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A Voice from Fly-Over Country
December 19, 2012

The Oracle of Omaha and the Secretary of the Treasury Speak…
Should We Listen?

by Robert L. Hale
fitzgerald griffin foundation

MINOT, NORTH DAKOTA — Warren Buffett epitomizes why things are going so wrong in America. During a recent interview by Matt Lauer on the Today Show, Buffett was asked whether he believed that raising taxes on wealthy Americans would have a chilling effect on hiring.

He answered "no," and then he opined that raising taxes on the wealthy "would have a great effect in terms of the morale of the middle class." Such nonsense today passes for insight and leadership in America.

A week earlier, Secretary of the Treasury Timothy Geithner said the amount of debt that Congress can place on the shoulders of American taxpayers should be unlimited. He called for Congress to eliminate the debt ceiling, allowing Congress and the President to engage in unlimited borrowing and spending.

These two men are considered by many to be two of the most knowledgeable financial men in America. One of them believes that increasing taxes on the wealthy is good public policy because doing so will "have a great effect… on the morale of the middle class." The other believes unlimited borrowing is good national policy. No wonder America is in such deep fiscal trouble.

  "America has a greater debt than all the nations in history combined — and it is growing. The tragedy is that only a handful of Americans understand that the debt is a direct claim on their future earnings. And that the future has arrived."    

Both men — so far removed from understanding how wealth originates — represent exactly why America is in a recession and on a collision course with depression. And their arrogance fuels their ignorance.

America has a greater debt than all the nations in history combined — and it is growing. The tragedy is that only a handful of Americans understand that the debt is a direct claim on their future earnings. And that the future has arrived.

The debate in Washington over America's financial mess is focused on only one issue — higher taxes. There is no serious plan to cut federal spending, which is nothing more than the redistribution of others' wealth. The current political system sustains itself by this redistribution. To be blunt — politicians are re-elected in exchange for continuing to take from those who produce wealth; they then give away that confiscated wealth for votes.

Until now, the game has been played by keeping tax rates below spending rates. Massive federal spending has been funded through borrowing — through the accumulation of debt. This is why Secretary Geithner is so insistent on abolishing any limits on borrowing.

Like Buffett, Geithner believes "perception" is more important than reality. Yet he knows that reminding Americans of the government's spending addiction is not a good thing. Having to go to Congress to continually increase the debt ceiling is troubling. Thus, eliminating this responsibility of our elected representatives will make it easier to engage in continual borrowing and spending.

Yet, there is a limit to borrowing — fewer and fewer lenders are willing to lend to a spendthrift America. This reality is forcing Congress and the President to do the only thing left — raise taxes.

Buffett is correct in wanting to give Americans a morale boost. We are all going to need it. There is no magical way out of the debt mess Congress has imposed on us. Eliminating debt requires two things: reducing spending and creating wealth. Neither Buffett nor Geithner understand this. Their entire careers have been built on manipulating the wealth-creating efforts of others.

However, the ability to borrow to continue government's spending spree is coming to an end. The only way to keep spending at unchecked rates will be to increase taxes — to take a greater portion of the earnings of those who work. The pool of earners is shrinking at the same time that the pool of the recipients of government largesse is growing.

Buffett, Geithner, the President, and the majority of the members of Congress are targeting the shrinking few who actually are earning private sector income. The first target is the "rich" — the "rich" can afford to keep less of what they earn. Of course, any rational person realizes "the rich" do not have sufficient income to solve the problem.

Such schemes always fail. History is littered with the remains of empires that went down this same path. America will simply be another example of what happens when people trust the leadership of fiscal wizards such as Timothy Geithner and Warren Buffett, aka the "Oracle of Omaha."

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A Voice from Fly-Over Country is copyright © 2011 by Robert L. Hale and the Fitzgerald Griffin Foundation. All rights reserved.

Robert L. Hale received his J.D. in law from Gonzaga University Law School in Spokane, Washington. He is founder and director of a non-profit public interest law firm. For more than three decades he has been involved in drafting proposed laws and counseling elected officials in ways to remove burdensome and unnecessary rules and regulations.

See a complete biographical sketch.

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