"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Tuesday, November 27, 2012

Why Buffett is Wrong

In an op-ed yesterday, Warren Buffett offers this ahistorical nonsense about the impact of tax rates on investment:

Between 1951 and 1954, when the capital gains rate was 25 percent and marginal rates on dividends reached 91 percent in extreme cases, I sold securities and did pretty well.... Never did anyone mention taxes as a reason to forgo an investment opportunity that I offered.

Under those burdensome rates, moreover, both employment and the gross domestic product (a measure of the nation’s economic output) increased at a rapid clip. The middle class and the rich alike gained ground.

So let’s forget about the rich and ultrarich going on strike and stuffing their ample funds under their mattresses if — gasp — capital gains rates and ordinary income rates are increased. The ultrarich, including me, will forever pursue investment opportunities.

Hmmm... what had just happened in the world of the early 1950s?   A cataclysmic world war in Europe and Asia.   France and Germany and Italy were, for all intents and purposes, economically destroyed.   Japan was destroyed.   Korea was in the midst of a civil war.   China was entering a dark night of communism that would last for fifty-plus years.   To be sure, the ultrich will always pursue investment opportunities, and in the 1950s they pursued them in America, the global hyperpower whose industrial base had been rejuvenated in the war, while our competitors had been destroyed.  But today, all of those countries that were destroyed are now huge investment opportunities for the ultrarich, the rich, the semi-rich, and the want-to-be-rich.   If American tax rates become confiscatory or punitive, which appears to be the goal of Obama and willing dupes like Buffett (who has already made his billions), capital will flow to countries where investment and income and wealth aren't treated like evils.   Where in 1951 that might have been difficult, in 2013 international investment in a global economy is a mouse-click away. 

Buffett knows this, of course.   But he's looking at his legacy, and playing to the elites he sees at cocktail parties.   Adulation from the beautiful people is an intoxicating elixir for an elderly man.  

I don't want to hear from Buffett.   I want to hear from the 35 year-old entrepreneur who hasn't made his first million yet.   The Buffetts of today vote Democratic; the Buffetts of tomorrow should be voting Republican.

No comments:

Post a Comment