Buffett Rule Hypocrisy
by GREG HUNTER
April 20, 2012
It looks like President Barack Obama is making the tax proposal called the Buffett Rule (also known as the "Paying a Fair Share Act") into a wedge issue. This weekend, the President was pushing the tax proposal, named after billionaire Warren Buffett, as a way to reduce the deficit. The pending legislation says anyone making more than $1 million a year should pay no less than 30% federal tax. Democrats are going to try to vote on the Buffett Rule this week, but it probably will not get very far in the Senate, and it is a non-starter in the Republican-controlled House.
The reason why I say this is merely a "wedge issue" is because it will not do much to reduce the $15.6 trillion deficit. It will set up another totally false narrative that will not help the country. According to the Joint Committee on Taxation, which provides the official Congressional analysis of tax legislation, the Buffett Rule will only raise $4.7 billion a year over the next ten years. Mr. Buffett's plan is nothing more than a proverbial drop in the bucket. Counting TARP, QE 1, QE 2 and the $16.1 trillion the Federal Reserve pumped out after the 2008 meltdown, we are well on our way to the $23.7 trillion Neil Barofsky, special inspector general for the Treasury's Troubled Asset Relief Program, predicted the crisis would cost back in 2009. But, even that number, as big as it is, does not tell a complete story, and Mr. Buffett knows it.
The banks are continually being bailed out in many backdoor ways, and to be fair, neither party will say a word about it. The recent $25 billion "Robo signing/foreclosure fruad" settelement was a form of a bank bailout. Foreign bank bailouts are also American bank bailouts in disguise. Take Fannie Mae and Freddie Mac, for instance. Taxpayers now own a 100% stake in these two failed mortgage giants. Last year, Fannie and Freddie either forgave or bought a total of nearly $200 billion in mortgage debt liability from Bank of America-alone. (I wrote about this before.) Let that sink in, and then consider Warren Buffet invested $5 billion, last year, into B of A at $7.14 a share. Friday, the stock price closed at $8.63 a share. If Buffett sold B of A today, he'd make about $750 million by my calculation. Give me a break! Would Mr. Buffett have invested the money into B of A if he knew the bailout party would stop? I think not. Why doesn't Buffett talk about one of the real problems facing America and that is the continuing bailouts for billionaires! These bailouts have greatly contributed to the ballooning $15.6 trillion U.S. deficit. Now, there is talk of committing another $100 billion to Fannie and Freddie to add to the $170 billion already blown in backdoor banker bailouts. (Click here for more on that story.)
Other companies Mr. Buffett invested in or owns include: American Express, Goldman Sachs, General Electric, JP Morgan, Wells Fargo and US Bankcorp. All of these companies have or continue to get financial help from taxpayers. If the government would not have stepped in and bailed out these companies (and others), Mr. Buffett's Berkshire Hathaway fund would have been decimated! Had there been no bailouts, no zero percent interest rates and no government sanctioned accounting fraud with the suspension of "mark to market" accounting by FASB in 2009, I'll bet it would be difficult for Mr. Buffet to still be called the "Oracle of Omaha." Party on, Mr. Buffett. Party on at the taxpayer expense. I think this is exactly what is meant by "privatize the profits and socialize the losses." Of course, no one on financial TV would ever call Mr. Buffett out on this shame called the "Buffett Rule."