Warren Buffett tells Congress to stop coddling the rich

They want to raise the wrong taxes.

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It reminds me of a toilet paper on the trees
- Paula

...which changes what I said not at all. And I wonder which taxes are the "wrong" ones. I'll bet the answer has nothing at all to say about business, investment, and jobs, right?

I'll bite anyway: the article labels this a "tax increase" because Republicans have, in the past, suggested that letting a tax cut expire is tantamount to raising it. Which is true. But that ignores a very salient difference: this isn't merely a change in general tax rates, it's a change in how much of a paycheck is withheld for Social Security, specifically. Calling it a "tax" is sort of a misnomer to begin with, at least considering the way Social Security is supposed to work.

While this point is fair, in the context of the political discussion, it infers that the Republicans are fighting to not lose any Social Security revenue in order to maintain the solvency of the present structure. But of course, most elected Republicans seem to want to change the present structure and possibly dismantle the program because of the current and future revenue requirements.

Also, just as one could consider the Social Security "tax" to be a misnomer, one could deem the idea of SS constituting an "entitlement" to also be a misnomer, since the program merely allows people to receive their own money on the back-end of their lives. The basic presumption (rooted in reality) behind Social Security is that in a sophisticated modern economy where the cost of living inflates over time, the overwhelming mass of citizens cannot be trusted to sufficiently save for old-age retirement (or the contingent possibility of unemployment or disability), so they pay into a government-controlled piggy bank during their working lives and then receive that money once elderly. Therefore, Social Security is not merely the mark of "charity" implied by the word "entitlement" and the same paradigm (and thus fallacious terminology) roughly pertains to Medicare.

Personally, I'm not a champion of band-aid measures such as the payroll tax "holiday," but while insufficient as an overall solution, it could be useful for another year, so long as this stopgap measure doesn't become a precedent that supplants more substantive change. Yet although there is a difference between payroll taxes and income taxes, elected Republicans expressing contempt, apathy, or even ambivalence for the proposal indeed come across as hypocrites looking to weaken Obama politically. In recent history, they have not defended payroll taxes as being necessary or as distinct from income taxes. Rather, they have suggested that all taxes are bad and that giving people "more of their money back" is always a great idea (until proposed by a Democrat, especially President Obama).

The structure of Social Security may defy some common terms, but I'll defend calling it an entitlement for the simple reason that you get it no matter what, whether you have a job or not, whether you pay in or not, and regardless of what you pay in. It's not as if you are forced to put X amount of dollars aside, but get that exact number of dollars back later (though even that would be a terrible deal, for a variety of reasons). You get it under all circumstances, and when there's a difference between what you pay in and what it pays out (which there pretty much always is), current taxpayers foot the bill for that difference. Anything you are entitled to, but not ultimately responsible for, is an entitlement.

I'm not sure why the "sophisticated modern economy or the "cost of living inflating over time" would make it any more difficult to prepare for one's retirement than it used to be. To the contrary, investing is easier and more accessible than ever, and as a result is done by the majority of U.S. households. If anything, the argument for Social Security is weaker now than it was upon its inception.

It is certainly true that some people will not adequately prepare for their retirement. But the government has to entrust us to our own lives. It cannot nerf the world or protect us from ourselves, and it's folly to try. But whatever you think of the wisdom of such an idea in theory, there's no denying that in practice it has grown wildly out of control. Political factors conspire to make even the most common-sense tweaks, like raising the retirement age to counteract increased life expectancy, almost impossible, and the overheard of such programs is far from insignificant as well. Perhaps in another world such a program would provide a safety net that is flexible and mutually beneficial to all of society, but in practice it has proved to be hopelessly rigid.

There is also the fact, of course, that the government does not put the money into anything resembling a piggy back. They simply spend it and worry about the payouts as they come due. Whether or not the program is a good idea is tricky. Whether or not it can be effectively tweaked and managed over time? Well, that answer is a bit easier.

"The structure of Social Security may defy some common terms, but I'll defend calling it an entitlement for the simple reason that you get it no matter what, whether you have a job or not, whether you pay in or not, and regardless of what you pay in"


Not true.

Okay. I'm certainly no expert: what did I get wrong?

Also, if you want to enlighten me/contradict me, that's fine, but I don't know why you'd make me ask you to elaborate.

You have to pay into the system so you need a job and you need to pay in a certain amount to receive benefits. You may be confusing it with SSi, which is really welfare, and even receiving that is not automatic and has stringent economic requirements.

SSi is not funded by Social Security.

The more you pay into SS, the more you receive in monthly benefits, but there is a maximum cap.

Actually, I think that that debt ceiling debate reinforced the (doubtlessly veracious) idea that the Republicans (led by the Tea Party) have become ideological extremists entirely averse to revenue enhancement and more than willing to harm the country's credit rating in order to score ideologically. Of course, a lower credit rating could produce higher interest rates that ultimately serve as a tax hike, but the GOP seemed to be banking on the notion that such convoluted displacement would prove beyond the reach of the public.

The epitome came in the most recent Republican debate in Iowa, where all eight canidates rejected a hypothetical proposal of ten dollars in spending cuts for every one dollar in tax hikes. Almost thirty years ago, conversely, President Ronald Reagan and Democratic House Majority Leader Tip O'Neill agreed to a deal that raised one dollar in spending cuts for every three dollars in tax increases. Times have changed.

Fair enough. Yes, I was thinking of SSi. But SSi, then, is merely an adjacent entitlement. It is, after all, even run by the Social Security Administration. The fact that it comes out of general funding isn't much solace. Also, making a distinction between SS and SSi only really works as a defense if the person defending SS is willing to possibly jettison SSi. If they aren't, then they're still defending an entitlement, and the same arguments apply.

There's also a speculative (but inevitable) component, which is that the ratio of workers to retirees is shrinking. This makes it inevitable that benefits will be reduced, or taxes will be increased. Either way, that means future retirees are paying more than their share to buttress an insolvent system. If I get to retirement and my benefits are cut, or my taxes in the meantime are raised to cover this quickly approaching shortfall, then it will, in fact, be equivalent to an entitlement.

This might not sound serious, but for people my age it's a very valid complaint. We face the prospect of paying into a system that won't be there (or won't be all there) when it's our turn to draw down from it.

Your argument presupposes the very thing being argued: that it's the people who draw the line in the sand on spending, and not the people doing the spending, who are responsible for our lower credit rating. But our credit rating was downgraded even despite striking a deal in regards to the debt ceiling. One has to perform some fairly impressive mental gymnastics to blame this on anything other than the massive increase in federal spending over the last few years. That's what's changed.

Yes, they have changed: Republicans have learned better. The spending cuts promised to Reagan never materialized. That's called learning from history.

You're correct, the format doesn't reflect an exact dollars-in, dollars-out scenario, but there is the general principle of paying into a system that then insures one's retirement. By "sophisticated modern economy," I was actually referring not just to the current moment, but also to the state of the times during which the government enacted Social Security. In effect, I was referencing modernity. Even by the 1930s, obviously, the economy proved much more modernistic and sophisticated than in, say, the 1830s. And while today there are more investment tools available than ever before and while I agree that people need to sink or swim on their own to an extent, I still think that Social Security makes sense. After all, people have lost their life savings due to Wall Street shenanigans and corporate frauds and while individuals need to try and be responsible for how they invest their money, some of these betrayals were hardly their fault (in some cases, as with Enron, the victims couldn’t be blamed at all).

The truth is that over the decades, presidents and legislators have agreed to Social Security adjustments in order to maintain the program's relevance and solvency, including Ronald Reagan and Tip O'Neill in 1983. There's no good reason why they couldn't come together to find a solution again, whether via "means testing," eliminating the cutoff on the SS tax, or even raising the retirement age. To this juncture, Social Security has worked well; now contemporary politicians just need to render the necessary tweaks for the future. And because Social Security has become an institution that neither party can radically alter without severe political blowback, the impetus for ensuring this insurance program's feasibility remains strong.

In explaining its credit downgrade, Standard and Poor's explicitly cited the (Republican-oriented) political shenanigans that dangerously pushed against the deadline

... More broadly, the downgrade reflects our view that the effectiveness,
stability, and predictability of American policymaking and political
institutions have weakened at a time of ongoing fiscal and economic
challenges to a degree more than we envisioned when we assigned a
negative outlook to the rating on April 18, 2011.

Since then, we have changed our view of the difficulties in bridging the
gulf between the political parties over fiscal policy, which makes us
pessimistic about the capacity of Congress and the Administration to be
able to leverage their agreement this week into a broader fiscal
consolidation plan that stabilizes the government's debt dynamics any
time soon.

... The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year's wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently. ...

http://www.standardandpoors.com/rati...=1245316529563

And in addition to insufficient spending cuts, Standard and Poor's noted the Republicans' intransigence regarding revenue enhancement.

... Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise evenues, a position we believe Congress reinforced by passing the act. ...

http://www.standardandpoors.com/rati...=1245316529563

No mental gymnastics are required: Standard and Poor's cited all these factors and the Republicans' unwillingness to reasonably compromise clearly proved decisive. If John Boehner, under Tea Party pressure, hadn't walked away from the deal with Obama that would have cut major spending growth and also increased revenue (at nearly a four-to-one advantage in favor of spending cuts), a credit downgrade almost certainly would not have occurred.

Firstly, Reagan isn't exactly innocent here. He proved so committed to dramatically increased defense spending while dramatically cutting taxes that the idea of balancing the budget became a joke. During the 1980 Republican primaries, George H.W. Bush derided Reagan's fatuous economic formula as "voodoo economics," which is exactly what it proved to be regarding fiscal responsibility. Of course, even Reagan, in inadequately attempting to address the enormous deficit that he created, raised taxes at times, yet after eight years of his presidency, the national debt had nearly tripled from $834 billion to $2.3 trillion.

Secondly, contemporary Republicans possess no credibility in terms of reducing spending. Over the first half-dozen years following Clinton's presidency, they indulged in deficit spending to no end and they still show little willingness to significantly reduce defense expenditures, the area where there is the most gratuitous fiscal outlay. We need to possess the world's best military, but we don't need to be indulging weapons-makers so that they can construct outdated weapons-systems, we don't need military bases all over the globe, we don’t need to be trying (and failing) to settle other countries’ civil strife, and we don't need to feed the military-industrial complex.

Overall, Republicans haven't learned for the better or else they would be behaving in the kind of pragmatic, no-nonsense manner advocated by former Reagan budget director and fiscal hawk David Stockman (I referenced him earlier in the thread). Instead, they have discarded even the occasional bits of pragmatism displayed by Reagan and taken his basic thrusts (bloated military spending combined with eager tax cutting) to an ideologically inflexible extreme: Reaganomics on steroids.

This quote doesn't have anything in it that explicitly blames Republicans, only to political challenges in general.

Neither does this one.

Neither does this one.

The key part being "in addition to insufficient spending cuts." You don't quote any of those passages, of course. Like this one:

"Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures"

Ahem:

"Standard & Poor’s takes no position on the mix of spending and revenue measures that Congress and the Administration might conclude is appropriate for putting the U.S.’s finances on a sustainable footing."

I assume this should settle the matter. If you want to cite S&P's own statement, you have to include the part where they directly contradict you.

So...this means it's okay to go back on the deal they had? This means Republicans should exchange an actual thing (raising the debt ceiling) for a promised thing that may not materialize? Whether you want to condemn Reagan for something else (wrongly, I think, but one thing at a time) is separate from the point being made here, which is that your example of Reagan being reasonable is an example of Reagan being swindled, and you cannot possibly expect Republicans not to have this in mind today.

Apparently the French took a page out of Buffets book, and their wealthiest all got together to [voluntarily] contribute a large amount of [self-imposed] tax to help reduce France's debt. I applaud them, but they did stop short of taking Buffet's route of imposing on themselves actual governmental oversight (that, I read, is to be handled by legislature later) in the form of new tax laws for their money.

A step, albeit a small one. But a step nonetheless. Buffet's changes are far more radical, and if it is to be believed that he is as fiscally conservative and penny-pinching as the biopics tell us - well, WHAT do you say to that? From what I've read of him, he doesnt appear to be a man who mindlessly throws money away.

EDIT: I honestly think the budget issue is like my father always says: The selfish guy feels that if he cant take the girl he wants to the dance, then he's going to ensure that there is no dance at all, for anyone. It boggles my mind that there are those in government who are willing to let this country be flushed down the toilet rather than concede....anything? Seriously. I get that Im talking big picture without care for small details, but when you step back, that's basically what it is. Mom and Dad are arguing, and the baby is drowning in the pool. Mom's asking Dad to let her save the baby, but Dad's so busy trying to "teach Mom a lesson" that he's willing to let the kid die, and destroy his home, for sake of his ego.

I honestly feel that S&P did downgrade us as a slap on the wrist, and its interesting that now they are being investigated by the DOJ (tho they say that the DOJ investigation started prior to the downgrade) for how they graded mortgage-backed securities before the crash, and now, they are also being investigated for how they downgraded the US.

and the CEO had to step down? granted he was going to do that anyway, but explain to me how one the one hand, you can fault S&P for being too liberal in its high-grading of mtg securities prior to the crash (i.e. artificially and irresponsibly inflating their value), and on the other hand, fault them for being too conservative in their grading of the US? Which is it?? Too liberal, or too conservative? Or......is it really that they're just too whatever we dont wanat them to be?

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something witty goes here......

I'm not sure I totally dig on the drowning baby analogy, for a variety of reasons. One is that it leaves out how the baby gets there, and the fact that one of the conditions is making the other parent promise not to, uh, throw the baby in the pool in the future.

The dispute was about nothing as trite as "teaching [someone] a lesson," it was about making sure we don't spend ourselves to the brink of default again and again without consequence. Reasonable people, perhaps, can disagree about how to do this, but it's not some petty tantrum, it's something that really, really matters.

And, of course, if you wanted to make any analogy more comprehensive you'd have to include something to illustrate the instances in the past where spending cuts were promised and never materialized, too.

By the way: the fact that Buffett chose to pledge his billions to private charities of his choosing rather than towards government says an awful lot about his actual feelings. Can anyone come up with any reason to do that except that he believes he can more effectively help people with his money than government can? Doesn't that completely undermine everything he's saying here?

maybe all it says is that while he's a raging capitalist, he's a bit of a socialist as well? perhaps not so polarized, those two ideals.

oh yoda. WHAT are we going to do with you??

Oh, you'll go on liking me even though half the stuff I'll say will seem horribly wrong to you. Just like I do with you! It's a nice little truce.

But yeah, I think Buffett's kind of struggling with this stuff, personally. I think he wants to be one thing but isn't really living those stated beliefs out. Obviously I'll come down on the "actions speak louder than words" side on this one.

So how come you don't apply those prinicipals to Congressional Republicans who are only for cutting government spending when a Democrat is in the White House?

Because the comparison you're making is not analogous. You're comparing different levels of debt for different reasons, and you're excluding the threat of a credit downgrade that did not exist before. We've been over this.