Buffett Recruited as Schwarzenegger's Economic Adviser

Bloomberg no url | 8/13/3

[Belial]

I'm off the Arnold bandwagon

You won't be the only one. The press is currently infatuated with Arnold, but that won't last.

And then his drug use, extra-marital affairs and sexual harassment accusations will start to get wider play.

[tophat9000]

I guess George Soros and Ted Turner are too busy.

O gees ...shhhh!.. or he'll hear and hire them too!

[BunnySlippers]

Who cares!

[Brian S]

Just for reference here are some of the most current "Buffet" threads that have been posted on FR

Warren Buffet Lies from the Pulpit
			Posted by presidio9 On 05/21/2003 10:28 AM EDT with 28 comments Capitalism Magazine ^ | May 21, 2003 | Don Luskin
Buffet(Warren) Slams Dividend Tax Cut
			Posted by NC Conservative On 05/20/2003 11:27 AM EDT with 62 comments CNNFN.COm | May 20, 2003 | CNN Money
Listening To Warren Buffet Could Create The Next Depression
			Posted by Stand Watch Listen On 05/09/2003 8:44 AM EDT with 50 comments Toogood Reports ^ | May 9, 2003 | Mary Mostert
Warren Buffet and Bill Gross warn on Derivatives
			Posted by BlackJack On 03/06/2003 2:50 AM EST with 1 comment quote.bloomberg.com ^
Warren Buffet on Derivatives: Good For Me, But Not For Thee
			Posted by conservativecorner On 03/04/2003 10:07 AM EST with 7 comments Capitalism Magazine ^ | March 4, 2003 | Don Luskin
Economic Apocalypse Is Nigh [Warren Buffet]
			Posted by AntiGuv On 03/03/2003 9:37 PM EST with 59 comments Daily Telegraph ^ | March 3, 2003 | Simon English

[spokeshave]

Quit all the handwringing.....This is MASTER STRATEGERY in action....

The dems are GOING NUTS RIGHT NOW...

Just when they were going to unload on Arnie for 157/immigrants/nude pics/pot smoking/etc...etc...

Arnie drops an economic nuclear bomb on them....

Now all the discussion for next week will be on Buffetts contribution to saving the CA bonds and the MASSIVE INTEREST payments etc etc....and guess who is responsible....rats and greyout.....

Bet that after Arnie is sworn in Warren has "pressing duties in Iowa" and quits.

[GraniteStateConservative]

And Larry Kudlow mentioned tonight that Steve Forbes, Art Laffer and George Shultz are also on Schwarzenegger's team. Does that make you feel more at ease?

[GraniteStateConservative]

And Larry Kudlow mentioned tonight that Steve Forbes, Art Laffer and George Shultz are also on Schwarzenegger's team. Does that make you feel more at ease?

[muleskinner]

Ditto your post. He also mentioned Arnie has created 4 groups that will be looking at the best way to fix the biggest issues in the state.

[motzman]

Especially the truth of the fact that Ayn Randians try to deny that Ayn Rand would not hold Warren Buffett in high regard.

LOL!! Even funnier! -- Keep 'em coming!

[motzman]

Oh, and BTW, Rand would have (correctly) identified Buffet as a "looter".

[rintense]

Buffet should be strike one for those who want to support him.

Oh I have several concerns about Arnold. And before you go making utterly ridiculous statements, I suggest you do a history check on what I've said about Arnold.

[motzman]

Here's a little article by Don Luskin of Capitalism Magazine explaining how Buffet is full of crap.

And, to repeat, Rand would have hated Buffet, just like she would have hated anyone (especially a rich person) that advocated a progressive tax system.


Warren Buffet Lies from the Pulpit
by Don Luskin (May 21, 2003)

Summary: Buffett's big accounting trick: what he doesn't tell you is that, because Berkshire Hathaway pays no dividend now, if it were to pay one tax-free in the future nothing would change!

[www.CapitalismMagazine.com] Ah, the beloved Warren Buffett. He's the second richest man in the world according to Forbes, and he's America's self-appointed corporate virtue czar, the Bill Bennett of the executive suite. He's the one whose folksy Berkshire Hathaway Corporation annual reports sermonize against the sins of stock options, demonize the coming debacle in derivatives, and preach against the perils of pension accounting. And he's the one who wrote an op-ed in the Washington Post yesterday blasting President Bush's plan to eliminate the unfair double taxation of dividends -- using arguments based on accounting tricks that would make Arthur Andersen blush.

It's ironic. In the column he talks about "voodoo economics" and "Enron-style accounting" -- but that's precisely what Buffett has no choice but to stoop to in order to justify his position that eliminating dividend taxes "would further tilt the tax scales toward the rich." Tilt? Further? According to the Internal Revenue Service, the top 10% of American households by income pays 66% of all the income taxes, and according to the Congressional Budget Office, the relative burden on the highest income-earners has gotten heavier over the last two decades.

Yet Buffett starts by making the extraordinary claim that he and his receptionist currently both pay the same 30% of their very different incomes to the federal government. This is pretty much impossible unless receptionists in Omaha are paid more than the CEO's of the companies they work for. Buffett takes a salary of $100,000 from Berkshire Hathaway (according to the company's most recent proxy statement) -- and assuming that his receptionist makes the same amount, then her average federal tax rate would be something like 16%, according to the IRS's online calculator. Adding the 6.2% payroll tax paid by her employer, we get to about 22%. Her salary would have to be about $250,000 to get up to the 30% Buffett claims. Can I have her job?

Okay, let's give Buffett a pass on that one and assume he's got the highest paid receptionist in Omaha (or anywhere else). Even if he and she are both paying 30% of their income in federal taxes, are they in any sense equal as taxpayers? No -- because the dollar amounts of their payments are vastly different. At 30% of $250,000, the reception is paying $75,000 in taxes. Working backward from figures provided by Buffett in his column, we can guess that his income must be something like $50.3 million dollars. 30% of that is $15.1 million.

Buffett isn't paying the same as his receptionist -- he's paying 201 times more.

Now let's see how that would change if taxes on dividends were eliminated. Buffett looks at a scenario in which Berkshire Hathaway declares a $1 billion dividend (it actually pays no dividend currently), to which 31% stakeholder Buffett would be entitled to $310 million tax free. That would raise his total income to $360.3 million, on which Buffett says he'd pay an average tax rate of 3%. Buffett says, "And our receptionist? She'd still be paying about 30 percent, which means she would be contributing about 10 times the proportion of her income that I would to such government pursuits as fighting terrorism, waging wars and supporting the elderly."

But 3% of $360.3 million is $10.8 million -- still 144 times what the receptionist would pay.

But be that as it may, here's Buffett's big accounting trick: what he doesn't tell you is that, because Berkshire Hathaway pays no dividend now, if it were to pay one tax-free in the future nothing would change! Yes, Buffett's money would be transferred from his corporate pocket to his personal pocket -- but if he wanted to transfer it back, Berkshire Hathaway could issue more stock and he could buy it. Nothing would change.

Buffett's average tax rate would not even change in the way he claims it would. Yes, income from dividends he's already receiving would become tax-free. But other than that, if he claims that his new tax rate would be 3%, then it must be pretty close to 3% now -- except that Buffett is choosing to arbitrarily not consider as income his money already being earned inside Berkshire Hathaway that is simply not being paid out. It's still his.

In that sense, Berkshire's failure to pay that money out to him right now and subject it to today's dividend tax rates is, at heart, a tax shelter (of which Buffett says in the column "I've never used any").

And Buffett pulls another big accounting swindle when it comes time to recommend what he would do rather than eliminate dividend taxes. "Instead, give reductions to those who both need and will spend the money gained… Putting $1,000 in the pockets of 310,000 families with urgent needs is going to provide far more stimulus to the economy than putting the same $310 million in my pockets."

The swindle? Buffett pretends the proposed tax cut was the entire $310 million value of the dividend, not just the elimination of the current tax on the dividend. Bush's plan wouldn't have never have put $310 million in Buffett's pocket -- all it would have done is save him the tax on $310 million, call it $110 million. Sound familiar? Paul Krugman makes Bush's tax cuts look expensive by "forgetting" to divide by ten; Buffett's not a Ph.D. economist, so he only "forgets" to divide by 3.

Buffett moralizes, "When I was young, President Kennedy asked Americans to 'pay any price, bear any burden' for our country." Yet for all his moralizing, Buffett's column never deals with the moral problem at the core of the current double taxation of dividends. Money paid out to shareholders as dividends was the shareholder's money all along -- money that has already been taxed when the corporation pays its corporate income tax. The payment of a dividend is nothing but a transfer of someone's already taxed money to himself.

If Buffett wants to make the judgment that the rich should pay more for government services to be enjoyed by all, then let him do so, and let him suggest optimal ways that such taxes should be levied in the future. Hey, in the meantime, Warren Buffet should feel free do a little leading by example by personally paying more taxes voluntarily. But even if he's not quite that sincere, if Buffet has any moral convictions about such things he should at least refrain from the hypocrisy of making his arguments using the kind of accounting tricks he damns others for.

About the Author: Don Luskin is Chief Investment Officer for Trend Macrolytics. You can visit the weblog of his forthcoming book 'The Conspiracy to Keep You Poor and Stupid' at poorandstupid.com. stem...



Rand would have loved Buffet.

Yeah, right.

[HamiltonJay]

Hardly a counterpoint... a philosophical observation perhaps, but hardly a ringing counterpoint.

[CyberCowboy777]

It is a fine counterpoint.

The argument is that all is well with Arnolds choice because Buffet is a successful businessman.

His ability to make money has no bearing on the Ideology he brings to the table concerning the great unwashed.

Many Fat Cats make money in socialism and many use do it in capital markets. They still intend on socialism for their own people.

Buffet is a socialist and Arnold knows this, he also knows he must win a good portion of democrat voters to win. Especially to hedge against a surge by a Tom McClintock.

Buffet is bad for California and Arnold agrees with his ideology.

[HamiltonJay]

A surge by McClintock?????? You are joking right? Arnold is hedging his bets against a guy who doesn't stand a chance of winning?

Pretty obvious what and where your thoughts are coming on this matter. Arnold is the only canidate in the race that has a chance of carrying any sort of large numbers... short of say a sudden democratic outpouring to keep a Dem in power, this race is Ahnolds to lose.

Anyone here that is pushing Simon, or McCLintock or any of the rest of the pack, just really didn't learn didly from the last election cycle. Or understand this election. Up until Ahnold entering, anyone could have one by simple plurality.. they didn't need to carry any swing or moderate voters, just carry the majority of your party and you could win... so everyone and anyone had a chance... the Minute ahnold entered the race, that ended!

Dems sure didn't break ranks in their support for Davis because of McClintock... but the minute Ahnold showed up, the stone wall crumbled.... He is that much of a powerhouse and EVERYONE knows it.

Ahnold has changed the rules.. ahnold could in theory pull his votes simply from the swing voters and barely touch the base of the R party and still win by a landslide! Now Ahnold is a winning canidate, hes got the name recognition, and politics that can win in california as it is today. I know I know, hes not what one could call a hard core conservative, but you know what, a hard core conservative cannot win in California statewide today... someday that may change, and you know what if this recall hadn't happened that day would have likely been closer to happening than it will with this recall in place, but that's reality.

You don't like Buffet, that's fine, but reality is, California is how many BILLION in the red right now? Seems to me, if I want my house in order, I find the guy who knows how to make and handle money, not the guy who locks into ideology over all else.

The criticism of Buffet are largely weak at best... from you and others. He's not pro tax cuts.... well you know what not every tax cut ever invented was a good thing at the time it was proposed from a policy standpoint... case in point is that last round of $300 checks... what stimulous did they bring to the economy? None of any measure.... so while it certainly isn't a bad thing to get some of your tax dollars back, did it increase or improve the position of the nation economically? Verdict is pretty much no it didn't... So, hardly criticizing an individual tax cut is hardly proof he has no concept of how money or policy works.. The other criticism is that he lobbies for government funding and assistance for his business ventures... Oh No! A CEO who actually lobbies for public monies or policies to benefit his company?????? You must be joking!!! NEARLY EVERY DAMNED COMPANY THAT CAN GET THE ACCESS DOES THIS!!!! Don't believe me, go look at the tax deals at every level of government, or the funding used to subsidize construction or expansion plans of all sorts of business.... And to top it off, the fact that he does it, and has been effective at it shows he does have a damned good understanding of public policy spending... which counters the challenge that he doesn't.

I don't know where you or others like you come from, when you are building a company, or a team to accomplish ANYTHING you do your best to surround yourself with the best you can find. You don't go second string when building your team... so far Ahnolds got a powerful team, the best without question going in Cali today... Pete Wilson, Buffet et al... and only in the race what now, a week? He is surrounding himself with first stringers who will very likely be with him long after 10/7,which is a good thing.

So, personally I just don't see all this crazy attack dog nonsenes bringing anything substantive to the table. You don't like the fact Buffet didn't see eye to eye with BUSH on a tax issue... so what! Nation of nearly 300 Billion, and you gotta agree with the administration lock step or you are useless? Please. Show me something substantive that even remotely suggests Buffet can't do the job hes been picked for... cause so far I don't see ANYTHING being put forward that remotely brings his ability to do what he is being asked to do into question.

[CyberCowboy777]

Why would it be wrong to support Tom?

One could simply vote Arnold if Cruz managed to secure the left. You rabid allegiance is weird, Arnold has said nothing other than that the state should take care of everyone and hire Buffet. Support Tom, it won't hurt Arnold and may well move him right. If Tom has it then great! If Arnold needs the support then we vote Arnold at the last minute.

My issue with Buffet is not the tax cut and your oversimplification is intellectually dishonest.

Buffet is a socialist and has no business working with Republicans. Nobody can deny his lefty credentials. The leaders of the U.S.S.R. may have been rich, that did not make them good leaders. Buffet's wealth does not make him good for Cali. To many much better and real economist are available. This is a move to the left to secure democrat votes.

The stone wall crumbled BECAUSE Arnold will TAKE democrat votes. Middle of the road Democrats do not like Davis or Cruz and WILL vote Arnold. The Left vote is split and this is why the media is going crazy. They know for a fact that a united right will win the election for Tom.

Support Tom, he is the best man.

[CyberCowboy777]

BTW

Every economist less one I have heard on NPR has stated that the tax cuts are a good thing for the economy. This is NPR and I hear it over and over (I listen to 15 hours plus a week of NPR).

Nobody denies the effect of the cuts except ideologues.

Buffet is wrong. Are you okay with that?

[HamiltonJay]

Sorry, but I think maybe you should look again, $300 checks back in 2001 or whatever it was did didly to jumpstart the economy (their stated intent). Not all tax cuts are the right policy at the time they are proposed, that is complete ideological nonsense.

As to Ahnold v McClintock, it was you who was proposing McClintock was going to surge... and its just not going to happen folks. I have nothing against Him as a human being, but in this election he, like the rest of the field became nearly irrellevant the minute Ahnold entered the race.

Its not a matter of being a rabid ahnold supporter, its a matter of recognizing the reality of the situation. The model of supporting McClintock in order to "move" Ahnold right is an interesting take, because in the same argument its being put forth by you he got Buffet to stop McClintock surging, which by your assessment Buffet is a socialist... so tell me how did hiring would hiring what you consider a socialist be an act to undercut a right wing surge? The whole argument being put forth is just pretzel logic.

You certainly are free to support whatever canidate you like, however to characterize Buffet as socialist is I think a bit of a stretch. Secondly to deny the reality of California politics is also naive. California is a liberal state, the republican party is largely irrellevant in statewide politics and pretty much has been since Pete Wilson left office. You aren't going to get one of if not the most liberal state in the nation to swing hard line right wing, it won't happen... in fact this recall in my opinion slowed down the swing right incredibly.

The republicans in california already screwed up one golden opportunity to capture the Governors seat when they put up Simon last election, probably THE only person in California who could not have beat Davis.... Now they are going to release the hounds against Ahnold???? And take down the only real canidate who not only CAN WIN, but can win with enough support to keep from being stonewalled by the state legislature after getting into office?? Seems rather foolish, to say the least, to me.

[CyberCowboy777]

Consumer spending and housing (refinancing included) have kept the economy moving forward.

The tax rebates have spurred a portion of that. Even $300.00 for only half the population is $45,000,000,000 in consumer income. If you think that has no effect you are sorely wrong.

In two years I have received $300.00 and $1,200.00.

The tax cuts are separate from those rebates. Saving $50.00 a pay check is a $1,300 a year investment in the economy. At 1/2 of the population that is a increase of $390,000,000,000 a year in consumer spending. Half again of that is a significant amount of money into the economy - $97,500,000,000.

This is simple, Reagan understood, JFK understood, GW understands, Buffet does not.

Do not be hoodwinked into some watered down economic policy. Only Socialist are against tax cuts.