TechCrunch Founder and Editor, and friend, Michael Arrington, has weighed in on Warren Buffett’s op-ed in the New York Times Monday entitled Stop Coddling the Super-Rich. It’s a work worth reading.
To put it simply, Warren Buffett explains how the super-rich essentially make money off making money, and it’s that money which they allow to be taxed, rather than actual wealth. Buffett writes:
While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors….These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.
Arrington, in TechCrunch, says that Buffett’s opinion is B.S.:
Buffett is just fine with big new taxes on the rich because those taxes never touch all the under-taxed wealth he’s accumulated over the decades. He talks about how he’s benefited for decades by being under taxed, but is only willing to pay more in the future. That’s like a steroids-ridden baseball player declaring that steroids are bad and from now on no one gets to take them. But paying for past sins? Shhh.
Then, later in his posting, Michael added a sentence that was shameful:
As for me, I think the government should be starved of income and be forced to spend money where it’s supposed to – defending the border, establishing a trusted currency, and protecting property rights.
That was all the evidence I needed to see that my friend just doesn’t get it, and is nothing more than a supporter of the Tea Party’s dime store ideas about the American Economy. So, to Arrington, I wrote a reply that I will share here:
Michael, you’re really missing the entire point. It’s not about you; we have a problem where, for some time, our revenue collection volume has been less than actual need. It’s not about “soaking the rich” and with all due respect, I find that view, and your own, reflective of an overall lack of understanding of not just the American Economy itself, but economic function, and Macroeconomics as a whole.
GDP = C+i+G+E-Im That’s the basic equation for Gross Domestic Product. Let’s make this simple. How do you make GDP equal “2” if C, I, and E are all Zero, and Im is 1? That means G has to be 3. The G is Government.
(Note: GDP = C+i+G+E-Im – where C is Consumption, I is Business Investment, G is Government Spending, E is Exports, and Im is Imports.)
In order to improve Government Spending, we need more tax revenue, and in a weak economy, where tax rates are lower than they should be for those best able to pay, those rates must be increased. That’s not happened, and Standard and Poors was right to point a finger at the GOP for blocking a much needed rate increase in their press release of two weeks ago. You should read it – carefully.
Running an economy is best done when dime store philosophy is left out of it. The problem is, dime store philosophy, and now I refer to ideas about NOT spending, are starting to run it. That will sink the American Economy at the very time it needs an injection of liquidity that Government Spending provides.
The velocity of money flow is already at a dangerously low level. Insisting on the kind of view you and Tea Party types offer will only make it lower.
We’re already seeing the impact of this ideology where the UC System can’t afford to make needed seismic repairs, and alumni donors think it’s the job of government to pay for it. The same government some of THE SAME DONORS don’t want to pay taxes to, or spend revenue it collects. That’s just plain nuts, but “nuts” describes a lot of thinking that’s become acceptable in politics today.
Michael, I really encourage you to stop advocating such an approach. It’s going to ruin America.
Stay tuned.
Bill Carroll