Buffett Takes Off the Gloves? He’s Getting Worried.

Stop Coddling the Super-Rich

Our leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks….

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places….

—Warren E. Buffett, New York Times, August 12, 2011

Warren Buffett’s politics have always been a surprise to first-time Berkshire observers. “How can a billionaire like that be such a liberal?” is almost always one of the questions I get after a speech, or before a speech, or during a speech, about Buffett.

But as anybody who’s followed Berkshire for a few years knows—or who’s read “Secrets in Plain Sight—Business and Investing Secrets of Warren Buffett”— Buffett’s Democrat credentials go as far back as 1968, when he supported anti-war candidate “Clean Gene” McCarthy in the presidential primaries.

And Buffett’s strident stance on the inequities in the U.S. tax code is nothing new: he’s been talking about the tax advantage accruing to so-called “unearned” income versus wages for years, even testifying before Congress on behalf of “fairness,” at least as he sees it.

Still, Buffett doesn’t—as readers of “Secrets in Plain Sight” also know—mention that while running what was, for all practical purposes, a hedge fund during the late 1950s, he took advantage of an even greater disparity in the tax code (the top marginal tax rate was 91% back then)—one of those ‘Do as I say, not as I do’ aspects to the Buffett PR machine that drives some investors crazy.

But Warren Buffett is the most successful investor of his times, possessing not only one of the most rational minds in the business but also the uncanny ability to frame the cloudiest issue in a crisp, clear frame that makes whatever he’s talking about sound, well, pretty rational.

And while today’s op-ed piece sounds pretty rational, the more interesting aspect is that it unleashes a new aspect to Buffett’s tax “fairness” campaign: he takes off the figurative gloves and talks about what he would do if he ran the joint.

Among these are “pare down some future promises that even a rich America can’t fulfill,” “leave rates for 99.7 percent of taxpayers unchanged,” “continue the current…reduction in the employee contribution to the payroll tax,” and “raise rates immediately on taxable income in excess of $1 million…”

Whether Buffett’s prescription is what America needs, let alone whether it will work, we make no judgment on here.

We’re more interested in why he’s taking off the gloves now.

And the reason—at least based on a close reading of “Stop Coddling the Super-Rich”—is that Warren Buffett is getting worried:

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.

The emphasis above—“That feeling can create its own reality”—was added by your editor, but having been written by a man born ten months after the Crash of ’29 who happens to be the head of a company with 260,000 employees making everything from chocolate candy to wind farms, and who is the overseer of insurance businesses holding tens of billions of dollars of exposure to financial markets through stocks, bonds, and the same kind of derivative contacts he once called “ticking time bombs,” the words fairly jump off the page on their own.

Sounds like Warren Buffett is getting worried.

Jeff Matthews

Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”

(eBooks on Investing, 2011) Available now at Amazon.com

© 2011 NotMakingThisUp, LLC

The content contained in this blog represents only the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.