While he certainly knows more mega-rich people than I do, his point rests on the purported fact that the very rich wouldn’t mind being taxed more.
Republicans have long said that taxing the rich pushes jobs out of the country and sends a message to the mega-millionaires that investing in the economy is against their self-interests. How can we simply rely on Buffet’s assertion that this is not the case among the philanthropic people he knows as the basis for taxing them more? Why does it matter what they want or what they are willing to do? Is that not, in and of itself, coddling?
Expecting representatives chosen by Mitch McConnell (R, KY) to do anything other than the will of those that pay for their campaigns is almost laughable. The very rich seldom vote by op-ed in the New York Times. The fact is, those with the majority of wealth hold the strongest sway among our elected representatives. Most of them might even give lip service to Buffet’s points, but when push comes to shove, they’re making the careers of our elected officials possible, and our congresspeople and senators know which side their bread is buttered on.
The reason we’re in this mess is because of policies enacted to fabricate money out of thin air. New financial policies were created during the Clinton administration that allowed the very people who were lending money (in the form of mortgages) to bet against that money ever being paid back (known as CDOs or collateralized debt obligations). This let banks lend an unprecedented amount of money for overvalued property to people who couldn’t reasonably be expected to pay it back, all the while insuring themselves against the possibility that those loans might be bad by investing in betting against them.
Loan officers were “encouraged” to endow people who had bad credit or no credit with mortgages beyond their means upon threat of losing their jobs. When the loans started to go bad, there was no money to pay the “insurance” of the CDOs and so the bottom fell out. Meanwhile, millions of people’s retirements were tangled up in these CDOs that somehow got rated AAA. Investors had no idea what their banks were doing with their retirement funds, which will never be recovered. Many people lost all of their savings permanently. All this was done legally, and when the bottom fell out, it was only the very rich who saw the benefit of the financial bail out.
So yes. The rich need to be taxed more. I really hope that’s not up for debate. But that’s the smallest message that needs to be sent to the people that make money making possible. CDOs still exist. There has been virtually no change in the way the system operates. No one is seeing jail time for this enormous swindle.
The real issue at hand is that the policies that allowed all of this to happen in the first place have remained in place. Sure, the SEC “punished” J.P. Morgan by making them pay $153.6 million for fraudulent investment practices. But how do you think that amount compares to the amount of money they raked in over the course of the sale of those products? While the SEC continues to charge companies like Wachovia and Goldman Sachs for the parts they played in the financial meltdown, the money they recover doesn’t hold a candle to the amount lost by the average investor and the $9 trillion it cost to bail these corporations out.
Please, Mr. Buffet, can you explain to me how your philanthropic mega-billionaire friends managed to squeak through this unscathed? Even the percentage of the tax revenue of the last 11 years that you say is something you and your good friends would all be willing to pay: how is that money going to get us out of this mess? The shock waves are still lapping up on the shores of the European economy, the US unemployment rate is 9.1%, and the system, as it stands, is broken beyond repair.
I’m not one of those nuts that calls for a return to the gold standard, but something fundamental has to change with the financial system before things can improve with any permanency. Warren Buffet’s got an idea, but higher taxes can’t solve everything. And saying that the rich are willing to be taxed isn’t a very good argument for taxing them more — that they can bear the strain of higher taxes is.
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Editor-at-large, Kate Sedgwick, works from Buenos Aires where she organizes her live storytelling project, Second Story Buenos Aires. Read more about her than you might want to know at her blog YesThereIsSuchAThingAsAStupidQuestion.com, and follow her infrequent tweets @KateSedgwick.