When you’re called “the Oracle of
Omaha,” ranked as one of the wealthiest people in the world, and
speak with a kind of folksy directness, people listen.
That’s Warren Buffett, the head of
Berkshire Hathaway, the huge investment company that seems to operate
as a personal extension of the man.
Last week, the firm held its annual
shareholders’ meeting in Nebraska, where it is headquartered, and
tens of thousands of people attended. The meeting, recalling the
hippy gathering decades earlier, is known as the “Woodstock of
Capitalism.”
They listened to Buffett answer
questions for about five hours, an appearance unlike that of any
other corporate leader.
He was asked about his attitude to the
tax cuts passed by Congress. He is well known for opposing tax
reduction, especially for the wealthy. He complains that his tax
rate is less than his secretary’s and generally supports Democrats.
But Buffett had warm words for the
Republican tax overhaul. Why? It’s aimed at helping corporations
and Berkshire Hathaway more than most.
He said that he does not mix his
personal and professional views. He willingly discusses his thoughts
on tax cuts, but as the keeper of shareholder interests, he supports
tax measures that boost profits, in his company’s case by tens of
billions of dollars.
Under the U.S. free enterprise system,
profits are the reward investors receive for the risk they take in
backing corporations. If the outfit is well run – Buffett is a
star at Berkshire – they may expect to see profits boom. His
investors are well rewarded.
Buffett made clear that he sees his
responsibility as gaining profits for today’s investors. Thanks to
his success, investors expect more of the same in the future. But
that means Buffett won’t endanger their investment return for his
view of taxes, even if he believes tax cutting is contrary to the
national interest.
His views echo much of the Trump
administration’s economic policy. Across the government, from
taxes to the environment to banking, the administration favors
corporate interests over policies to fight poverty or climate change
or to protect borrowers.
Take environmental policy. President
Trump pulled the U.S. out of the Paris climate accord because
American participation might limit the use of fossil fuels,
especially coal. Companies engaged in extracting and processing
these fuels are the chief beneficiaries of his move. Their
short-term interest is profits.
When a shareholder raised environmental
issues at the Berkshire meeting, Charlie Munger, Buffett’s
sidekick, feigned falling asleep. You cannot produce good profits,
it seems, if you worry too much about air quality.
Any harmful effects of Trump’s
environmental policy are simply denied or delayed, while profit gains
may come before the next election. If your constituents are
corporate operators, you favor them now and don’t allow views of
the long-term effect of climate change to influence your policies.
Though Buffett buys and holds his
investments in the belief they will remain profitable for years,
Trump does not take the long view. It matters little that coal is
fading as it gives way to natural gas and renewable energy, if it can
provide an immediate and politically profitable boost.
At least one analyst has pointed out
that the Trump policy is not market oriented so much as business
oriented. Promoting coal undercuts increased economic efficiency,
which is what the market should produce. Helping coal is only about
immediate profit and the false promise of retaining jobs in a dying
industry.
The effort to promote business over the
individual’s interest runs through Trump policy. The tax bill has
given the false impression of cuts for average taxpayers. Their
withholding has been lowered in hopes of influencing their votes in
November.
But next April, when the expected tax
refunds for many don’t materialize, they will learn the hard way
about short-term fixes. Far greater corporate tax benefits will
continue.
The soundness of the banking system,
the level playing field of the Internet, and the protection of the
shoreline are all being sacrificed to business interests. That’s
all right, in theory, because booming business should add jobs,
though unemployment is now about as low as it can get.
Buffett is a chronic optimist. He
believes the U.S. will survive and flourish, because it always has.
He notes the country survived the Civil War. Tell that to people who
suffered under Jim Crow laws for another century after the war ended.
Buffett divorces his personal integrity
from investment decisions. For a man who invests for the long run,
that approach seems to be short-sighted.
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