Archives for October 2011

A Proposal for Mr. Buffett

I have a proposal for Warren Buffett and his fellow billionaires like Bill Gates: Pool your tens of billions, and give that money to the U.S. government to reduce the federal deficit. Taken together, you may breach the $100 billion mark – a significant chunk of change, even when talking about the deficit.

Do it IMF-style, where there are conditions. I.e., if the government takes the money, it has to use it to pay down the debt rather than spend it. Like the IMF, disburse it in tranches, so that if the government isn’t living up to its commitment, then you can withhold the remaining funds.

Of course, you always could give your tens of billions without conditions, given that you seem to have a lot of faith in how the federal government spends its money, based on your campaign to raise taxes. But I would think that even you would realize that that’s like putting your money down a black hole (which should make you think twice about your eagerness to raise taxes).

Isn’t it obvious even to left-of-center people like yourself that the more money government takes in, the more it spends as opposed to pay down debt? That’s why I would think you would be reluctant to give your riches to the government without conditions. (And that reintroduces the irony of why you’re so eager to surrender your money to it through taxation.)

It’s telling that you are admirably giving so much of your wealth to charity, instead of to the federal government. You must think that charities are better stewards of money than the federal government. Why are you so willing to surrender your – and other folks’ – wealth to the government through taxation with no strings attached, but you don’t seem to be willing to give to it voluntarily? It must mean you don’t totally trust the government with your money – you have much more trust in private foundations and/or the private business sector. So why the campaign for higher taxes? It doesn’t make sense. Or if it does, please explain.

You should at least be demanding better accountability from the government in exchange for pledging your support for higher taxes. You have some great leverage – why don’t you use it? Or, are you satisfied with how the government is currently spending your money? If so, then why are you making your donations to private charitable foundations rather than to the government? It’s quite contradictory.

If I were a billionaire (keep dreaming, bub), I would try to set up a deal where I’d pledge my money to the federal government in exchange for it using that money to finance Social Security reform where the program is transformed from a spending program into a savings program via personal savings accounts (PSAs). But I understand that the likes of you and Mr. Gates, being left of center, probably aren’t too thrilled with government-sponsored PSAs. (Plus you’d get beaten up by your friends on the left, who’d accuse you of being handmaidens of Wall Street PSA money managers.)

But one thing you are in favor of is reducing the national debt, correct? So let me repeat: Pledge your billions to the federal government in exchange for it committing to using that money as seed money for paying down the debt, and committing to using its tax revenue (in addition to grants from you) to pay down the debt.

I doubt right-of-center billionaires would go for this idea because they don’t have as much trust in government being a good steward of money. But you seem to have more trust based on your willingness to raise taxes. So see what your left-of-center billionaire friends think of the idea. Who knows – it may even be the beginnings of the U.S. government getting its fiscal house in order.

If you’d be worried that imposing conditions would be perceived by the general public (especially the Left) as plutocratic, i.e. billionaires telling the federal government how to spend its money, then pledge the money with no conditions. Of course, in that case, two-thirds of the money would go toward redistribution, and most of the money redistributed wouldn’t be going to the poor.  (I.e., two-thirds of federal government spending now goes toward redistribution rather than toward traditional government services, and most of the recipients are middle class or rich.)

In that sense I could see why you’d rather give your money to charities rather than to the government.

And that should make you reconsider your desire to raise taxes on the wealthy.

Mr. Buffett, Come Clean On How Much Your Secretary Makes

Here’s an article of mine on rich guilt, positing that Warren Buffett perhaps (emphasis on perhaps) could harbor that emotion. He famously says that his tax rate is lower than that of his secretary. My instinct was to give him the benefit of the doubt on that, because based on what I’ve read about the man, he seems of high moral character.

But in researching the article, I looked into his claim. First there’s the well-known observation that if you take his corporate taxes into account, his tax rate is a lot higher than that of his secretary. Technically he’s referring to individual tax rates so we’ll put that aside for now.

But who is this secretary that he talks about so much? He doesn’t say. Is that her or his official title? Or is it “executive assistant” or something along those lines? If the latter, why doesn’t he refer to her or him as “my executive assistant”?

In any event, in order for her or him to have an effective tax rate higher than Mr. Buffett’s claimed 17.4 percent rate, the secretary must be one very highly paid secretary – much more highly paid than a typical secretary.

Mr. Buffett’s reportedly said that his secretary makes $60K a year. But as Chris Edwards at the Cato Institute points out, at that salary it’s difficult to see how she can be paying a higher tax rate than Mr. Buffett. Could it be that she’s married to a high-earning spouse?

A typical secretary in the U.S. makes on the order of $30K-$40K a  year. So when people hear Mr. Buffett and President Obama talk about Mr. Buffett’s “secretary”, they naturally think that her income is modest. The title “receptionist” also has been used in Mr. Buffett’s tax rate comparison, and people certainly associate receptionists as people with modest pay as well.

So Messrs. Buffett and Obama are leading Americans to believe that $35K-a-year secretaries and receptionists are paying a higher tax rate than billionaires.

But the effective tax rate on people making that salary is very low; near zero in many cases. Here’s what the left-leaning PolitiFact had to say:

Most secretaries don’t make that much. Salary.com put the average salary for an entry-level secretary at $33,249. The top marginal rate for the secretary would be 15 percent, and then typical deductions and exemptions would reduce the tax burden even more. If the secretary had children and no other income, the likely income tax burden would be zero.

In order for Mr. Buffett’s secretary to pay a higher effective tax rate than him, she would have to be earning on the order of at least $100K to $200K a year. And at that rate, she’s almost in Mr. Obama’s infamous “top 1 percent” – the folks who Obama wants to tax more based on Mr. Buffett’s secretary tale!

Mr. Buffett, you do realize, don’t you, that when you talk about secretaries, the vast majority of Americans think you’re talking about people making on the order of $30K-$40K? They are therefore being misled into believing that Americans of modest incomes are paying higher tax rates than the wealthy.

For example, MoveOn.org made an “I’m Warren Buffett’s Secretary” ad in which someone saying they have three kids and make $40K a year has a higher tax rate than millionaires and billionaires, which is clearly false. (That’s particularly false vis-a-vis millionaires, many of whom pay more income taxes than dividends or capital gains taxes.)

You’re a man of high moral character, and I can’t imagine that you deliberately would want to leave Americans with this misconception. So I recommend that you state exactly how much your secretary earns, his or her exact title, and whether his or her salary is vastly above what typical secretaries in America make.

Random Observations on Occupy Wall Street

Today I asked an ethnic Chinese who frequently watches and reads the Chinese news if she has ever heard of the Occupy Wall Street protests. She said yes – it’s all over the Chinese news. Then I asked her if she has ever heard of the Tea Party protests. She said no – never heard of them.

Interesting that the Chinese news media is happy to report on protests against bankers and the wealthy, yet avoids protests against the profligacy of the U.S. government. Wouldn’t the Chinese government want the Chinese people to know about the $15 trillion U.S. debt and associated fiscal woes? It would drive home how irresponsible the U.S. government is. I would think the Chinese would want to play that up to the maximum extent possible, and therefore plaster the media with news of the Tea Party protests. Yet for some reason, that doesn’t seem to be the case.

Meanwhile, watching news reports of the OWS protests is fascinating. It reminds me of the Star Wars bar scene. True, it’s almost all white people. But of those white people, it is a motley crew indeed. One of my favorite scenes is the Atlanta group that went through such great extents not to give one protester an advantage over another, that the resulting rules and behaviors were otherworldly. They conducted weird deliberations for 10 minutes on whether to allow leftwing Congressman John Lewis to speak to them, and finally decided not to let him speak, because apparently he’s no more special than anyone else and therefore shouldn’t be granted any special speaking privileges. The audience had to repeat everything that the main facilitator said, so that everyone can participate. And rather than clapping which could drown out voices of the least-vocal among them, all were required to make hand signals whenever they wanted to show their approval. Here’s the clip.

And then of course there’s the some 31 percent of OWS protesters who would accept violence to get their way, like this guy at the Los Angeles protest. To be sure, a small minority of Tea Party protesters probably would accept violence as well, but probably far less than 31 percent. I was filled with revulsion when I saw a report awhile back about a radio show host named Joyce Kaufman at a Tea Party rally somewhere who said if ballots don’t work, then use bullets.

Of course it’s also revolting when actress/comedian Rosanne Barr says with a serious face, on Russia Today TV, that bankers who don’t do what she wants literally should be guillotined and others sent into reeducation concentration camps. At first you’d have thought she was deadpanning or doing parody, but usually when one deadpans one gives some sort of hint that one is deadpanning. But she never did, that I saw. And when I did a Google search as to whether she ever subsequently wanted clarify that she was just joking, I came up with nothing.

Scary stuff. After all, genocide and reeducation camps are what the Weather Underground spoke of when they were active in the 1960s and 1970s. Rosanne Barr probably has a lot of like-minded company these days.

Here’s something that’s priceless: Rosanne Barr wants to put a $100 million limit on how much wealth anyone can have. She actually said “wage”, as in yearly earnings, but she probably meant net worth. Reportedly, her net worth is valued at $80 million. So I guess she picked $100 million in order to give herself a $20 million buffer in case her own net worth should ever fluctuate upward.

 

More Bad News on the Self-Esteem Movement

One hears so much about childhood depression these days in addition to the adult kind, one wonders what’s causing it all. Here’s what appears to be one factor: the self-esteem movement.

Though I poke at LiveScience.com in the below post, the website is definitely worth reading. One of its latest reports is that undeserved compliments may harm, not help, kids’ self esteem.

“Students who rated their own performance as much higher than it actually was were significantly more likely to feel depressed than those who had rated their performance more accurately,” they write. They cite researchers who conclude that “These findings challenge the popular notion that self-enhancement and providing positive performance feedback to low performers is beneficial to emotional health.”

The article states that under the influence of the self-esteem movement, ” teachers are often pressured to provide unfounded positive performance feedback to their students.” So it seems a little more tough love could help.

It notes, however, that self-effacement may be just as bad. “The studies showed that subjects who rated their performance as much lower than it actually was also showed higher levels of depression.”

So it looks like one has to find the right balance between positive and negative feedback. Hey, how about just telling kids the truth, free of either sugar-coating or rubbing salt into their wounds.

LiveScience Should Examine the Science of Envy, Using Itself as a Research Subject

Here’s a comment I wrote in response to a LiveScience article titled “5 Facts about the Wealthiest 1 Percent”:

“Hey LiveScience, have you ever thought about writing an article about the science of envy?

For manifestations of envy, you could point to this very article. It plays on people’s envy. It clearly implies and assumes that rich people getting richer is an inherently bad thing. But what if the rich get richer while the lower-income groups get richer as well (which by and large was happening until the Obama years)? That’s a good thing. Only the envious would think it’s a bad thing. And envy is an immature and destructive emotion; one should not base public policy on it.

And by the way, it is probably true that wealth inequality is rising. But wealth inequality is mainly a function of inequality of education. Our educational system is breaking down and our dropout rate is high, resulting in millions of uneducated, unemployable, and low-income people. And our lax immigration policies are resulting in millions upon millions of uneducated people arriving here from the third world who can’t even speak English. Do you expect them to be instantly rich or middle-class as soon as they cross the border? Of course not.

So you should have discussed the main factor that is causing rising income inequality, namely inequality of skill levels.

The ironic thing is that people on the left wail the loudest about inequality, yet it is they, through their support of near-open borders, of education-stifling teachers’ unions, and of job-destroying anti-business policies that give rise to worsening inequality in the first place.

Meantime, hey Natalie Wolchover (author of the article). I’m curious. Are you an envier? From the tone of this article, it appears so.”

And here’s a comment I posted in response to another LiveScience article titled, “Who Has the Money and Power?”

“Hey LiveScience, you should run an article on the science of envy. For manifestations thereof, you could point to your own articles such as this one, which really play on people’s sense of envy. The material here conveys the false impression that the rich are sinister and conspiring to hold the rest of us down. The graphs are really biased, too. Did you know that the top 1 percent’s income has actually substantially declined during the last few years, during the anemic economy? Nah – that wouldn’t jibe with the agenda you want to promote.

It’s also telling that in your race chart, you left out Asians, who have the highest income and net worth. I guess that would have been politically incorrect, eh? After all, you want to make it look like the evil white folks have all the money and power. Not that there’s anything wrong with Asians being the wealthiest race — they should be admired for that.”

A Leftie Actor Says a Shocker

Hm. Well it’s good to see that the leftie actor Alec Baldwin isn’t totally off his rocker. He actually told a group of Occupy Wall Street protestors, “I think capitalism is worthwhile. And capitalism demands the flow of money. So, I think we need to have that. … I do not want capital markets dismantled.”

Boy I wonder if he was concerned about his personal safety after that. I’m sure he in an instant created a lot of enemies. But at the same time I’m sure he prompted some OWS-types to ponder what he said for a while, and realize that there may be a legitimate opposing viewpoint after all.

Predictions: Did it Happen?

Jump back three years ago, October 8, 2008, on the eve of Barack Obama’s election to president. An article in the American Spectator by Peter Ferrara reviewed a newly released book by Steve Moore, Art Laffer and Peter Tanous, titled The End of Prosperity.

Writes Ferrara,

The book explains in full detail the economic disaster that will befall America if it takes a sharp left turn to neo-socialism under the leadership of the far left President Barack Obama, the ultraleft Speaker of the House Nancy Pelosi, Senate Majority Leader Harry Reid with 60 liberal Democrat Senators, and their pal the ultraliberal Howard Dean heading the Democrat party.

He continues,

One of the insights of the book is that a major factor already tanking the stock market and leading foreign capital to flee America is the threat of the economic policies promised by Obama. Obama proposes increases in every major federal tax, on savers, investors, employers, small business, big business, and anyone who would start a business. Obama also promises to add additional federal spending of almost $1.5 trillion over the next four years ….That would be on top of all the spending increases already scheduled for our exploding entitlements and other programs. Obama also promises a massive increase in regulatory controls….These retrograde economic would ultimately produce a deep, long term decline in America’s standard of living, particularly for the middle class and working people. America would actually fall behind countries around the world.

Ferrara indicated that what happened under President Carter was a precursor to what was to happen under Obama:

The poverty rate actually started increasing in 1978 during the Carter years, eventually climbing by an astounding 33%, from 11.4% to 15.2%. A fall in real median family income that began in 1978 snowballed to a decline of almost 10% by 1982. Average real family income for the lowest income 20% declined by 14.2%. Indeed, during the Carter years (1977 to 1980), real income declined for every quintile, from the lowest 20% to the highest 20%.

So, three years later, here in October 2011, were the predictions of Ferrara, Moore, Laffer, and Tanous correct?

If you were an Obama supporter, you would have laughed off their predictions as being absurd. But how wrong you would have been. Their predictions were excruciatingly on target. As discussed three posts below, the poverty rate is the highest it’s been since 1993. And average real family income has declined to levels not seen in 15 years.

Seems, though, that the authors were a bit off on their prediction that Obama would add additional federal spending of almost $1.5 trillion over the next four years. It turns out that Obama has added at least $3 trillion in additional federal spending in three years. (The amount by which our national debt has shot up during that time.)

Ferrara’s article was presciently titled: Prepare for the Worst.

The Obama-Pelosi-Reid episode is proof positive if you let big-government policies flourish, the consequences are tragic. We need new leadership. Fast.

Redistribution Nation: 48.5% of U.S. in Households Getting Handouts

“Nearly Half of U.S. Lives in Household Receiving Government Benefit,” roars the headline, based on the latest U.S. Census data.

That ties in with the fact that, with two-thirds of federal government spending dedicated to redistribution, the government’s main function is now taking away money from some people and giving that money away for free to other people . It used to be that its main role was to provide essential services. Those essential services are being crowded out.

It’s worth repeating Patrick Lencioni’s observation, writing in Personal Excellence. He’s talking about socialism, but it equally applies to mixed economies – i.e. a mixture of capitalistic and socialistic policies, especially the ones where the latter gain in prominence, such as ours right now:

…First, socialism just doesn’t work—at least not for long. Most people won’t keep working hard for the greater good if they don’t receive the fruits of that work. The free-loader effect is the tendency of people to do less work when they realize they won’t see more in return. Over time, socialist societies experience decreasing productivity, risk-taking, and innovation, along with increasing tax rates, government programs, and expectations. When the economy falters, those expectations can’t be met.

Unfortunately, by the time people realize this, it is often too late for them to try a different approach, since there are more people who expect benefits from the government than there are people who pay for them. And thus begins a descent to economic and motivational malaise. Ironically, the people who socialism is supposed to help—the poor—only grows because they are joined by more people who drop out of the shrinking middle class…

That last observation – that the ranks of the poor only grow under such a system – is happening to us right now, as discussed two posts below.

 

 

 

Elizabeth Warren and the Crisis in Government Services

Lefties are going ga-ga (the uppercase of whom, by the way, is also a leftie) over a quote by one Elizabeth Warren who’s running for Senate in Mass., in which she says something along the lines that job creators should pay more taxes because of the of the government services provided to them like roads, police, education, etc.

The irony is that we’re getting less of those essential government services because of people like Elizabeth Warren!

She and her brethren on the left are fueling the biggest crisis in government: the the crowding out of things like law enforcement, fire protection, transportation infrastructure, education, etc. by wealth redistribution. For the lowdown, click here.

Another irony: her comments apply to anarchists (those who don’t want any government services). And where can you find marauding bands of people who call themselves anarchists? Try any typical anti-globalization, anti-capitalism, or other leftie rally.