WATCH Warren Buffett on Charlie Rose Today 8/16

[Midpack]

I just watched, but I am sure it's on at different times on various PBS stations. Warren is in the news today for his NYT op-ed piece http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?_r=2&ref=warrenebuffett, but CNN and other networks are focused on Warren's statement that the rich should be taxed more without also acknowledging that he realizes that won't be enough, that we must deal with spending and revenues (aside from the super-rich). He is only volunteering as a sincere means of starting the process.

I thought it was interesting that he suggested tax/revenues of 18½-19% and spending of about 21%. I think we're at about 15% and 24%+ respectively right now. He said we can stand a deficit of 3% of GDP because growth will resume (and already has in his businesses not associated with home building), but not 10% like we are now. Interesting insight IMO...

If you're down on America Inc lately (political gridlock, stock market volatility, etc.), I think you'll feel a little better having watched his interview today with Charlie Rose. FWIW...

Stop Coddling the Super-Rich
By WARREN E. BUFFETT

Published: August 14, 2011

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

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. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

 

[JmfromTx]

I caught the last half. Warren Buffett has more common sense than our whole electorate combined. I like listening to Charlie Munger too.

 

[nvestysly]

I Liked the Interview

DW and I saw the interview too. I think it originally aired on August 14 but we watch it a day later at a more agreeable (to us) time slot.

In general I think Warren is on the right track. I think he may have oversimplified the situation but it's a good direction to take. He indicated Bowles-Simpson (or vice-versa) made too much sense so it couldn't be adopted by congress or the president for that matter. I favor what was labeled as the zero plan in the B-S proposal. The zero plan provided the biggest bang for the buck IMO - it would have made the largest change to the tax code in a while - leveling the tax playing field in some ways. Yes, it would have been a revenue increase (aka tax increase) in some ways but it would have removed many of the oddball incentives that have been handed out over the years. It would have also decreased the corporate tax rate considerably and IMO this is key to increasing domestic spending for corporations.

The interview is definitely worth watching.

 

[Nords]

I always watch Buffett to see if he's losing his edge. In this interview, though, he seemed to be a bit hypercaffeinated.

"Oh, look, the market's down another 500 points!! Woo-hoo!!!"

I wonder how many of the super-rich have a $10Billion charitable-donation tax deduction to carry forward.

 

[scrabbler1]

I saw part of the show last night and the whole thing earalier today in the replay.

While he makes a lot of sense, especialy about Bowles-Simpson, some of what he said about the Payroll Tax was a little off. He doesn't pay the SS part of it on his wages over the cap and on his dividends and cap gains because SS does not replace any wage income over the cap or any of his nonwage income. If he is implying that the Medicare part of the Payroll Tax should apply to all of his nonwage income then he is on target, though.

But the pols should pay attention to what he says nonetheless.

 

[Midpack]

?..some of what he said about the Payroll Tax was a little off. He doesn't pay the SS part of it on his wages over the cap and on his dividends and cap gains because SS does not replace any wage income over the cap or any of his nonwage income.

I'm guessing he's well aware of same.

 

[haha]

Notice that buried in Buffett's remarks is an indirect reference to COLAs on entitlements. He says we have to stop the situation where our entitlement outflows automatically increase each year, which sounds like COLAs to me.

Ha

 

[Midpack]

Evidently you can watch it here anytime Charlie Rose - Warren Buffett

 

[FANOFJESUS]

He talked about means testing too.

 

[donheff]

Notice that buried in Buffett's remarks is an indirect reference to COLAs on entitlements. He says we have to stop the situation where our entitlement outflows automatically increase each year, which sounds like COLAs to me.

Ha

He may have been alluding to the proposals to use an alternate - less generous - index for SS.

 

[FreeAtLast]

I thought he was alluding to his monthly SS was like a fly on an elephant. It just did not make much sense for him to be receiving the benefit. It was not providing him with any financial security he did not already have.

 

[haha]

I thought he was alluding to his monthly SS was like a fly on an elephant. It just did not make much sense for him to be receiving the benefit. It was not providing him with any financial security he did not already have.

Although he did discuss this, and the topic of means testing for benefits, this is not what I am referring to. What I mentioned turns up somewhere around minute 22. Anyway, what Buffett thinks should happen is just what he thinks should happen, likely far removed from what will happen. However, I hate to see discussion of killing or weakening COLA when the FED is exerting itself so valiently to destroy the value of the dollar.

Ha

 

[ejman]

Some of his statements sound to me almost socialistic. It's self evident that since tax rates starting dropping in the early 80's we as a nation and particularly the middle class have had an unequaled period of ever increasing prosperity as the trickle down theory as shown its worth. We clearly need even lower taxes, particularly on the wealthiest americans. It's interesting that Mr. Buffett should take an opposite tack.

 

[clifp]

He in the past has talked about both. Changing the COLAs to be less generous (switching indexes) and also means testing it.

A few weeks ago I attended the lecture by another billionaire Sam Zell who is far far to the right of Buffett politically, (he hates Obama) and he too found it absurd that he was collecting social security.

Certainly eliminating social security for people with AGI above million/year I doubt would be wildly unpopular even among the super rich. Of course it would be largely symbolic.

Did anybody else catch the part where he said that last Monday (when the market was down 600+) that he bought more stocks than any day this year. Me too Warren, I'm trying to learn from you.

 

[chinaco]

His message: The rich are have an unfair advantage and are being shielded for an equitable part of the burden.

Why is he speaking up? Because some of the political rhetoric is convincing some people (voters) to support continuing to shield the wealthy. What those people do not realize... is that they are paying for the low tax rate for the rich.

Rich in terms of his definition of rich! Not you with your 401k!

 

[ERD50]

Haven't listened yet, but I just hope for [-]2[/-] 3 things:

1) That this discussion brings to the public/Washington that there is a big difference between the $200,000/$250,000 'rich' and the $1M, $5M and >$10M 'rich', and that taxes are adjusted accordingly.

2) Any changes are automatically inflation adjusted (don't create another AMT mess).

3) That the discussion includes some realistic measure of just how much/little this will help balance the budget. Are there enough multi-millionaires to make a significant difference? I fear that if they pass some changes, they will claim 'problem solved' and continue to spend far beyond the new revenue. That doesn't mean don't do it if it is a small benefit, just don't 'over-sell' it.

-ERD50

 

[youbet]

Haven't listened yet, but I just hope for [-]2[/-] 3 things:

1) That this discussion brings to the public/Washington that there is a big difference between the $200,000/$250,000 'rich' and the $1M, $5M and >$10M 'rich', and that taxes are adjusted accordingly.

2) Any changes are automatically inflation adjusted (don't create another AMT mess).

3) That the discussion includes some realistic measure of just how much/little this will help balance the budget. Are there enough multi-millionaires to make a significant difference? I fear that if they pass some changes, they will claim 'problem solved' and continue to spend far beyond the new revenue. That doesn't mean don't do it if it is a small benefit, just don't 'over-sell' it.

-ERD50

+1

Strongly agree with all three points.

Obama's speech writers would be doing him a favor if they'd stop putting in so many references to "Billionaires" and "corporate jets" when he's advocating for the tax increases to start at $200k single and $250k MFJ. Maybe the $200k/$250k is the best level to start jacking up the rates. But why keep trying to sell that as only impacting Billionaires and corporate jet owners? It's insulting that they think we're that dumb. I'm glad Buffet was clear that he was referring to the "Super Rich."

 

[M Paquette]

Certainly eliminating social security for people with AGI above million/year I doubt would be wildly unpopular even among the super rich. Of course it would be largely symbolic.

Can they keep just enough to cover their Medicare payments? Otherwise they'll have to write a check every month, which can be a pain (especially if one accidentally misses a payment!).

 

[Purron]

How about this for an alternative to our current political choices?

Buffett/Buffett 2012

 

[walkinwood]

I watched it last night and agree with Nords about Buffet being a bit over caffeinated.

The PBS news hour yesterday had a piece on income inequality that was interesting. Most people interviewed thought our income inequality was a lot less than it really is, and most wanted to live in a society where income inequality is much less.
Land of the Free, Home of the Poor | PBS NewsHour | Aug. 16, 2011 | PBS

Interestingly, Buffet pointed out that all his non real-estate related businesses were doing better, quarter over quarter.

 

[tjscott0]

CNN and other networks are focused on Warren's statement that the rich should be taxed more without also acknowledging that he realizes that won't be enough, that we must deal with spending and revenues (aside from the super-rich). He is only volunteering as a sincere means of starting the process.

Yep. I noticed that also. Main Stream Media is more interested in sensationalizing news rather than reporting news. But neither political party or Americans in general have any interest in cutting spending.

As US tax rates drop, government's reach grows / The Christian Science Monitor - CSMonitor.com

Slightly over half of all Americans – 52.6 percent – now receive significant income from government programs, according to an analysis by Gary Shilling, an economist in Springfield, N.J. That's up from 49.4 percent in 2000 and far above the 28.3 percent of Americans in 1950.

Mr. Shilling's analysis found that about 1 in 5 Americans hold a government job or a job reliant on federal spending. A similar number receive Social Security or a government pension. About 19 million others get food stamps, 2 million get subsidized housing, and 5 million get education grants. For all these categories, Mr. Shilling counted dependents as well as the direct recipients of government income.

I'm afraid that US has reached the tipping point. Over 1/2 of population is currently receiving some sort federal gov't benefit with baby boomers rolling onto SS & medicare rolls at a rapid pace.

 

[rockyj]

Evidently you can watch it here anytime Charlie Rose - Warren Buffett

Just watched the interview. Interesting to hear more than the soundbites of the last couple of days on this. Thanks for pointing this out.

 

[Gone4Good]

He said we can stand a deficit of 3% of GDP because growth will resume (and already has in his businesses not associated with home building), but not 10% like we are now. Interesting insight IMO...

I wrote a post about the math on this a little while back. Buffett is basically correct with the 3% figure. That's the approximate deficit we can run in perpetutity while maintaining a stable Debt / GDP ratio.

But I think he's wrong to suggest that we should target a structural deficit just because we think we can. Instead, we should target a balanced budget over the cycle - which means not freaking out about deficits in the midst of a giant slump and not freaking out about projected surpluses at full employment.

Having dry powder available to confront crises is something that's hard to put a value on. Just think how much better off we'd be today if we left the surpluses of the late 90's alone.

 

[ERD50]

Just think how much better off we'd be today if we left the surpluses of the late 90's alone.

Wouldn't the bursting of the dot-com bubble and the bursting of the housing bubble made that difficult?

-ERD50

 

[Gone4Good]

Wouldn't the bursting of the dot-com bubble and the bursting of the housing bubble made that difficult?

-ERD50

My comment doesn't say those surpluses would persist.

The intended way to read the words "left the surpluses of the late 1990's alone" is that over the succeeding decade we would have passed balanced legislation that paid for itself.

Tax cuts paid for with spending cuts.

Spending increases paid for with tax increases.

We didn't do that. Tax cuts were said to be needed to eliminate unwanted government surpluses by none other than the Fed Chairman. Spending increases were a free lunch, even though the previous surplus had long become history.