the affect as measured against mortgages. The fact is corporations can borrow at the lowest rates in nearly three decades. they could be borrowing to grow their business, expand their markets, introduce new products, add jobs, increase salaries, improve healthcare coverage for their employees - except they didn't. Productivity in this country improved on the back of employee expense becoming a smaller portion of operating expense and companies refuse to borrow to grow their businesses because most don't have a fucking clue as to where they would spend it to improve their performance. Stiles properly dubbed this "jobless recovery."

Instead, all that readily available cash has gone to businesses like ours, where we can borrow nearly unlimited amounts of cash to fund/force business consolidation through M&A efforts that actually serve to make it increasingly difficult for other businesses to compete; for consumers to have choice; for market conditions to drive favorable prices for the purchasers of goods and services; and to create more jobs. The result is wealth distribution to a narrow band of executives, institutions, and financial advisement bodies who have absolutely no incentive to reinvest their wealth in building businesses, which might translate into what you want to believe are Pareto improvement. In fact, economic intervention is the requirement recognized by Warren, Bill, Steve, and others.

The second is the big lie that Republicans are fiscally conservative when compared to Democrats. We can now all look one another in they eye and admit that the difference is NOT the amount spent, but how the spending priorities are different. I could go on ad nauseam about the cuts made to staffing federal agencies who now struggle to perform their duties while we spend what will certainly be something close to $2.5 trillion on military efforts in what are primarily two countries, Iraq and Afghanistan. For those of you counting, that $2.5T is nearly 20% of total US GDP. Even if 50% of this debt is inflated away as would be normal over the next generation, your children will be saddled with servicing a debt more than 10% of the current GDP.

Getting back to the crux of the arguments put forward by people like Warren, it's really quite simple. He (they) believe economic intervention is required and there are better ways to distribute the responsibility for funding the government and the programs the government must support. Equally important, these investors believe that some government programs deserve more attention and funding than do others. Examples of areas these investors would prefer to see investment include infrastructure development and repair at the national and local level (roads, bridges, dams, power facilities, etc), healthcare and medical industry reform, social security, energy research and development, middle market business development, poverty, and education. Not surprisingly, these same investors would prefer to see reductions in military spending.

Again, to make it clear - we are talking about the distribution of wealth not the distribution of income. By nearly every measure or source available, somewhere between 70 and 75% of the wealth in this country is held by just 10% of the population. Now flip that on its side and view it from the bottom and you will find that the bottom 40% of all Americans hold only 1% of this nation's wealth. I'm not here to argue the inequity of distribution, but I will argue that the top 10% should be paying far, far more for the support of this country and it's agreed upon initiatives than should the bottom 40%.

Finally, we must begin to address the issue of poverty. Firstly, poverty should not be tolerated in this country. I'm not suggesting the redistribution of wealth in some socialistic scheme. I would suggest that we follow the model being developed by Warren and Bill and many others and work to improve the lives of this nation's poorest people (that 40%) by developing programs, which can only be funded by taxes and the wealthiest are going to have to fund a proportionate amount.

Yeah, well...I have too much time in the airport lounge today.