Following his op-ed on Monday in the New York Times, which called for taxing the rich at an undisclosed higher rate than what we currently have, Warren Buffett was held out as a great hero – a traitor to his class and a rare American who actually believed we should tax rich people. While I agree with Buffett that we should tax the rich, there are a couple large and fundamental problems to liberals elevating Buffett’s arguments.
First, as I highlighted on Monday, Buffett is completely non-specific about what the higher tax rate for the wealthy should be. He suggests that there be tax brackets for people making over $1 million and another for people making over $10 million, but doesn’t say what those should be. Specifics matter because a small hike won’t really do much at all. Instead, the hike should seek to achieve a particular social end. In this case, that goal should be reducing the political clout wealthy elites have through their wealth. If you question this, just ask yourself if you think the Koch Brothers or Rupert Murdoch should have less power in American politics. If you’re reading this blog, I’ll presume that your answer is yes and move along.
Second, and more importantly, in his op-ed, Buffett came out in favor not only of the austerity measures pushed by both Republicans and the White House, but called for the Super Congress to go beyond $1.5 trillion in spending cuts. This has been almost entirely ignored by people elevating Buffett’s op-ed. He wrote:
Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here.
Coincidentally, the AP reported today that President Obama “will challenge the new “supercommittee” of Congress to go beyond its goal of $1.5 trillion in deficit reduction.” Apparently Buffett and Obama are working from the same playbook on this issue. Anyone following the austerity debate knows that spending cuts of this magnitude require major cuts to Social Security, Medicare and Medicaid to rich that mark.
Third, Buffett frames his call to tax the rich around the idea of shared sacrifice. At first blush, this seems like a pretty good idea, and again, it’s one that we’ve seen from President Obama in recent months. The problem with this is that tax rates which keep millionaires millionaires and multi-millionaires multi-millionaires don’t in any reasonable sense actually constitute sacrifice on the part of the rich. On the other hand, cutting Social Security dramatically reduces the amount of money tens of millions of Americans have to live on, mostly while they’re living on a fixed income. Cutting Medicaid and Medicare likewise require massive cost increases for seniors in nursing homes, again, many of whom can’t afford more cuts. Cutting unemployment benefits or aid to homeowners, well, you get the picture.
The zeitgeist should properly be defined by how much pain and suffering poor, working and middle class families have felt following Wall Street crashing the economy. People who’ve lost their homes, their jobs, their health insurance, and their basic economic security have already sacrificed. They’ve sacrificed far more than they could afford to sacrifice. And what about those lucky poor, working and middle class Americans who have not yet lost their homes, their jobs and their health insurance? Clearly now is not the time to take away their safety net.
Elites pushing for austerity are saying these people should give up even more, because suddenly the deficit is an existential threat to America. And Warren Buffett chimes in, “Well, me and my pals could kick an extra few bucks to the kiddie and it won’t hurt us.” Thanks, pal.
Here’s what would make sense: recognize that poor, working, and middle class Americans have already suffered enough. Recognize that wealthy elites not only caused the calamity everyone else is suffering under, but have yet to be asked to pay to clean it up. Then tax millionaires and multi-millionaires at, say, Reagan-era rates (which in 1986, for the top bracket, were 50%). Then don’t cut any more social spending, let alone the Big Three programs. I don’t know if that would produce equity, but frankly, shared sacrifice is not particularly appealing, especially when it’s a vehicle for destroying our social safety net.
Naturally what I’m describing is not politically possible. The Obama administration, the Republican Party, and many Democrats in Congress believe that the poor, working, and middle classes of America should make more sacrifices in the form of cutting government spending and cutting the social safety net. There is near-unanimity on this across the aisle, which again is what makes Buffett’s shared sacrifice rhetoric so troubling. During the deficit debate, the Republicans wanted all spending cuts and no tax increases, while the Obama administration wanted about as many dollars of spending cut, while also having small revenue increases through things like taxes on corporate jets. This was a fig leaf. The differences were purely optical and remain so. The shared sacrifice rhetoric of Buffett, as with Obama, is simply a way to achieve austerity with some minor taxation of the rich. The rich may oppose this taxation, but as Buffett ably points out, it won’t change any of their behaviors, let alone their rich lifestyle.