Monday, December 3, 2012

How the Extreme Left Thinks Warren Buffet's Proposal Was Wrong

They think, surprise, that government spending should be an even higher percentage of GDP than Buffett recently proposed and that a consumption tax should be added to Buffet's call for a tax on the rich.

Here's David Warsh explaining the position and taking some nasty swipes at the mental ability of Buffett:
The fiscal cliff negotiation is no better than a skirmish in what promises to be an epic ten-year struggle to achieve a new fiscal compact. For evidence of that, consider Warren Buffett’s entry into the debate last week, with a suggestion that negotiators seek to bring in revenues at 18.5 percent and cap spending at about 21 percent of GDP...

It was the right argument, but Buffett had the wrong numbers. He apparently borrowed them from the National Commission on Fiscal Responsibility and Reform, led by Erskine Bowes and Alan Simpson, now more than two years old.

The first to say so was Matt Miller, a former McKinsey consultant and Clinton era advisor to the Office of Management and Budget, who has been slowly working his way into the upper ranks of the next generation of opinion-makers as a talk-show host and weekly columnist for The Washington Post...

If only because of the aging of the baby boom, Miller wrote, the future isn’t going to be like the past.  The number of seniors on Social Security and Medicare will nearly double in the next fifteen years, to around 77 million persons.

There is the question of the trajectory of health care costs...

The significance of Buffett’s faux pas is that, for forty years, he has been such a sensible guy...

Unfortunately, Buffett’s op-ed article last week showed that he is no longer thinking seriously about the future. Despite its elaborate courtesy (“ I hate to pick a fight with the sage of Omaha…”), Matt Miller’s column was a good example of the symbolic slaughter of the elders that should occur more often when their opinions are no longer relevant to the debate.

So what’s the right number?  Miller guesses 28 percent by the time the boomers’ retirement is in full swing.  That seems plausible, though of course this is not the way that such targets are set. In each new era, policies are chosen.  Appropriations are made. New sources of revenue are found (in the present instance, almost certainly a consumption tax.)
Speaking of symbolic slaughter of the elders, Warsh is fast approaching 70.

Buffet, though, has not likely lost his marbles. He is simply a clever opportunist who will misrepresent facts that will aid the government officials he plays footsie with. He knows damn well that a call for government spending at the 28 percent level would be lacking in political astuteness. Even though he may fully expect spending to eventually reach that level, given the current interventionist trends. In fact, he likely knows that government spending at some point will really skyrocket well beyond 28 percent of GDP because interest rates are likely to soar at some point.

The far left can't call Buffett on any of this, though, because they want that spending at 28 percent and beyond, now. So instead of correctly identifying him as a crafty oligarch, they call him nuts.


  1. The younger boomers, and millenials, are screwed. There won't be enough productive capacity left to feed them or give them health care, no matter what bargains are struck, now or later.

    The link between a job and an income will have been severed. There won't be many jobs, and even the service sector will shrink. Humans will be ejected from the system, in fact, it's already happening, and it will accelerate...

  2. Model brain with 2.5 million neurons configures itself to solve problems
    For this model brain, architecture matters more than sheer numbers.

    COMPUTER chips that mimic the human brain are outstripping conventional chips in crucial ways. They could also revolutionise our understanding of how the brain functions.

    Machine translator speaks Chinese in your own voice

    These are a tiny fraction of the things under development.

    Machine intelligence is following Moore's law.

    Human intelligence may even be decaying.

    Economics may matter very little by the middle of the 21st century.


    by economist Mike Norman

    I am amazed at how many people still believe the deficit is a problem. Where is the problem, show me? In spite of the deficit AND a downgrade of the US credit rating, interest rates are at record lows, economic growth remains positive and is leading most of the world, unemployment is coming down, the dollar is stable, inflation is low, the housing market is recovering, corporate profits are at record highs, personal savings have rebounded and the list goes on and on and on. There is not one, negative consequence of the deficit—NOT ONE—yet people remain convinced that we need to cut the deficit. What we really should be doing is concentrating on more important things, like creating more jobs, reducing income inequality, stopping foreclosures that are blighting our towns and cities and prosecuting Wall Street fraud and criminality, but instead, all you hear about is this phony fiscal crisis and the deficit. The average person has been massively propagandized into believing this is an issue, when it’s not. It’s simply not.

    For what it’s worth, here’s my plan: Forget the deficit. No, wait, even better…run it up. Run it up big time, like we did in WWII, to 30% of GDP. But instead of building armaments, let’s rebuild our roads, bridges and infrastructure, provide gov’t paid healthcare to people (fire the insurance companies!), invest in education by building schools and hiring teachers (and paying them well), expand basic science and research, explore alternative energy, create new transportation systems. Let’s do all these things. Sure, the deficit will get really, really, big, but in the end we will have created massive amounts of new physical and intellectual capital. That’s real wealth. And it’s the wealth that we will be passing along to our kids and grandkids and generations to come. That’s what we should do with the deficit.