Just thought I’d let you know where the foremost apostle of the gospel of robustness is putting his political money. Nassim Taleb assures us that it is not because of the chances of Paul winning the presidency but because of the fact that he’s the only one who even gets the problem. He was on CNBC last week and this is what he had to say.
The gravity of our problems seems to me, as it does to Taleb, extreme. How can we continue to go about printing and spending money without ever having to pay for it? Frighteningly, the foremost spokesman for building a robust economic system capable of withstanding severe shocks thinks that Romney and Santorum are no different than Obama in any substantial way. Wow. What does that tell you? Taleb is mentally ill? If not, how does our way of life survive? Ron Paul as president is our only chance according to Taleb. Remember, he was one of the few people who criticized the pre-2007 financial world for creating a house of cards which was bound to fall. If the chance of Ron Paul winning is the same as the chance Taleb thinks that we can avoid another 2008-10, what does that tell you? Whatever it is, I think it’s safe to say that he’s telling us that it is not a pretty picture.
Sorry about the six weeks of silence. Been busy. First, let me clean up some unfinished business on Warren Buffett and what he thinks about taxing “high earners” much more.
Billionaire Mayor Michael Bloomberg’s media operation has outed Warren Buffett’s real views concerning the need to raise taxes on the wealthy. Do you believe you already know them? Who exactly does he think should pay more in income tax? Have a look for the answer to this question.
Now, have you heard of the Buffet rule? The millionaire surtax? The Occupy Wall Street rule — “Let’s Eat the Rich”? Each of these ideas seems to be supported by the president. First, let’s see about the millionaire surtax idea. The democratic party’s own senate majority leader has proposed a 5.6 surtax on all income above $1,000,000 in order to fund the president’s job program. A permanent tax of this type, of course, would fly directly in the face of Mr. Buffett’s position as stated in the clip above that people who already pay tax at the ordinary income rate should not see their taxes raised. Reid, though, proposed this when he saw that the president’s taxing proposals to fund his so-called jobs bill weren’t going to fly.
How about this Buffett rule? What is that? The Buffett Rule is a rule which would make the tax rates levied upon dividends and capital gains up to the level applicable to ordinary earned incomes. Remember Buffett’s secretary? Yeah, it would actually do what Buffett says he wants. You’ll remember that I blogged about Obama’s hesitance to do this very thing back in April.
Well, this is what Mr. Obama said last month to a CNBC reporter in response to a question as to whether he would support the surtax proposed by the senate majority leader:
So, the approach that the Senate is taking, I’m comfortable with in order to deal with the jobs bill.
We’re still going to need to reform this tax code to make sure that we’re closing loopholes, closing special interest tax breaks, making sure that the very simple principle, what we call the Buffett Rule, which is that millionaires and billionaires aren’t paying lower tax rates than ordinary families, that that’s in place.
This gets really confusing. In April Mr. Obama’s proposed tax plan did not include a return the Reagan Rule of taxing all incomes equally. In fact of the three players, Rep. Ryan, the president and the Debt Commission, it was only the Debt Commission which did that. Now, however, Mr. Obama says something which sounds a lot like he is adopting at least the taxation part of the Commission’s proposal. Is there any indication that he is serious about this? Shouldn’t this be touted by the press as big news? A change in the president’s position vis-a-vis taxes on capital gains and dividends? Why isn’t this big news?
I propose to you that it is not big news precisely because it is just a big fudge (I would have said something else but look at the abuse Joe Wilson got when he said something unkind about the president’s health care bill which apparently is turning out to be a reality). Even the rosy glass wearing news media sees it as a fudge and therefore is just not interested in reporting it as a change in position. Wouldn’t the famously liberal media prefer that taxes on the “paper rich” be raised to at least the level of the “working rich?” All this is confusing if you pay attention to what is being said but watch what is being done on this score when the “super committee” which is tasked with reducing the budget reports in the day before Thanksgiving. That will be action, not words. By the way, isn’t Thanksgiving Wednesday the least important news day of the year. Everyone is traveling or cooking. Can you imagine anyone paying more than just passing attention? Why did they set this day for issuing their report? Washington is such a strange place. And we have a strange president who first rails against the mega-rich both directly and through his OWS surrogates but perversely won’t raise their taxes. He even seems to prefer their company (i.e. Martha’s Vineyard) to the company of his old ChiTown crew.
Bravo Mr. Buffett!! At least you cleared up the ambiguity in your own position. On the other hand, even if the President is ignoring your sage advice on this score apparently you’re still bundling lots of money for him. What do you think that this might be about? I know, I know, I’m may be a bit too cynical about a really nice man like Mr. Buffett.
Have a look at this exchange between Rick Santelli and Tom Friedman on CNBC. Santelli is very focused on the fact that social security is a pyramid scheme requiring constantly increasing numbers of participants over time in order to support those who got in the system, the scheme, ahead of them. Such schemes were apparently originated by Charles Ponzi beginning in the early 1900’s. Friedman is focused on the “out of order idea” that a “popular” government program could be associated with a situation otherwise characterized as criminal conduct. The two of them, Friedman and Santelli, then proceed to cross talk for a couple of minutes instead of carefully delineating what they agreed about and what they did not agree about. Have a look. It looks for a moment that Friedman will begin to reach across and agree with Santelli about the pyramid scheme when Rick removes the criminal connotation from contention but that moment passes and they get back in their corners and fight it out.
This is so very instructive as to what happens in America in the 2010’s. These two men, both very smart, are so invested in their own worldviews that they do not seek points of practical and factual agreement, they seek only points of disagreement.
Who was right? A Ponzi scheme, according to the SEC’s government website, has the following characteristics.
What is a Ponzi scheme?
A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.
Why do Ponzi schemes collapse?
With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.
Santelli and Friedman could have agreed on the fact that Social Security requires an ever-growing pool of funds from newer workers over time to pay the mandated benefits of retired workers. This certainly meets at least one of the criteria specified in this government website description. Likewise, as with the Ponzi scheme there is no investment activity which goes on with social security, the money is used to pay people who joined the system earlier. Any money not so used is placed into government IOU’s with very low interest rates which, when they are redeemed, will have to be paid out of other government tax monies. They could have agreed that the available funds must meet the mandated benefits over time and that this can only be achieved, in the context of Social Security, by: 1. Cutting mandated benefits; 2. Quickly increasing the numbers of those paying into the system; or 3. Increasing by some means the per person amount that the newer folks, those still working, are required to pay in. The latter solution was tried and is the one alluded to by Friedman which occurred during the Reagan administration in 1984, the last time social security came close to running out of money to pay mandated benefits. Santelli’s implied criticism of this “solution” is that the 2.4 Trillion dollars in taxes which exceeded the benefits actually paid out between 1984 and 2009 was gobbled up by federal government which spent the money as if it were ordinary tax money and the government left a bunch of IOU’s in the till. In terms of the description of the Ponzi scheme, these funds may legitimately be viewed as having been used for the personal expenses of the scheme promoters, in this case the U.S. government. This fact, Santelli’s argument implies, made the government the equivalent of Charles Ponzi, the criminal, who raked off some of the proceeds from the new “investors” for his own use rather than to pay the early investors. It appears to me that just the label, Ponzi scheme, angered Friedman greatly. No real attempt at rational discussion was made after this charge was leveled by Santelli. Pehaps had Santelli chosen the less judgmental term “pyramid scheme” it would have seemed less offensive to Friedman?
What purpose did this exchange serve other than entertainment for CNBC viewers? Who comes off well? Until we get to the point where we can stop calling each other liars or “idiots” because the other’s worldview is different than our own, we’re not going to get very far in bridging the differences between us. We will remain at drawn daggers over every issue. And that is not good since the existence of a country, this country, which is a multicultural country, must necessarily be based upon reaching some type of a broad based agreement across the generations and the classes and the races and the cultures as to what this country’s government should be about.
They could have agreed on all of the facts. But they chose instead to fight out a war of terminology which predicably degenerated into calling the other a belittling name. The different assumptions which each makes underly this argument. The distinction is whether the government is viewed as a benevolent father figure seeking only the good of its citizens or as a self-interested participant whose actions benefit some of its citizens at the expense of others. There you have it, a concrete example of the clash of worldviews.
Short and Sweet Blog 