President Obama sure has been talking about Warren Buffett’s taxes a lot lately. At his speech before a joint session of Congress this month, the president said that the billionaire shouldn’t pay a lower tax rate than his secretary, a point Buffett has often made. The secretary’s tax rate, and her boss’s, made another appearance Monday in Obama’s address on his deficit-reduction plan.
When the president invokes Buffett’s name, he is using it to enhance his own economic credibility. It’s an old habit for him. On the campaign trail in 2008, when Obama wanted to talk about the unjustness of the tax code, he often turned to Buffett — sometimes referring to him as “my friend Warren Buffett.” For his part, Buffett appears pleased to play along; he’ll headline an Obama fundraiser in Chicago next month.
But why should the president stop at using Buffett’s name as shorthand for tax reform? The entirety of Buffett’s life and career offers lessons that could guide Obama as he works to steer the U.S. economy toward recovery.
Buffett made his $39 billion fortune by picking stocks and buying companies. (Berkshire Hathaway, which Buffett heads, owns a substantial minority stake in The Washington Post Co., and Buffett is a former longtime member of the company’s board of directors.) He is sometimes labeled a populist. But he’s better classified as a progressive who believes that the privileged are bound by a covenant to share society’s rewards with the less fortunate. However you label him, his best-known political belief is this: The rich should pay higher taxes.
For a decade, Buffett has been making an appeal to shift the tax burden in the United States further toward the wealthy. He began challenging the Bush administration’s tax reductions in 2001, and in 2003 he focused on opposition to lowering the tax on dividends. Buffett believes that government is the expression of a republican social contract, not a faceless, coercive state. In his view, unchecked capitalism is a route to plutocracy and social oppression. You may like these views or detest them, but by attaching Buffett’s name to the tax proposal, Obama sent a message of what it stands for in a single word.
The “Buffet rule” debate got bogged down this past week with quibbling over whether Buffett literally pays a higher tax rate than his secretary. He is getting picked apart by critics because he has already benefited so much from the current tax code that any changes would essentially be irrelevant to him. This has prompted some to say that he’s either a hypocrite or simply not the right spokesperson for the president’s plan.
Resentment toward Buffett also springs from another source, one that, if turned on its head, suggests what may be his real value to Obama. The unpopular estate tax has long been one of Buffett’s primary causes. In 2001, he set off a storm of criticism by saying that President George W. Bush’s move to repeal that tax was a “terrible mistake,” the equivalent of assembling the 2020 Olympic team by picking the children of the 2000 gold medalists.
In opposing plutocracy, he is following the lead of industrialist Andrew Carnegie, who wrote, in his “Gospel of Wealth,” that riches originate from society and should recirculate back to it. It is immoral, Carnegie wrote, for the rich to squander money on self-indulgent living or accumulation for heirs. This idea is counter to trickle-down economics, suggesting that a prosperous society yields opportunities for the rich that are not necessarily shared.
Espousing this idea hasn’t won Buffett a lot of friends among wealthy conservatives, any more than it did Carnegie. But that is not Obama’s intended audience, anyway. He’s appealing directly to voters who are pro-capitalism, yet concerned about a widening social gap. This group is more likely to agree that wealth is not trickling down, it is evaporating up. To them, Buffett’s message is a welcome call for greater social equality that could be made more explicitly.
Despite his own wealth, Buffett can make this call because people associate him with simple tastes: the burger-chomping billionaire who drinks Cherry Coke and has lived in the same house for 55 years seems like part of the middle class. When people whose standard of living is getting squeezed hear Buffett claim that billionaires are being coddled by the tax laws, they absorb that message in a cultural context of 500-foot yachts and $100 million mansions. The “Buffett tax” or “Buffett rule” may sound like class warfare, as its detractors claim, but it would not be resonating without rising income inequality and diminished expectations in this county.
Buffett himself is not a symbol of class warfare. People see him as an example of the American belief that success can come through hard work and merit. In 2001 he told the New York Times that the United States has “come closer to a true meritocracy than anywhere else around the world.” This is one of his ideals, and, as he has stressed to me more than once, he considers social mobility crucial to sustaining it. His own family was far from rich. Buffett’s ambition was spurred partly by a dislike of having to shovel snow at his grandfather’s grocery store. To escape manual labor, he had sold everything from chewing gum to golf balls by the time he was in high school.
The broad outlines of Buffett’s biography tell the story that it’s possible to succeed without sacrificing your soul. It’s duly noted that Buffett is not a saint but a tough deal-maker who pursued success single-mindedly. Still, the American public trusts him as a credible expert on the economy and how to fix it.
In this respect, Buffett could help Obama explain (or repair) the mistake of bailing out the big banks at everyone else’s expense. This is a slightly greater stretch than championing tax reform. While Buffett sides instinctively with the little people, Berkshire Hathaway benefited handsomely from the bailouts of companies in which it invested, such as Goldman Sachs and Wells Fargo.
Buffett himself is a two-sided character — on the one hand, a champion of the ideal of self-reliance; on the other, just as willing to lobby the government for Berkshire’s interests as any other business executive. If he chose to go beyond the “Buffett rule” and explain in a frank and open way how the relationship between business and government really works, how it has benefited Berkshire, and how it in turn affects economic growth and employment — detailing mistakes, successes, loopholes that should be closed and changes he wants made — that could have a greater impact than the symbolism of his secretary’s tax return.
I’m not holding out hope for this, however, because the nature of politics works against this kind of candor. As a full participant in red-in-tooth-and-claw capitalism, Buffett is unlikely to defend its gorier bits in public.
The president has tapped Buffett for service in the one area of life where he is shamelessly immodest and lavish in his behavior. Buffett likes nothing better than to stand on a platform and dispense his ideas. He not only agreed to have a tax proposal named after himself — something I can’t imagine that a lot of people would be clamoring for — but he is happy to go around promoting it. I’m hoping that Obama will go further and put all of Buffett’s 81 years of wisdom to work.
Alice Schroeder is the author of “Snowball: Warren Buffett and the Business of Life.” She is a Berkshire Hathaway shareholder.