In a recent New York Times op-ed, Warren Buffet points out the dangers of the rising U.S. deficit. But in doing so he refuses to point the finger at the obvious cause: the incredible mal-distribution of wealth in our country.
Instead, using a climate-change analogy, Buffett worries about a "greenback effect" -- the inflationary impact of printing more money to deal with the deficit which could turn the U.S. into a "banana republic economy." He quotes the famous Keynes passage about how governments can use inflation to "confiscate, secretly and unobserved, an important part of the wealth of their citizens...."
Buffett has the perfect opportunity to help the public understand that the root cause of the economic crisis is our horrendous income distribution exacerbated by decades of tax cuts on the super-rich, especially the unconscionable gift to the super-rich by George W. that gave our surplus to the wealthy and saddled the government with a trillion dollar deficit. The last time the nation's income distribution was this bad was just before the great crash of 1929. Because we destroyed the progressive income taxes that moderately constrained great concentrations of wealth during the post-War period, another great fantasy finance crash emerged. (Forgive me for suggesting you take a look at The Looting of America for a detailed account of how we got here.)
Instead Mr. Buffett makes the problem seem entirely the result of our efforts last Fall to pour money into the economy in order to prevent another Great Depression. Buffett tells us that by piling up so much debt we are stuck with three bad options: either China and other countries with surpluses buy up our debt, or that we buy up our own debt through increased savings, or we print more money and become a banana republic. He implies that raising taxes will not happen because, "Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election."
Even if we do assume that raising taxes on the super-wealthy will "threaten their re-election" (something that may no longer be true), Buffett isn't up for any re-election bids, so why does he pull his punches? This is the perfect time to call for a new progressive tax schemes on the super-rich. In fact, if we had in place a fair system, there would be no deficit problem at all. Consider the fact that by 2008, the top 400 billionaires in the U.S. averaged $3.4 billion in assets each! Their total net worth was a whopping $1.56 trillion. That capital accumulated because, as a matter of policy, we encouraged income and wealth to concentrate at the very top of the income ladder. If we had kept in place the Eisenhower era tax system, the deficit Buffett worries so much about would nearly vanish.
We need Warren Buffett to stand up and demand such an income tax, not just hem and haw and hint about it. It's the only way to adequately finance the debt, and it is the best way to prevent the next fantasy finance meltdown. He knows better than anyone that the casino economy is the direct result of too much money in the hands of the few. I trust that Mr. Buffett would be more than willing to pay his fair share to save his country -- he has said as much on more than one occasion (see this report from United for a Fair Economy).
Mr. Buffett could change the national dialogue by calling for hard caps on Wall Street compensation, a windfall profits tax on financial firms that are profiting from our subsidies, financial transaction fees, and a steeply progressive taxes on the super-rich.
If he really led the charge, we might be able to break through our congenital resistance to any and all taxes. As Wall Street gears up to pay itself outrageous sums again, even as we're bailing them out, it's possible that a majority of Americans would see the justice of having the super-wealthy pay their fair share. Maybe, just maybe, even weak-kneed politicians will follow along. Come on Mr. Buffett, do your patriotic duty.
Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It, Chelsea Green Publishing, June 2009.