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Buffet, Reich on the right track

August 30, 2011
By Richard Clark , Daily Press

ESCANABA - We tend to hold opinions regardless of evidence to the contrary. A friend in the newspaper business had a saying about opinions he would sometimes hear. They were "..don't confuse me with the facts" propositions.

Experiments in cognitive psychology demonstrate how potent this oppositional tendency can be. Groups on the opposite sides of controversial issue such as the wisdom of nuclear power, were asked to give their arguments based on fact. Researchers would give the groups studies that contradicted their "facts." The studies were conclusive and authoritative - and some were made up. The results? Both groups, pro and con, dug in and held their views more firmly than before.

We need to set aside our oppositional tendency for Warren Buffet and Robert Reich.

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Richard Clark

Since the 1970s we have been slashing taxes for the extremely wealthy with the idea that their extra money would be invested in American jobs. Today after decades of tax cuts for the extremely wealthy jobs are down, American investors place money in Asia, the economy tanked in 2008, and a rise in jobs is not on the horizon.

Warren Buffet, the billionaire investment guru from Omaha, recently wrote an op-ed piece in the New York Times called "Stop Coddling the Super-Rich." www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?_r=1&emc=eta1. Mr. Buffet was responding to the call from our leaders for shared sacrifice. Mr. Buffet noted that the people who work for him pay a higher percentage of their income in taxes than he does. He pays a little more that 17 percent of his income in taxes while the people in his office pay and average of 36 percent of their income in taxes.

Mr. Buffet doesn't consider the mega-rich unpatriotic or money grubbers, just the opposite. He wrote, "I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them."

He wrote that in the 1960s when taxes were higher on investment income investors didn't stop investing. "I didn't refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone...shy away from a sensible investment because of the tax rate on the potential gain."

Mr. Buffet called for higher taxes on income over $1 million and another increase at $10 million. Leave the taxes of lower incomes where they are and continue the 2 point reduction in the payroll tax.

In "Aftershock" Robert Reich, former Secretary of Labor under President Clinton, calls for raising taxes on the super-rich for practical reasons.

In 1914 Henry Ford paid workers the unheard of sum of $5/day. When asked, Ford said that if he paid workers enough those same workers could by Ford cars. Reich observes that the economy works much the same way. The more workers make the more they can spend and the more they spend the more that is produced.

Our economy is consumer driven. If consumers don't have cash the economy slows. There is plenty of money, but it is concentrated in the hands of the top 1 percent. Producers aren't producing and hiring because consumer demand is low. America had great growth in the 1950s, 1960s and 1970s at a time when the top 1 percent were taxed at higher rates. Consumers had more to spend, demand for products were up, and assembly lines hummed.

History gives us warning signals but we ignored them. The lead up to the Great Depression was punctuated with unequal distribution of wealth. Accumulation of the nation's wealth in the top 1 percent of income categories were remarkably similar to the accumulation leading to the 2008 recession.

The difference between the two eras was the rescue of financial institutions by the Bush administration with TARP and the infusion of money by the ARRA of President Obama.

TARP and ARRA were very short term fixes. Both Mr. Buffet and Mr. Reich deserve a hearing - while controlling our oppositional reaction.

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EDITOR'S NOTE - Richard Clark, Escanaba, practices personal injury law throughout the Upper Peninsula. He can be reached at uppermichiganlaw.com/richard-clark.html

 
 

 

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