Battle of the Billionaires

And now the ultra-rich are duking it out via email and in the op-ed pages of the nation’s newspapers over how much they should be taxed and why. Warren Buffett fired the opening salvo, complaining that the federal government was “coddling the super rich”. I don’t think that “coddling” is quite the right word but this is a family-friendly blog so I won’t suggest a more accurate diction. The bête noire of progressives, Charles Koch, responded:

Much of what the government spends money on does more harm than good; this is particularly true over the past several years with the massive uncontrolled increase in government spending. I believe my business and non-profit investments are much more beneficial to societal well-being than sending more money to Washington.

The next salvo has now been fired, this time by Harvey Golub, former American CEO and chairman, in an op-ed at the Wall Street Journal:

Governments have an obligation to spend our tax money on programs that work. They fail at this fundamental task. Do we really need dozens of retraining programs with no measure of performance or results? Do we really need to spend money on solar panels, windmills and battery-operated cars when we have ample energy supplies in this country? Do we really need all the regulations that put an estimated $2 trillion burden on our economy by raising the price of things we buy? Do we really need subsidies for domestic sugar farmers and ethanol producers?

Why do we require that public projects pay above-market labor costs? Why do we spend billions on trains that no one will ride? Why do we keep post offices open in places no one lives? Why do we subsidize small airports in communities close to larger ones? Why do we pay government workers above-market rates and outlandish benefits? Do we really need an energy department or an education department at all?

Here’s my message: Before you “ask” for more tax money from me and others, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely. Then you’ll need less of my money.

That response actually appeals to me more than Mr. Koch’s does. Caesar’s wife must be above reproach.

I’ve said for nearly a decade that I thought the “Bush tax cuts” were an error (they were mis-targeted, aiming at increasing consumer spending which wasn’t in jeopardy). If I were king I’d start by removing the subsidies, fashionably called today “tax expenditures” but which used to be called “loopholes”, the bulk of which go to the rich and ultra-rich. The political problem is that each one of those subsidies has a group to whom they’re a vital interest, a matter of survival. That’s why even capping the mortgage interest deduction at some seemingly high level, say $50,000 is fought tooth and nail by the realtors’ guild.

Update

The following is from a lengthy comment I made in this thread which I felt deserved to be given a post of its own or, at least rescued.

What I found most telling in Mr. Golub’s op-ed is something that I think needs to be heeded: confidence in government at all levels is going down. So is confidence in banks, universities, big business, news media, churches, and practically every other institution we have.

I don’t know whether this is due to more timely and complete information (no man is a hero to his valet), Third Generation Warfare, arrogance, poor governance, coming to the inevitable end of a process that reached its zenith with the Great Society programs of the 60s, imperial overreach, other factors or all of the above.

I don’t think that the president has done much to foster confidence in government. I can’t read men’s hearts but however benign the intentions of the many actions taken by his Administration once things filter down to us here in the provinces a lot of his programs look like the same old favoring of contributors and special interests, politics as usual.

I might add that I don’t think it is possible for anybody who lives in Chicago to believe that all of our problems would be solved if, somehow, Republicans were to vanish into oblivion and Democrats had complete control of the reins of government. IMO that’s simply making excuses, submitting a stump speech as an alternative for a policy position.

That’s the problem with the E. J. Dionne column I commented on earlier today, too. It pretends to be an analysis of policy but it really is political posturing. Go big! (because nothing you propose will actually happen and, consequently, you can’t be held accountable for its disastrous outcome, and you can use your inability to produce a positive program as a club to hit your political opponents with).

25 comments… add one
  • Drew

    “Why do we keep post offices open in places no one lives?”

    Google Eola, IL. If there are 50 houses and 150 people I’d be surprised. A Naperville post office is a mere 10 minutes away – tops. Does Eola have a post office? You bet they do. A relic from a bygone era. Look across America and you’ll see a 100,000 of these.

    Pick another “government service.” Repeat.

    But of course government spending cannot be reduced. Grandma doesn’t like dog food, and reacts badly to falling 1000 feet from a cliff we are told……..

  • michael reynolds

    Yeah, the problem is the post office. That’s why we’re trillions in the hole.

    Not unfunded wars, or stupid tax cuts. It’s the post office.

    You have two quotes up there, the first is the usual snarling rich asshole with nothing to offer but, “Me, me, meeeee!” and the second is a series of rhetorical questions of highly dubious relevance or honesty.

    Do we really need to spend money on solar panels, windmills and battery-operated cars when we have ample energy supplies in this country?

    Where are those energy resources “in this country?” Oh, wait, by “in this country,” he means in Saudi Arabia and Venezuela and Iraq and other wonderfully stable countries. I wonder how this brain surgeon feels about the part of the government known as the United States Navy which, you know, allows us to actually get that energy into this country?

    Sorry, but this is very weak tea.

  • Michael,

    I assumed that Golub was talking about coal, but maybe I’m wrong. Anyway, his arguments tie into this Stanley Greenberg opinion piece I read recently:

    This distrust of government and politicians is unfolding as a full-blown crisis of legitimacy sidelines Democrats and liberalism. Just a quarter of the country is optimistic about our system of government — the lowest since polls by ABC and others began asking this question in 1974. But a crisis of government legitimacy is a crisis of liberalism. It doesn’t hurt Republicans. If government is seen as useless, what is the point of electing Democrats who aim to use government to advance some public end?

    In earlier periods, confidence in the economy and rising personal incomes put limits on voter discontent. Today, a dispiriting economy combined with a well-developed critique of government leaves government not just distrusted but illegitimate.

    Read the whole thing as well was Walter Russell Mead’s response. I think the legitimacy problem is an accurate analysis of why the progressive message is failing and Mr. Golub’s comments exploit the crisis of government legitimacy. And on that score, I think he’s got a point.

  • Drew

    Michael, you completely whiffed on the point. And I know you will recoil at this, but it comes from my experience with organizational behavior, and your lack of it.

    The post office example is just an example of organizational mindset: Turf protection. Power structure protection. Political perks. Employment protection. “And after all, its only a few bucks, and, hey, it ain’t my money….so who cares?” But when that mindset is pervasive……..Katy, bar the door. This is how every single poorly financially run organization I’ve come across gets into their fiscal problems. And the government is the poster boy. Imagine that post office mindset in a bazillion government organizations. Here in Chicago there has been a bit of a tempest because the new mayor has decided that a powerful alderman’s limo and police protection costs are not warranted. Like I said, a bazillion examples, and they all add up. But I know, I know, costs simply can’t be cut.

    As for “me-me.” Please. The raw arithmetic is that the rich simply can’t be soaked enough to make a material dent. The taxation will have to go way down the income ladder………not right, and not good for the economy…………………and all for government mismanagement. Do you really want to defend that?

  • michael reynolds

    Unfortunately the opening on my gas tank is too narrow for to shove chunks of anthracite in there.

    The problem with the notion that coal is energy we have right here at home is that it’s no different from arguing that we have lots of natural gas (we do) or that we have ample sunshine. We also by the way have lots of atoms.

    Right now clean coal is a myth, just like cheap wind power or reliable solar. So if we were being honest we might ask “Why spend money on developing solar technology and wind technology etc as opposed to spending money developing coal technology?” Or perhaps as opposed to investing hundreds of billions in natural gas distribution networks.

    What we’re mostly doing at the moment is subsidizing oil, because oil works and because it’s the status quo. But it is obviously foolish to continue to subsidize a commodity (to the exclusion of others) which may have already passed its peak supply just as China and India are seeing massive increases in consumption.

  • Maxwell James

    I have to agree with Andy, and not because I have even an ounce of sympathy for a leech like Golub, whose vast wealth is almost entirely the creation of heavy government subsidies to the financial sector.

    The cost of doing business is just way too high right now, particularly for smaller firms. See for example this SBA analysis from 2009, which I think may be one of Golub’s sources.

    The annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008. Had every U.S. household paid an equal share of the federal regulatory burden, each would have owed $15,586 in 2008. By comparison, the federal regulatory burden exceeds by 50 percent private spending on health care, which equaled $10,500 per household in 2008.

    There’s a handy chart on p. 7 of that report which shows just how the compliance costs break down.

    I absolutely think taxes on the rich should go up, and will go up, for the simple reason that we’ve run up a very high deficit year after year after year and those bills have to be paid. It is only fair that upper-income Americans, who have benefited by far the most off of the increases in government spending in the past decade, should be the first to pay for those bills. But we all will have to pay eventually, either in terms of taxes increased or a loss of services rendered.

    And the Democratic Party, which I have to support when I look at the madmen driving the other car, needs to learn that the only way to accomplish their aims is to insist that government become far more efficient than it currently is. I’m afraid the number of Democrats who have internalized that lesson remains unfortunately small.

  • michael reynolds

    The post office example is just an example of organizational mindset: Turf protection. Power structure protection. Political perks. Employment protection. “And after all, its only a few bucks, and, hey, it ain’t my money….so who cares?”

    That mindset is pervasive among humans. It affects business every bit as much as government.

    I wonder what you’d be saying if it were government rather than HP that paid better than a bilion dollars for a toy they had to pull from the market after 90 days of futility. What mindset was that?

    As for “me-me.” Please. The raw arithmetic is that the rich simply can’t be soaked enough to make a material dent.

    I think of that as the Br’er Rabbit argument. Tax increases? Hell, we won’t even have to pay them, so hah hah!

    That’s why they spend millions in lobbying against tax increases: because they won’t really have to pay them. Right.

    Every little bit helps, right? I mean, if closing a post office helps just a little, why Br’er Rabbit, I bet taxing a billionaire will also help.

  • Drew

    “It affects business every bit as much as government.”

    No. There is a check and balance: capital return requirements. I know you’ve proclaimed you aren’t good with money and finance, but no need to demonstrate it on a routine basis.

    BTW – Go back to old pic. You looked distinguished. Now you are back to the Japanese disaster worker look.

  • michael reynolds

    Drew:

    Thank you for your non-response and fashion advice.

  • michael reynolds

    FYI: My avatars aren’t about you guys, I’m usually playing around with fans.

  • TastyBits

    Poor, poor Warren Buffet. What is a Billionaire to do. Instead of the gnashing of teeth, hair pulling, and wailing, he could simply fire the Tax accountants and lawyers, pay himself a salary, and fill out the 1040-EZ form. Problem solved. He will be paying more than his secretary.

    Or, he could don a hair shirt.

    The ultra rich have options that ordinary cannot imagine, and Warren knows this. He will only pay what he chooses to pay. If he were serious, he could advocate an asset tax.

  • michael reynolds

    And the Democratic Party, which I have to support when I look at the madmen driving the other car, needs to learn that the only way to accomplish their aims is to insist that government become far more efficient than it currently is. I’m afraid the number of Democrats who have internalized that lesson remains unfortunately small.

    Maybe they should study the IRS. I just moved and within two weeks they had my new address. No, I didn’t give it to them. Blue Shield I have to tell 3 times and fax them.

    Of course government needs to be more efficient. I don’t know anyone who would disagree.

    One way to do that might be to reduce the impact of business lobbying on government. Many, maybe most, lines of the tax code were first written in a K Street law firm for the benefit of a client. (I’ve sat in on that kind of thing as a go-fer.) The subsidies for sugar mentioned in the piece didn’t just appear in the imagination of Congresspeople, that subsidy was conceived and pushed and paid for by (this will be a shocking revelation) sugar interests.

    As for the post office and their outdated facilities in the wrong places, they have been too slow to adapt to an environment that has undergone radical change. (I would be more amazed by that if I were not working in an industry — all big businesses — that is stuck in the 19th century.) The thing the post office most reminds me of is that agile, clever, profit-motivated bunch of square-jawed capitalists formerly known as Blockbuster Video.

  • Drew

    “No. There is a check and balance: capital return requirements. I know you’ve proclaimed you aren’t good with money and finance, but no need to demonstrate it on a routine basis.”

    Thank you for validating my observation.

    “FYI: My avatars aren’t about you guys, I’m usually playing around with fans.”

    The hamsters must be thrilled.

  • Drew

    I think you miss the point, Tastybits. If Warren Buffet really thinks it immoral to pay the tax he pays, for all these years, what kind of immoral piece of shixt is he for not having taken action previously? All he has to do is write a check. Instead, he’s given money through a tax free vehicle, and sought favorable publicity through disingenuous remarks. (shocking!!)

    I have first hand experience. Don’t believe a word in the press.

  • michael reynolds

    No. There is a check and balance: capital return requirements.

    Yes, your affirmation of faith is very touching. And I’m ready to join your cult, Drew, really I am, if you can only explain why the mystical powers in which you believe didn’t stop Enron or Lehman or Countrywide or about a million other companies from crashing and burning?

    Now, I know: crashing and burning is good! It’s creative destruction. And the abject failure of so much of private industry only goes to prove the infallibility of private industry. Their very failure proves their superiority!

    Except that often when the Capitalist Gods fail they have to be rescued by government because otherwise they’d completely f— the country and indeed the world. When they fail they throw employees out of work and people without jobs and without health care get rowdy and troublesome if you don’t find a way to help them.

    I wonder how much better off the government would be today if major sectors of private industry were not run by dishonest, greed-obsessed imbeciles? Why, I bet we’d have trillions more. I also wonder how much better off we’d be if some of the employees at places like Bear, Stearns were less credulous capital cultists like you and more people who were capable of doubting their gods?

  • Drew

    “The thing the post office most reminds me of is that agile, clever, profit-motivated bunch of square-jawed capitalists formerly known as Blockbuster Video.”

    The point you repeatedly miss, Michael, is that they – exhibiting governmental behavior – are shrinking and will going under. Capital will flee. The government – absent of such a governor – just grows, and grows, and grows……….

    And further, the general population will not suffer from Blockbuster’s problems. Just capital stupid enough to stick around.
    But government? They have apologists like you to keep feeding the idiocy.

    You really don’t understand capital, do you?

    “One way to do that might be to reduce the impact of business lobbying on government. ”

    As they say: “duh.” But somehow you put your blinders on when lobbyist driven – bad – “big government” goes to “big government” programs you like. No advocates there? Please.

    Do you think there are two lines for government employment? One for the stupid, lobbyist-sensitive inefficient dolts at defense or whatever program you don’t like? And one for the efficient, brilliant types for the programs you like? WTFU.

  • Drew

    As I’ve always said, you are a great set up man, Michael.

    “Now, I know: crashing and burning is good! It’s creative destruction. And the abject failure of so much of private industry only goes to prove the infallibility of private industry. Their very failure proves their superiority!”

    That’s childish. No. It demonstrates that when failure occurs in the private sector capital and human resources move. And that those capital and human resource providers pay the cost of their errors. The problem gets rectified. Now, in government, when the exact same thing happens we get told costs can’t be cut, grandma is doomed, the children will drink poisoned water…….and we have to spend even more, no matter the waste. No cost to stupidity.

    “Except that often when the Capitalist Gods fail they have to be rescued by government because otherwise they’d completely f— the country and indeed the world.”

    You need to look in the mirror. YOU are the big government guy, not me. I’d let them crash and burn. Did you hear me? Let them fail. YOU and Barry bailed out the idiots at GM, not me. Barry sucks the units of Wall Street, not me – because he gets campaign money. Yet you support him no matter. WTFU.

  • I agree broadly with Maxwell to the extent that I think that it’s inevitable and, sadly, necessary that taxes go up on income earners in the highest quintile (the highest quintile is families who earn, roughly, $90,000) largely for the same reason that Willie Sutton robbed banks: it’s where the money is. Income earners in the top .1%, the group that Mr. Buffett is complaining about, will largely be able to avoid the increase.

    What I found most telling in Mr. Golub’s op-ed is something that I think needs to be heeded: confidence in government at all levels is going down. So is confidence in banks, universities, big business, news media, churches, and practically every other institution we have.

    I don’t know whether this is due to more timely and complete information (no man is a hero to his valet), Third Generation Warfare, arrogance, poor governance, coming to the inevitable end of a process that reached its zenith with the Great Society programs of the 60s, imperial overreach, other factors or all of the above.

    I don’t think that the president has done much to foster confidence in government. I can’t read men’s hearts but however benign the intentions of the many actions taken by his Administration once things filter down to us here in the provinces a lot of his programs look like the same old favoring of contributors and special interests, politics as usual.

  • Michael,

    Stop being a twat.

  • Drew

    “Income earners in the top .1%, the group that Mr. Buffett is complaining about, will largely be able to avoid the increase.”

    I’ve heard this argument for years. I’ve made a million+ a year many times; I don’t know what percentile that puts me in. But I’ll be damned if I know what those tax avoidance techniques are……..and I’ve got fancy accountants. I’d like a coherent, real world, response some time.

    “…confidence in government at all levels is going down. So is confidence in banks, universities, big business, news media, churches, and practically every other institution we have.”

    Think about that list for a second. Every one is either abusing power, a beneficiary of power, a beneficiary of government subsidy or an advocate of government……….to protect their power or subsidy.

    No concept of liberty. Just constant positioning to control the Average Joe, while providing benefit for the occupants of the powerful institution. This informs so much of what I write here.

    The more time that passes the more I am convinced that the only commenter here who gives a rats ass about the little guy and the prospect of a fair shot at opportunity is me……..and all else just are masturbating at double time while reciting their allegience to controlist ideology.

  • Icepick

    The more time that passes the more I am convinced that the only commenter here who gives a rats ass about the little guy and the prospect of a fair shot at opportunity is me……..and all else just are masturbating at double time while reciting their allegience to controlist ideology.

    Seriously? Mr. Million+ Many Times is the only guy here concerned for the Little Guy?

    Wow. Not, “Wow!”, or “WOW!”, or even the relatively muted “WOW.” Just simply “Wow.”

    Having been relegated to Peon status in life, I am really, truly … something … to discover that I don’t give a rat’s ass about myself. I think “bemused” might best capture the feeling.

  • I don’t think you make the cut, Drew. You’re rich but not ultra-rich. As of 2007, the most recent year for which data are available, the threshold for the top .1% of income earners in the U. S. is about $10 million income per year.

    Many years ago (and years after my dad died) my mom dated a guy who qualified as ultra-rich. He was also one of those guys who prided himself on paying as little as was humanly possible in federal income taxes. Strategies include income from tax-exempt bonds, overseas income, longterm capital gains.

  • steve

    “All he has to do is write a check. ”

    But Drew thinks we spend too much, so let us even things out. Buffett pays some extra tax, which goes to pay down the deficit. All else stays equal. Drew agrees to forego Medicare in the future, all else stays the same. Both guys contribute to reducing the debt. The rest of us are so very grateful.

    Steve

  • Micheal,

    This is why I think you are being a complete twat,

    Except that often when the Capitalist Gods fail they have to be rescued by government because otherwise they’d completely f— the country and indeed the world. When they fail they throw employees out of work and people without jobs and without health care get rowdy and troublesome if you don’t find a way to help them.

    This is complete bullshit. The head of Citibank, Goldman Sachs, and other big banks are not capitalists. They are anything but. In fact, I’d say they are corporatists–people who think government policy should be determined by what is good for big corporations. The old, “What is good for GM (IBM, or any other big corporation) is good for America,” style nonsense.

    Corporations like Citibank, GM, and others do not like competition. The would prefer policies that would limit competition, but such policies also limit freedom. Corporatism is not capitalism, in fact I’d argue they are mutually exclusive, or the former is a perversion of the latter.

    I think keeping these distinctions in mind is important is it prevents people from talking past one another. Frequently people who criticize about capitalism think of an economy with monopolies, not competitive firms. People support capitalism often dislike monopolies and prefer competition and note that in many instances monopolies arise due to intervention by government.

    Another example is your misuse of the phrase creative destruction, you are bastardizing the term as used by Joseph Schumpeter, IMO. For example, you often bring up various applications for Apple products, but those very apps might very well entail some element of creative destruction–i.e. changes in how things are done that result in improved efficiency and also a reduction in the number of people working in a given field. Another example is the computer. Computer was actually a term that applied to people, people who computed. The electronic version ended up replacing the human version. The PC I’m using to write this post is doing the work of dozens possibly hundreds of people would have done several decades ago.

    So, getting back to your quote, I have not nor have I ever advocated rescuing “capitalists gods” since I think that is how we ended up getting in this mess. When government decides that certain businesses are too important, too big, or too whatever to fail it ends up promoting the very problems we see today. Firms take excessive risks, the grow to unmanageable sizes, and so forth. It is the antithesis of capitalism if you will. So your comment above is a complete straw man. A well crafted bit of rhetoric that will likely influence some readers, but when you get right down to it, it is not something I, a person who does think capitalism is a good way of organizing our economy generally speaking, would support in the slightest.

    In capitalism firms do go out of business. That is what happens to badly run firms. Yes, the impact on others is not pleasant, but what is the solution? Bailing them out? Allowing badly run firms to continue to be badly run? That is how we got into this mess. Badly run firms mis-allocate resources. That slows down growth, that in turn helps keep unemployment high, and in the end really helps nobody.

  • Strategies include income from tax-exempt bonds, overseas income, longterm capital gains.

    This understates the tax burden guys like that face since tax exempt bonds usually have a lower rate of return.

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