In many ways, Warren Buffett reminds me of J. Wellington Wimpy, known to any fan of the Popeye cartoon series and comic strip as Wimpy; they have a lot in common.
On Google, J. Wellington Wimpy is described as soft-spoken, very intelligent, and well educated, but also cowardly, very lazy, overly parsimonious and utterly gluttonous.
I will not go as far as calling Warren Buffett cowardly or lazy, but he is a very intelligent person known for being overly parsimonious, and considering his riches, many would suggest utterly gluttonous.
What the Oracle from Omaha and J. Wellington Wimpy do have in common is pushing the notion of endless debt. In his New York Times hit piece, Buffett reiterated his contention there should be a minimum 30% tax on incomes above $1.0 million and up to $10.0 million. He also was magnanimous enough to say don't let the Bush tax cuts expire on those making less than $500,000. Of course, he spent the first half of the op-ed pounding his friends on the Forbes 400 list of richest Americans and then segued into hiking taxes on small business and successful families that earn in a year what Buffett loses in sofa cushions every time he sits down.
His plan is no different than the one he floated around earlier in the year that was promoted by the White House.
Sadly, the White House published "The Buffett Rule: A Basic Principle of Tax Fairness" which admits there's the small pool of millionaire income households.
"Nearly one-quarter of all millionaires (about 55,000 taxpayers) face a tax rate that is lower than more than millions of middle-income taxpayers. This is fundamentally unfair." - White House
So, the White House admits there are only 210,000 households making more than $1 million and only 25% of them have low tax rates, but thinks promoting tax plans that would hammer up to 3.9 million households is fair?
This goes beyond the notion of hating the rich and those motivated by the profit-motive. The reason the White House is bludgeoning those not in Buffett's income or wealth bracket is because they must start with a low bar for "rich" and at some point that bar will move even lower. This is an administration that plans to remake America into a nation where nobody works for the basics, including free cell phones, and it is going to be expensive. Snatching big chunks of wealth will not be enough even if it's grinded down into flakes or crumbs.
This government has a ferocious appetite and will need more sources of revenue, and since they don't believe in the notion of more businesses and people earning more would result in higher revenue at lower rates, look for rates to move up for people under $250,000. Pointed out by Buffett yesterday, Washington isn't even talking about cutting spending but maybe, at some point down the road, slowing the rate of spending increases.
As you can see from the table above, Buffett still espouses deficits although grudgingly admits spending needs to be curbed. By advocating more debt, Warren Buffett is rolling the dice with the future of most American children and grandchildren. In the process, he's making it harder to become a millionaire, let alone his neighbor on the Forbes 400 list. Not only does Buffett back higher taxes, but he also suggests that nobody he knows considers taxes when making investments. I'm not sure how he'd explain the $3.0 trillion tax-free municipal bond market, or any number of tax shelters, or factories outside of America, but investors obviously care about net return on investments.
It's time for all the phony-baloney to stop. I understand taxes are going higher and I understand the US economy will not fall off a cliff... right away. I understand that spending will continue and trillion dollar annual deficits will become the norm - they already are the norm. I understand the war on success, from those that have benefited the most from the ability to grow fabulously wealthy from scratch, to those without two nickels to rub together, will squeeze those in the middle that still wake up each morning and grab their bootstraps.
There will be a disastrous final act, but when that happens, I'm not sure. Along the way, there will be countless lost dreams and opportunities. Along the way, we will create a nation of people dependent on government for all aspects of their lives. I don't get what makes Buffett tick. I think he works hard on trying not to be labeled a modern-day robber baron although his insatiable desire for all the money in the world is on display for all to see. In the end, he will be labeled a robber baron - the man that removed rungs from the ladder of success and hogged up all the opportunities after he hit it big.
I'll gladly pay you back... never
The last couple of weeks in Greece have seen frustrations bubble right beneath the surface (in some cases boil over), and while it was smoldered by the Fiscal Cliff hubbub, traders were aware of problems with this salvage job. The Greeks will get their money, or I should say, everyone else's money.
The €130.0 billion bailout continues for the second tranche of cash as details are worked out. This next round of €31.0 billion is supposed to carry the country through 2014, but I doubt it. The old goal of a debt to GDP ratio of 120% has been hiked to 124%, or another €40.0 billion, by 2020. Next year debt will be 190% of GDP.
There is a debate on how to pare down debt beyond just paying it. Those stingy workaholic nations Germany, Finland, and the Netherlands say there is no way they would go for writing down the value of loans, but the IMF likes the idea of debt forgiveness.
Either way, the markets are breathing a sigh of relief on this saga - for now.
By the way, we have great piece on our homepage by a very successful American with lots of business interest in Greece. Check it out.