Warren Buffet and Occupy Wall Streeters: 2 peas in a pod
The economy stinks and we’re not going to take it any longer. While this may not be the official message of Occupy Wall Street (OWS) participants, it seems to come pretty close to understanding why the movement was born, blossomed and now searches for a unifying message to policymakers. Had the U.S. economy experienced anything like a normal recovery from the Great Recession, it seems unlikely the movement would have developed. But with an unemployment rate in excess of 9 percent and nearly 14 million people unemployed — and many more millions underemployed — it is little wonder that some people have taken to the streets to protest.
And who is to blame for this abysmal state of economic affairs? It would seem as though the villains chosen by OWS are the top 1 percent of income earning households and any other dispensers of corporate greed. With OWS claiming to represent the remaining repressed 99 percent of the taxpaying public (nearly half of whom pay no federal income taxes); yet another us-versus-them conflict has been generated.
Oddly enough, one of the champions of the OWS crowd is multi-billionaire Warren Buffet. Mr. Buffet is apparently leading the charge of the 1 percent who have a conscious and feel that the progressive tax system of the United States is fundamentally flawed and that the less socially-conscious members of the 1 percent group are tax-dodging degenerates. As such, Mr. Buffet states that the privileged 1 percent (and quite possibly others in high income categories) should see their taxes increased to eliminate inequality and (presumably) generate renewed economic growth. Are the top 1 percent of income earners really the despicable creatures loathed by OWS, and will raising taxes prove to be the silver bullet needed to kill our unwanted economic stagnation?
Of course, definitive answers to such questions are impossible to ascertain, but one might legitimately wonder if the cause of our economic malaise lies elsewhere and thus the Buffet-provided remedy is lacking. Does the problem lie with individual Americans, their desires to enrich themselves, and the for-profit motivation that induces businesses to prosper/grow in our market-based economy? Or is it just possible that the true impetus for economic instability may reside with a federal government that wavers back-and-forth from promoting a free-wheeling, anything-goes economy to one which is tightly controlled by politicians and bureaucrats intent upon vilifying and destroying anyone who opposes their messiah-like mission to save us from ourselves?
Consider the role of the federal government over the past decade. In the early 2000s under the presidency of George W. Bush, a noble cause was unfurled, that is, to increase homeownership rates among Americans. Toward that end, much-needed regulatory oversight seemingly came to an abrupt halt and government sponsored enterprises such as Fannie Mae and Freddie Mac relaxed standards for mortgages they would purchase/guarantee (with the full blessing of many members of Congress from both parties). The market responded with a whole host of previously unthinkable arrangements from liar-loans to providing mortgages above the value of the underlying home. All of this was done with regulators such as the Federal Reserve and FDIC sitting quietly by and claiming they had no responsibility or jurisdiction.
When the housing bubble burst, the knee-jerk reaction was to claim markets were to blame (NOT government or regulators) and move in the other direction under the presidency of Barack Obama. Banks, auto manufacturers and others were bailed out and government assumed tremendous control over a huge segment of the economy: healthcare. So, after walking away from its legitimate regulatory-oversight role, government morphed into an economic demigod capable of making decisions individual people/businesses were too unsophisticated and/or unsavory to make.
But in this latest Warren Buffet/OWS world in which a villain must be punished, one should at least consider the possibility that the much-despised 1 percent are not quite the evil-doers they are assumed to be. If they are simply a convenient scapegoat at this time of extraordinary economic distress, then the solution of raising their taxes may destroy individual economic incentive; with future economic vitality also becoming an inevitable casualty.
Despite what some in the OWS movement suggest, this situation may not be about the privileged 1 percent, but rather the dearth of opportunities available to Americans due to a dysfunctional/overextended/fundamentally inept government. Rewarding this failed government with greater taxation and spending powers makes no more sense than passing legislation to allow Enron (if it still existed) to further manipulate energy markets to its own advantage.
Dr. James Newton serves as chief economic advisor to Commerce National Bank and is an auxiliary faculty member in economics and statistics at OSU-Marion and OSU-Newark. Dr. Newton’s views do not necessarily reflect those of Commerce National Bank or OSU-Marion/Newark.