Warren Buffet on Bush Tax Cuts and "Trickle Down"Follow

That's certainly possible. Heck. It's even probable. But that just means that Obama is just as wrong about economic policy as you are. For you, it's harmless. For him, it's harmful to all of us.



What is the virtue of raising taxes on the rich? Is that virtue economic in nature, or social manipulation?



You've been well indoctrinated, I see. And who do you suppose put the tax rates for those groups in danger in the first place?



Yes. The overwhelming agreement among economists is that the problem with the economy is that those with capital are not investing it in ways which result in increased employment. That's why the markets have recovered, but unemployment is still high and threatening to go higher. Companies are not hiring.


So... Knowing this we should all be rejecting any policies which make the cost of hiring people higher, or which reduce the amount of profits one might get to keep as a result of expanding business and hiring more people. How does mandating higher health care for employees, and raising taxes on the wealthy help accomplish this? Oh wait! It doesn't. In fact, if I were to actively come up with an economic policy designed specifically to ensure that unemployment stays high in order to lengthen the economic crisis, I would have done exactly what the Dems have done over the last couple years.


Think with the part of your brain that reasons, not the part that simply regurgitates what you've been told.

No it just means Obama is trying to keep the money in the hands of the people that need it most. The rich fat cats put the country in the mess, the other 90% of the country should not continually be put under the buss for them.




It gives a garunteed sum of money that the government can then put into programs that are garunteed to create jobs. Giving the rich tax cuts does not garuntee they will invest it. Providing a larger purse at the end of tax season can see increases to small companies tax benefits, large companies tax benefits, which in turn allows for increased hiring or at the very least a more stable bottom line and more stable jobs. There is nothing forcing say Buffet to put his money into anything. Infact I think he states that himself.

What is the virtue of cutting the riches taxes? Keeping in mind they are not being forced to invest and if they do, they are not forced to do so in the USA. There is no positive reason to keep them in the cuts.



There should not have been mass cuts in the first place anyhow. The entire work of the clinton years was wiped out before Bush was done his first term. Thanks in part to 2 wars. 2 very unsuccessful and costly wars. This was further cemented on the fact the economy at the time was built on a foundation of sand. It was built entirely on spending, which the cuts to taxes further helped a long. But when the creditors cam knocking and people had no money the sand washed away and the house of cards collapsed.

The largest reason behind this was because of the Wars, the longer they progressed the more Oil prices went up, the more they went up the more gas cost. Instead of going to the movies or out for dinner people had to spend that extra money so they could continue to get to and from work. The less and less money was changing multiple hands the more and more the economy hurt. It was because of Jack and Sue not seeing a movie that Sally lost her job, Sally was saving for a new car, but now because she couldn't get one Jeff and Jim lost their jobs, now Jeff and Jim needed those jobs to pay for their mortgages, but without them the bank had to take their homes.

Where were the rich fat cats when this happened? Oh thats right buying up these high risk low cost investments and when it went tits up they lost money, so they sold some assets else where, which affected the small time guys they were invested in. Now the small time guys had to lay off 100 people because their investors backed out, and so on and so forth.

As for being indoctrinated I live in Canada because of our regulations and government support programs, and Tax Rates (which hit the rich harder than the not as wealthy) we came out of the Recession virtually untouched. To the point where we were bailing out american companies, issuing loans to the Govt to bail out your failed wall street, out Private Banks buying out your Private banks. I guess that is me being well indoctrinated, or maybe its just me seeing that your failed trickle down economic system, has benefited my countries non-trickle economics more.


But companies are hiring, companies have been hiring, the US has recovered nearly 95% of the jobs lost due to the Recession. Does this mean that everyone who had a job before does now. Nope it means new people do. Is the plant in such and such going to rehire 1500 people, probably not. But the three new ones in other places might hire 1200.

The issue with the american economy is the fact your media seems to love to hone in on the fearful, and displeasing numbers. They gloss over the fact that the economic index has been steadily climbing. Jobs have been replaced not recreated. More and more people are spending again. It has nothing to do with investment from the top. You can invest 400 million into something, but if people aren't buying that something, what is the point of hiring people to make more of it.

Trickle Down economics do not work. You think the republicans would have learned this after destroying the economy in the 80's and early 90's.

Now don't get me wrong, im no a staunch supporter of either side. I am just saying, money isn't like water, it doesn't flow down hill. Tax breaks on the rich is redundant. Give more to the middle class and the rich make more money. The guy who owns walmart sees sales increase, gets more money, thus he builds another store. He doesn't just build another store and hope sales increase. (ok mybe walmart was a bad example because it is pretty much a goldmine wherever it opens, but you get my point.)

Wonderbread,



And of course he's the one who tells us who most needs the money we've earned am I right?

You speak as though tax cuts are not their own reward. Also, by that logic, the Dems should have allowed all the tax cuts to expire unless they were willing to also cut spending. But instead we're supposed to accept the whole "I want to help working and middle class people cause I'm nice!" rhetoric. Nice little double standard you've got going on there.



No, they wouldn't. If you knew what "Fiscal Conservative" meant, you'd know why.


Also: Lol! Pay for tax cuts. Shows just how indoctrinated you are as well.

And you don't see that there's a conflict between doing that and someone generating that money in the first place?



Except that the status quo you blame those rich fat cats for ******** up exists because of their actions. Without them acting as they do, the bad state some people are in right now would be normal instead of unusual. But you can't see that. You don't see that people have jobs because wealthy people have the money to employ them. And when the wealthy lose money they stop employing as many people and the other 90% gets screwed over. To respond to such a thing by punishing the rich by taking more money from them is not only counterproductive, it's also insanely stupid.




But those jobs aren't guaranteed to generate productive output in excess of their cost, are they? So to interpret this as an actual answer to my question, the virtue is not economic in nature, but about social policy. You want people to feel better because their government is taking care of them even if in the long run that same government is hurting their real economic future. At the end of the day, who holds the money doesn't really matter. What matters is that the total amount of "stuff" we have to enjoy in our lives draws from the total poll of "stuff" we create via productive labor. Any system which disconnects the productive labor from the distribution of that stuff is inherently dangerous and unstable.



You're correct. There's nothing forcing him, or any other wealthy person, into investing their money. But they do anyway. They do because the reason they are wealthy is because they do. Consistently. And they tend to do so in ways that are vastly more productive than what government would do with the money if it had it.



By that logic, no one should ever be allowed to retain any wealth beyond that needed to buy food, shelter, and clothing. Heck. We shouldn't have money at all. Let's just have everyone work and let the government provide just those things for them. Cause that's worked so well every time it's been tried.

At the risk of waxing poetical about the principles of freedom and liberty, I'll just point out that the idea that people's property should be taken from them because the government can't guarantee what they'll do with it is pretty far away from the things most of us think are important.



Are you suggesting that the goal of economic success is to make the government richer? Tax cuts let the people retain a greater share of their own labors. How is that ever a bad thing? I thought the government was supposed to work for us, not the other way around.

I'm cutting out the next two paragraphs because they're just splurge and meaningless to this conversation. You can all thank me later. :)



Sigh. You realize that the government forced those rich fat cats to buy those investments, right? Ok. You probably don't. Maybe you should educate yourself on the whole sub-prime loan mess before insisting that it was all greedy investors who caused it. The government, and its social agenda, had a pretty massively large hand in creating the conditions which lead to the housing bubble. Ignoring that in favor of blaming the rich guys only shows your ignorance of the issue.



You fail at math. Seriously. And you apparently don't understand what an unemployment rate is. A larger percentage of the US population as a whole is without a job today than were when Obama took office. Recovering jobs lost without maintaining the existing rate of new jobs created is meaningless. I can tell you that nearly all major corporations in the US right now have hiring freezes and have had them for about 2 and a half years.

No amount of the government creating jobs will fix this. The private employers need to create jobs. And that has not been happening.



Lol. What do you think trickle down economics is?

Are you suggesting that the big government spending programs work as an alternative? How well has the stimulus worked? Has it worked at all? I know you're going to continue rambling on about jobs created or saved, but that is completely irrelevant if overall employment has dropped during that time period. The private economy continually creates jobs. Far far more jobs than the government can create. By running massive deficits attempting to create jobs itself, and then dithering over future tax rates, the government did far more damage than it did help. It created a handful of jobs, but eliminated all the jobs that the private market would have created by itself during the same time period.

That's counter productive. Some of us understand this. Others, like yourself, don't.



Um... But if you take the bolded section out of the equation it doesn't work, does it? If he doesn't get to keep as much of the money he gets by selling things, he's not going to build as many new stores. And those stores in turn are not going to be as profitable either. Over time, he'll hire fewer people than he would have otherwise. People spending money in his store only helps him if he actually sees the profit from it. If his taxes go up, or the cost of running the store goes up, the effect of greater consumption is diluted. Surely, you can understand this?

Edited, Dec 20th 2010 4:33pm by gbaji

85% of that is wrong or at least misguided in the explanation.

Oil prices did not cause economic choppiness, it's still artificially low.

The main problem with trickle down as an economic tool is diminishing returns on this capital as opposed to recurrent gains on the demand side.

Think of it as the difference between giving someone more money and hoping that they invest In you as opposed to having your investment vehicle having a better ROI and thus being Inherently more attractive.

Now because of the jumble quote you made Ill try my best to respond to you and not myself. But only on a couple of points.



Are any jobs no, be they via public or private investment. There is no garuntee that one job will be productive. Which is why the jobs are coming back so slowly. There is no garuntee that people will buy products, or said products will be relevant tomorrow, next month, next year. It is always a gamble enterprising a product.

The difference that Government can make is through Static Investment. If they were able to take taxes from one area and lower them in another. For example take taxes from the top 10% of earners, and use those taxes to offset a tax decrease on companies, small companies can use that money to staff more people. More people staffed is more tax revenue. If the owners of these companies do not hire more people and in turn just pay themselves than the govt taxes these higher bracket earners and still gets some return on their investment.




No thats not waht I said at all. The majority of foreign investment from private entities in the USA comes from the wealthiest americans. Middle income/Lowincome tend to invest in products they recognize, home grown things like Googles, and Microsofts, and Fords. These people alse spend considerably more (due to population differences) on everyday products in the USA. Products above food/shelter/clothing. Products like Cars, Computers, Video Games, etc etc etc. The reason you see Fords and GMs moving to mexico's and China's is because of cheaper labor which means a fatter bottom line for them. They invest in other lower market countries to ensure they get maximum dollar value. It has nothing to do with controlling the money inside a nation, its about keeping that money inside the nation. A new plant in mexico does nothing for the thousands of american auto workers without a job.



No I am suggesting the Govt stop being idiots and thinking not taxing the rich is the way to fix the economy.

Jan 1993: UER was 7.4%
Enter Bill Clinton

Jan 2001: UER was 4.2%
Enter GWB

Jan 2008: UER was 7.7%
Enter Beebop Obama.

Nov 2010: UER 9.8%
still tax cuts for the rich......

source: http://data.bls.gov/PDQ/servlet/SurveyOutputServlet

Seems like everytime the GOP gets in and flaunts their tax cutting scissors around, people lose jobs. Lots of them. Seems as if their social spending programs do work (that or actually putting money back into companies via tax relief made available by taxes on the rich.)

Oh and for comparison sake tax brackets for the same years.

Bush left highest earners (86K+) @ 31%
Clinton Came in New bracket Highest Earners (250K+) @ 39.6%
When Bush JR left that last bracket changed to 209K @ 33%
new Braket highest earners over 373K @35%.

His tax cuts did nothing but lower the amount of revune available. He fought 2 wars and Had nearly 8% less overall in the budget than Clinton. Not to mention losing 3% employment on top of that for a further loss of income.

But yes trickle down economics really do work.....

Soure: http://www.taxfoundation.org/publications/show/151.html.

Id get into the debt/deficit too but I am now bored of teaching you to google.

Of course they are. Because in the private sector, if your labor doesn't benefit me, I'll lay you off. In the absence of the government stepping in and forcing employers to hire and pay people, we can pretty safely assume that the overwhelming majority of people who are currently employee in the private market are employed at a cost that is less than what their employer gains from their labor. If it wasn't, the employer would lose money on them and quickly get rid of them.



But at a macro-economic level, you absolutely can say that "employment" must be productive in excess to its cost in the private market. I suspect you are missing the point I'm trying to get across.

The government's revenue is not dependent on the jobs it creates being productive, thus there's no requirement that said jobs be productive relative to their cost. The total labor an employer hires absolutely has to cost less than it produces, otherwise he'll go bankrupt. He can't pay his workers more money than his business makes, right? It's kinda axiomatic.



How is that by any definition an "investment"? Can we please be honest with the terms we use? What you're describing is a methodology for government to maximize the amount of revenue it can take from the private economy. It has *nothing* to do with investment. Period. I know that politicians like to use the investment label when talking about government spending, but that's really not what's going on.




This is total BS. People invest their money in whatever will generate the most profit for them. If you want people to invest in domestic companies and domestic products, then you need to make those companies and products more attractive and profitable. Raising taxes and mandating additional employment costs isn't going to do that. Please tell me you can understand this.



But it does allow millions of American consumers to buy a better car for less money. But this is really beside the point. The issue of offshoring is far more complex than what we're talking about here. The question is whether or not profits made by the wealthy and businesses inside a country benefit the people living in said country if the government doesn't intervene.

That's what trickle down is about, right? And it's not just about jobs and wages, and doubly so not in the super-simplistic way you're expressing it. It's also about development of new products, and improvements to existing products, and drops in relative costs of both.

If I double everyone's wage, but triple the cost of everything you buy, I haven't improved your condition, have I? Similarly, we can say that a reduction of the relative cost and/or increase in the quality of consumer goods is equivalent to an increase in wages. Wages alone are only part of the equation. If wages are flat, but the quality and quantity of available goods have increased, and the cost of many of those goods has decreased relatively speaking, then those people's lives have been improved. Even if they did not get a raise, or a better job, their lives are better. Yes, even if the products they're using were made in Taiwan.


You're also losing sight of something. Employment rates dropped the most *after* we passed the stimulus bill, and that was after the companies which lost money from the housing bubble had been bailed out by TARP. Now we can assume that there was some magical and undefined thing which continued to cause employment to drop at a greater rate than during the height of the crisis *or* we can look around for other causes. And when we do the latter, we can look directly at the uncertainty created by the massive borrowing required by the stimulus and the additional uncertainty caused by failing to extend the Bush Tax cuts.

That's perhaps a side issue, but is relevant to a degree. Trickle down assumes that people are benefited by "the rich" having more money. But it's more complicated than that. The rich have to both have money *and* believe that they can gain more by investing their money in expanded domestic business. If you adopt policies which hurt both of those things, you should not be surprised when things get worse for the poor and working classes. They will bear the brunt of those things.




Are you arguing that taxing the rich *is* the way to fix the economy? Cause I don't think it's that simple.



Um... You're missing the other side of the correlation. It's not just about tax rates, but about how well business is doing. In the late 90s we had a booming economy, and unemployment was good. We also had a booming economy in the 2005 - 2007 time period, but you wouldn't know it from the media coverage. Things did not start to get crappy for the workers until the rich lost a bunch of money on their housing investments.


The correlation is that when the rich make large profits, the working class benefits by having more and better jobs. How we get to the rich making large profits can vary, but as a general rule, taxing the hell out of them isn't a great idea.



That's not even relevant math. You may as well just spout random numbers and insist that they support what you are saying. How much is in the budget is irrelevant. All that really matters is how much you are taking from the private economy, and how much debt you have relative to the size of the economy.

What Bush did was drop the percentage of the economy which was being taxed, which did create a deficit. However, after just a few years, the economic growth offset those deficits, allowing us to sustain a consistent debt to GDP ration in the 35-37% range. Contrasted to the Clinton administration, during the last year when the Dems still controlled congress, and that ratio was 50%.

The correlation you are missing is that Congress actually holds the purse strings. It's not all just about the president. And it's not just about tax rates, but overall how friendly the environment is to business. Tax rates are just one aspect of the issue.



Yes. It really does. Probably not in the strawman ways you've been taught though.



What do you think this source tells us? I'm always amused when people just post a link to some site and don't bother to provide any explanation as to why said site actually supports what they are arguing.


I'll also give you a hint: Nowhere in any of those tables with tax rates, and employment rates, and revenue and debt, and all those other indications can you find a real measurement of "people's lives are better". That's the problem with the academic economic approach that the left seems to love. They forget that there are people who make up those economic statistics. And people don't tend to like being treated like mere statistics. If your entire policy is based on treating people like either sources of revenue for the government, or targets for funding for government, don't be surprised when they see your policy as dehumanizing. You're so focused on what the numbers say that you lose sight of the people.

Does it mean something that every time you've written a paragraph saying why the demand side process is "good", it sounds like you just strung a bunch of words and phrases together semi-randomly? In my experience, demand side advocates use language like this purely to attempt to obfuscate the actual policies they're operating on. Usually because they don't want anyone to realize that the math they are using doesn't work out. At least not in terms of supporting their policies.

The reality is much simpler. You are arguing that since the supply side gains its revenue from consumption of the products it makes, that anything taken from the supply side and handed to the demand side (via entitlement for example) doesn't really cost anything since it'll come right back in the form of consumption. And that's a wonderful idea in principle and on paper. But it doesn't work in the real world. I'd explain why, but it would be a long explanation. I'd rather you actually explain, in clear English, why you think it works.




This is circular reasoning though since it starts with the assumption that economic growth arises as a result of consumption (spending). Obviously, the wealthier someone is, the less of their money they spend on direct consumption (demand) and the more they spend on investment. However, to use this fact as an argument for the demand side economic position requires that one already accept demand side economic position.


Let's also be clear that the "position" isn't the same as the math and theory. The position isn't really about the demand side at all, but a rejection of the value of capital left in the supply side of the equation. And IMO that isn't driven by economic factors, but social and political ones. It enables politicians to run on a platform of entitlement to the voting population, which buys them votes and gives them power. Of course, it only works if you can convince enough people that there really is no cost. And that's where the position comes in.



Not without a loose definition of "capital gains". What you're saying is that it's ok to replace profits gained via investment with profits gained via sales of productive output and nothing is lost. IMO, this is the huge flaw of the demand side only argument. There *is* a difference between them. As you say, it does not guarantee that profits are retained domestically, or that someone gains the use of a product in the process.

However, you run into the "you can't buy what's not on the shelf" problem. What you're describing is great if all we ever want to do is produce the same goods and trade them for the same labor. Forever. But if we want to make better products, and produce them more efficiently, and pass the savings on in the form of greater economic prosperity, then we have to allow for as much investment as possible.

And that means allowing as much supply side "wealth" as we can. And all one has to do is look at the advancements in the last century or so to see that this works.

Where do you think the products on the shelves today came from? Did they arise because we took the profits from earlier endeavors and handed them to consumers so they could keep buying? Or did they come as a result of wealthy people sinking large amounts of capital into investments and some of them bearing fruit?

The example of trickle down I like to use is cell phones. How many people owned a cell phone just 15 years ago? How expensive were they? And how useful were they? Contrast that to today. How did that happen? On paper, the people who own cell phones today are no wealthier than they were 15 years ago, so what changed? Now, ask yourself if the cell phones you can buy for relatively cheap today would exist if we'd applied demand side economic policies.


The answer is "no". Cell phones would still be toys for the rich. There would be massive taxes on them, and the money would be handed to poor people so they could buy more important things like potatoes or something. Even if you subsidized cell phone technology itself, it would not have advanced so quickly without a desire for profits on the investment itself. Why develop a better cell phone if the government is going to tax your profits greatly and subsidized the sales the same whether it's got new features or not. No, you'll just keep selling the same crappy motorola brick to the same customers forever.


That's the problem with the demand side. Without allowing profits from investment, no one has any incentive to make anything better. And what has improved our lives over the last century or so has been making products better, not making higher wages, or more equal pay, or any of those other things. There is a high cost for what you're arguing. It's just that most people don't realize it.

Edited, Dec 20th 2010 8:02pm by gbaji

Actually, we were discussing consumerism. There was that whole bit about how people need jobs more than they we collectively need the products of those jobs, which is increasingly making a job a commodity that one must have, even if it's in trade for an unfair wage.

But I can understand why you would think we weren't discussing it. It's very inconvenient to your argument.

No. We were debating between economic policies either advocating leaving greater wealth in the supply side, or using government to artificially shift that wealth to the demand side. Since both of those equally fail to address the issue Paul brought up, his point is completely irrelevant (at least to this discussion).

Certainly it is absurd to advocate for a policy which absolutely depends on entitlement money being spent consuming more quantities of produced goods in order to "trickle up" wealth if your argument is in opposition to the very nature of consumerism in the first place.



And that's a great argument. But it's like jumping into a conversation about the best dog breeds by insisting that cats make better pets than dogs.



We weren't discussing it. And it's no more or less inconvenient for my argument than the arguments I'm opposed to. In actual fact, my position is less opposed to what Paul is saying since my position is not as reliant on increased consumption to make work.