Every publication in the country has squirreled away in its
files a canned obituary for Warren Buffett and every one of those
notices carries virtually the same lede: “Warren Buffett, widely
considered the greatest investor of the modern era, died peacefully
last night at his modest home in Omaha, Nebraska.”
Mr. Buffett should have left well enough alone.
Mr. Buffett’s company, the legendary Berkshire Hathaway,
is now experiencing what Mr. Buffett would describe in any other
company as a crisis of leadership. After running off one “heir
apparent” after another over the last twenty years, Mr. Buffett now
sits alone atop the giant Berkshire portfolio with his longtime
associate, Charles Munger. Mr. Buffett is 81. Mr. Munger is 87.
Every time the two executives appear in public, there is
appreciative attention for their market views and, let’s be candid,
acute attention to the impending actuarial reality. Analysts seem
to have concluded that Berkshire Hathaway is experiencing precisely
the kind of governance problem that Messrs. Buffett and Munger have
never tolerated in any of the dozens of companies they own or
co-own.
Berkshire stock closed last week at 66, down from its
52-week high of 88. That’s cause for shareholder concern, but no
more than transitory concern given Mr. Buffett’s stellar record of
investor returns. He has a knack, demonstrated repeatedly, for
turning small setbacks into large advances and even at 81 he seems
capable of doing it again. What’s different this time is that Mr.
Buffett has taken on a new public role that will not only distract
him from the investment business, but will inevitably change
perceptions of him among colleagues, investors, and perhaps even
obituary writers.
Surprising to some, dismaying to many, the iconic Mr.
Buffett has signed on with the Obama re-election effort to serve as
a kind of campaign prop. Every time the President demands higher
taxes on the rich, Mr. Buffett is cued to leap to his feet and
exclaim, “Great idea, Mr. President!” Mr. Buffett plays this role
with gusto and shows no sign, as distinguished from his audience,
of either fatigue or boredom. (The role of Rich Guy Demanding That
His Taxes Be Raised is, of course, a staple of the American
political theatre and is usually played in road-company productions
by Bill Gates Sr. or some particularly guilt-stricken Rockefeller
descendant.)
What’s surprising is Mr. Buffett’s apparently unquenchable
desire for attention at his late stage of life. He seems to exult
in media turns as the slightly dotty, ukulele-strumming uncle, a
kind of plush-toy version of an animated Fox-TV tycoon. What’s
dismaying is that Mr. Buffett has reached well beyond his area of
expertise to embrace a bad political idea. This Obama-Buffett idea
—to soak the rich in the current economic environment — is so
egregiously bad that, remarkably, it appears to be about neither
the money nor the principle of the thing. According to a recent
Wall Street Journal story, the so-called “Buffett
tax” would have hit only 22,000 taxpayers in the most recent year
for which data are available. If the taxes on those taxpayers had
been doubled — and assume for the moment that, for the
first time in history, the rich would not have mobilized lawyers
and accountants to avoid the tax — the total additional revenue to
the government would have been $19 billion. Back in his role as a
financial analyst, Mr. Buffett would have scoffed at this
“millionaires and billionaires” tax as a serious way to close a
trillion-dollar annual deficit.
If it’s not about the money, then, it must be about the
principle of the thing, right? As far as I can determine, there has
been no argument advanced by either President Obama or Mr. Buffett
drawn from economic or political principle. They do not bother to
contend that the “Buffett tax” will either raise significant
revenue or incentivize employers to hire more workers or in any way
revive a sick economy. Their argument for the tax-the-rich
offensive, rather, has been based on “fairness,” which is an
emotional rather than an analytical term.
The number that all sides seem to agree on is that the top
one percent of earners currently pay 40 percent of all income
taxes. It would not be unreasonable to look at that number and say,
“Uh oh, that’s too high in a society that still pays formal
allegiance to the principle of shared responsibility. That’s got to
be unhealthy for a middle-class economy.” President Obama looked at
the number and concluded otherwise: to him, 40 percent appears to
be intolerably low and the rich should thus be made to “pay their
fair share.” And what might that be, their “fair share”? Would that
be sixty percent? Eighty? One hundred percent? The answer for Obama
is that the rich must be made to pay enough so as to give emotional
satisfaction to their fellow citizens who pay no income taxes
themselves. This is not about economics, remember. This is about
the politics of division, the politics of bitterness. Obama is not
appealing to our better angels, which is precisely why the angelic
Mr. Buffett has been so useful to him.
In the fiscal debate now unfolding in Washington there are
two statistical tent poles between which are strung all of the
subsidiary arguments about tax policy. At one pole is that stunning
40 percent number. At the other is the fact that fully 50 percent
of the 144 million tax filers pay no Federal income tax at all. To
me, that is an even more stunning number. What it means is that —
in what we still like to think of as our middle-class society —
half of the middle class (along with a handful of rich guys) pays
all of the income taxes while the other half pays none. The Jones
family pays, the Smith family doesn’t. Forget about economics. By
what standard of “fairness” is that fair to the Jones family?
President Obama would respond that the folks at the bottom of the
ladder deserve a break, but the numbers are clear on this point:
the tax filers in the lower half are not, most of them, anywhere
near the bottom of the ladder. By definition, they are, most of
them, smack dab in the middle and they are in the process of
becoming a powerful and self-defining political class. Call them
the non-tax-paying class and understand that, almost always, they
will support both higher taxes on the other half and increased
government services for themselves. Understand, too, that they have
centered their natural enemies in the crosshairs of tax policy: not
just the few rich but the vastly more numerous savers and scrimpers
and people who play by the rules.
Over the course of his first term, and with its
implications now marbled through his proposed reforms and early
campaign rhetoric, President Obama has made a historic decision to
stand for re-election as the representative of the non-tax-paying
class. Depending on the outcome of the 2012 election, that decision
could play out as farce, one hopes, or as constitutional strain,
one fears. Americans have always had a problem with taxation
without representation, and, with Obama reinstalled in the White
House, the taxpayers would be effectively unrepresented in the
Executive branch of the government.
For Mr. Buffett, the prospects are bleaker still. An old
man who can’t find a way to get off stage is always but a few
uncertain steps from a farcical finale. We can only hope that he
doesn’t take a header into the orchestra pit. But the economic
damage has already been done. Year after year for more than a
half-century Mr. Buffett has faithfully paid his income taxes. Last
year alone, he paid more than $6 million. Imagine if Mr. Buffett
had invested those dollars in productive enterprise instead of
giving them to President Obama to, oh, prop up the indefensible
pension plan for government employees. Think of the jobs that went
uncreated, the mortgages unpaid, the medical bills deferred, the
college dreams abandoned.
Mr. Buffett claims that he wants to pay higher taxes. The
rest of us should want him to pay lower taxes.
