Warren Buffett on the Debt Ceiling, Tax Rates, and the American Century
A 2011 Squawk Box interview in which Warren Buffett argues that using the debt ceiling as political leverage is Russian roulette, that the richest 400 Americans have seen their effective tax rate fall 11 points while their incomes exploded, and that the country's long-run magic is intact.
1 / 5p. 3 · Yank's paraphrase
I can end the deficit in five minutes. You just pass a law that says that any time there's a deficit of more than 3 percent of GDP, all sitting members of Congress are ineligible for re-election.
AI Summary
Warren Buffett, chairman and CEO of Berkshire Hathaway, speaks with CNBC's Becky Quick at Sun Valley, Idaho, opening with a sharp warning about the debt-ceiling standoff in Washington. He compares the brinkmanship to Russian roulette, arguing it is reckless to use the credit of the United States as a political hostage.
Yank Summary
What matters, in Yank’s words, each linked to where the source says it.
Buffett compares the debt-ceiling standoff to Russian roulette, noting the ceiling was raised seven times under President Bush without such brinkmanship. p. 1
Buffett says he could end the deficit in five minutes by making every sitting member of Congress ineligible for re-election whenever the deficit exceeds 3 percent of GDP. p. 3
I can end the deficit in five minutes. You just pass a law that says that any time there's a deficit of more than 3 percent of GDP, all sitting members of Congress are ineligible for re-election.
Buffett proposes that self-interest alone would force Congress to eliminate deficits within five minutes.
In context
CNBC SQUAWK BOX TRANSCRIPT: Thursday, July 07, 2011 PAGE 3 OF 3 BECKY: But these problems— these problems aren't new. These problems aren't problems that have built up over decades and there hasn't been a Congress that's been mature enough or a president that's been mature enough to take this head on. BUFFETT: I can— I can— I can end the deficit in five minutes. BECKY: How? BUFFETT: You just pass a law that says that any time there's a deficit of more than 3 percent of GDP, all sitting members of Congress are ineligible for re-election.
I can end the deficit in five minutes. BECKY: How? BUFFETT: You just pass a law that says that any time there's a deficit of more than 3 percent of GDP, all sitting members of Congress are ineligible for re-election.
Receipt
My cleaning lady's payroll tax — counting the portion her employer pays — is higher than my capital gains tax.
A concrete comparison anchors Buffett's case that capital gains rates systematically favor the ultra-wealthy over wage earners.
In context
And they're being— my cleaning lady is being charged a payroll tax. Her payroll tax, counting the portion her employer pays, is higher than my capital gains tax. BECKY: So that's your argument for capital gains, why it needs to be— the rates there need to be raised. BUFFETT: Oh, yeah. I mean, I am treated like I am— I am, you know, the bald eagle or something, that I have to be protected at all costs, you know, and they— I'm nurtured. I am paying— that's the reason that the 400 largest incomes in the United States paid an average of 16.6 percent last year, and they did not pay much payroll tax, I mean, just by the nature of it.
My cleaning lady is being charged a payroll tax. Her lady's payroll tax — counting the portion her employer pays — is higher than my capital gains tax.
Receipt
If you gave me a six-shooter with one bullet and said spin it — five times out of six nothing bad happens — but we haven't done this before, so we don't know what happens when the sixth chamber's pulled. It's just silly.
In context
How big of an issue is this and how dangerous is it— how dangerous is it really if they don't raise the debt ceiling? WARREN BUFFETT (Berkshire Hathaway Chairman & CEO) : Well, we don't know exactly what'll happen. I mean, but if you gave me a six shooter and stuck a gun in— a bullet in one chamber and said spin it and five times out of six nothing bad's going to happen, but we haven't done this before, so we're not sure what's going to happen if the sixth one's pulled. It's just silly to do and we raised the debt ceiling seven times during the Bush administration and now in this administration, they're using it as a hostage and you really don't have any business by playing Russian roulette…
don't know exactly what'll happen. I mean, but If you gave me a six shooter and stuck a gun in— a bullet in six-shooter with one chamber bullet and said spin it and — five times out of six nothing bad's going to happen, bad happens — but we haven't done this before, so we're not sure what's going to happen if we don't know what happens when the sixth one's chamber's pulled. It's just silly.
Receipt
The 400 richest Americans averaged $45 million in income 15 years ago and paid 27 percent tax; today they average $350 million and pay 16.6 percent. While they got ungodly richer, the rate came down 11 points.
Fifteen years of Treasury data show the wealthiest 400 Americans grew far richer while their effective tax rate fell sharply.
In context
But I'm rich. BECKY: So where do you draw the line? Where would you draw the line? BUFFETT: Oh, I would— well, you certainly change it on capital gains and dividends. I mean, if you take the 400 richest Americans and the 400 people who paid the greatest income tax— the Treasury's been putting those figures out for 15 years or so. If you go back 15 years, the average income of the 400 top people— the 400 top people's around 45 million. They paid about 27 percent. Now it grew, the most recent figures, to 350 million.
richest Americans and The 400 people who paid the greatest richest Americans averaged $45 million in income tax— the Treasury's been putting those figures out for 15 years or so. If you go back 15 years, the average income of the 400 top people— the 400 top people's around 45 million. They ago and paid about 27 percent tax; today they average $350 million and pay 16.6 percent. While they got ungodly richer, the rate came down 11 points.
Receipt
You can cut my tax rate to zero and I'll still drink five of these a day. But if you cut my cleaning lady's payroll tax rate, she can drink one she couldn't afford now.
In context
…fact that Germany's— Germany is the second largest exporting company today, it's all about the middle...(unintelligible)...and it's all back to the courageous policies that were taken— decision that were taken by Schroeder back in two— five years ago when he had the agenda 2010 program that he implemented, and then he lost the election, of course. BUFFETT: Becky, you can cut my tax rate to zero and I'll still drink five of these a day. But... JOE: Hey, Beck... BUFFETT: But if you cut my— if you get— if you cut my cleaning lady's rate on payroll taxes, she can drink one of these that she couldn't afford now. BECKY: Oh. JOE: All right, Becky... BECKY: JOE: JOE: Yeah, one more time— one more ti…
You can cut my tax rate to zero and I'll still drink five of these a day. But JOE: Hey, Beck... BUFFETT: But if you cut my if you get— if you cut my cleaning lady's rate on payroll taxes, tax rate, she can drink one of these that she couldn't afford now.
Receipt
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