Jamison Foser

How ABC Got The Buffett Rule Wrong

The “Buffett Rule” is the idea that really rich people like Warren Buffett shouldn’t pay lower effective tax rates than middle-class people, like their secretaries. This sometimes happens when the really rich people in question make much of their money via capital gains, which are taxed at a much lower rate than typical salaries/wages. Buffett has been making this point since the Bush administration.

Today, Warren Buffett said this:

“My program would be on the very high incomes that are taxed very low. Not just high incomes. Somebody making $50 million a year playing baseball, his taxes won't change. Make $50 million a year appearing on television, his income won't change. But, if they make a lot of money and pay a very low tax rate, like me, it would be changed by a minimum tax that would only bring them up to what other people pay."

What Buffett is -- very clearly -- saying is that if you make $50 million in salary as a baseball player or television star, your taxes wouldn’t change under the Buffett Rule, as you’re already paying higher effective taxes than a secretary. If, however, you “make a lot of money and pay a very low tax rate” like Buffett does, because that money comes not from your salary but from, for example, capital gains, you might pay higher taxes.

That is very clearly what Buffett is saying, because that is the whole point of the Buffett Rule in the first place: Certain types of income, like capital gains, are taxed at a low rate, allowing a small number of super-rich people who have a great deal of capital gains income to pay lower effective taxes than middle-class people who don’t have much capital gains income. I can’t state clearly enough: This is the whole point of the Buffett Rule.

Now, here’s how ABC reported Buffett’s comments:

“Later on CNBC Buffett said if it were up to him, people earning $50 million would not see any tax increases, only people who ‘make a lot of money and pay a very low tax rate, like me.’ Buffett did not put on a number on what he considers a ‘very high income.’”

This is absolute nonsense, and suggests a complete misunderstanding of what the Buffett Rule is and how tax rates differ for different types of income. Buffett absolutely did not say that “if it were up to him, people earning $50 million would not see any tax increases.” It simply didn’t happen. He said that people who earn $50 million in salary and therefore already pay (relatively) high taxes wouldn’t see increases. But if they “pay a very low tax rate” on $50 million in capital gains income, they would see tax increases if it were up to Buffett.

Buffett was very clearly talking about types of income, not levels. This is obvious from the fact that he mentioned two specific professions -- athletes and television stars -- and from the fact that, again, this is the whole point of the Buffett Rule. So ABC’s statement that “Buffett did not put a number on what he considers a ‘very high income’ misses the point entirely. And ABC’s claim that Buffett said “people earning $50 million would not see any tax increases” is simply false.

And, again, this is a point Buffett has been making for several years. It isn’t new. It isn’t particularly complicated. Anyone who has any knowledge of either the point Buffett has been making for years or the disparate taxation of capital gains and income from wages should have immediately understood what Buffett was saying today. And anyone who doesn’t have that knowledge probably shouldn’t be in charge of producing reporting about those topics.

There are other problems with the ABC report. The most fundamental problem is that it suggests Buffett does not support the Buffett Rule, which is absolute nonsense. He has for years, he did today, and he will tomorrow. I focus here on the $50 million part because it’s simply a flagrant misquote, and one that suggests that the people responsible simply have no understanding of the topic they’re covering.

President Obama's Jobs Speech

A few quick thoughts about President Obama’s address to Congress about jobs last night:

1) I have some substantive and rhetorical concerns -- the suggested need to cut Medicare benefits for future retirees, for example, and the stipulation that job-creation not come at the expense of increasing the short-term deficit. And, of course, it’s impossible to fully assess either the substance or the rhetoric until we know what’s in the President’s “more ambitious deficit plan” to come.

2) That said, the speech was a welcome step in the right direction. As Krugman notes, it was bolder than expected and the plan, if enacted, “would probably make a significant dent in unemployment.” It’s still smaller and more focused on tax cuts than I’d like, and I wish the President done more to articulate a progressive Keynesian view of how the economy works and what it needs.

3) Big picture, though, there was a lot about the speech to be happy about. The mere fact of it, first of all: An address to Congress about the jobs crisis was long overdue. Speaking of which: Right there in the first paragraph, the President made clear that it is a crisis: “Tonight we meet at an urgent time for our country. We continue to face an economic crisis that has left millions of our neighbors jobless, and a political crisis that’s made things worse.” At various times over the past few years, he’s said things like “we are past the crisis point in the economy,” which were perhaps defensible if you defined “crisis” as “dangerous times for banks” rather than “massive, sustained unemployment.” We’re still in a crisis, and I’m glad to see it described as such.

4) That said, the President has previously given speeches that suggest he’s going to engage more aggressively on jobs, with little follow-up. If this is a one-off speech, there isn’t much point to it. If it’s the beginning of a sustained period of intense focus on jobs and economic growth, that’s better. If you want people -- the public, the media, members of Congress, etc -- to focus on job creation, you talk all day every day about job creation, not deficits. You appoint bipartisan jobs commissions, not bipartisan deficit commissions. And so on. There needs to be more like this -- much more -- and not just from the President. The administration as a whole, Democratic members of Congress, too.

5) Will it work? Depends on what work means.

6) If work means “pursued Congress to pass legislation that will provide significant economic stimulus and create jobs” … No, probably not. But trying is more likely to succeed than not trying. And success is more likely if people who want it to happen fight like hell for it rather than feeding into the assumption that it can’t pass. Speaking of which: It’s probably useful to remember that Michelle Bachmann and Jim DeMint aren’t the people blocking urgent job creation: Olympia Snowe and Scott Brown and the couple dozen least conservative members of Congress are. Congressional passage of legislation is not determined by what the most extreme members of the opposition will accept, but by what the most moderate members of the opposition do. What might happen if President Obama and the Democratic leadership decided to just ignore Mitch McConnell and Paul Ryan and focus all of their efforts (positive and negative) on the Snowes and Browns of the Republican party? Would that be more likely to succeed? The better question might be: How could it be less likely?

7) If work means “enhance the President’s political standing, and that of the Democratic party” … That, too, is a heavy lift. By a huge margin, the most important factor in the President’s political standing is going to be the condition of the economy. If he can enact job-creating legislation, that’ll help him politically. If not, he’s in trouble. (This, of course, creates unfortunate incentives for Republicans.)

8) That said, if the economy is terrible, it’s probably better to be seen as having been thwarted by the opposing party in your attempts to fix it than it is for people to think you got what you wanted and it didn’t work. This is one of the many problems with the administration’s decision to go small with the 2009 stimulus package: Had they asked for the roughly $1.3 trillion their economists thought they needed and gotten it (or more, and settled for $1.3 trillion) it likely would have worked better than the much smaller package they got. (Though, as we now know, it still would not have been sufficient.) And had they not gotten it -- had $800 billion really been the most Congress would pass under any circumstances -- they wouldn’t have been as vulnerable to the perception that they got the massive stimulus they wanted and it didn’t work. They’d have been better positioned to seek more later, and to say “If you’d given us what we said we needed, things would have been better.”

9) Again, though, that’s playing around at the margins: By far the best political outcome is to improve the economy. But if you can’t do that, it’s better to have a plausible story about how you tried and the Republicans stopped you. “We would have tried to do more, but we didn’t bother, ‘cause we knew Republicans wouldn’t go along with it” isn’t as good as showing people a lengthy, acrimonious fight in which you actually try to do more and Republicans block it. (To those who worry that such an approach would result in appearing weak: You look weak anyway.)

10) If work means “reverse the decades-long skepticism among both elites and the public at large about progressive approaches to the economy and accomplish fundamental reform that addresses the massive and growing concentration of wealth and power in the hands of a tiny elite that results from a system rigged in their favor” … No. Of course not. That will require years of sustained effort by many people. But it’s a broad goal progressives should keep in mind and try not to undermine by doing things like stipulating to the importance of cutting taxes and regulations for “job creators” who already enjoy historically low taxes. We have a tough enough climb without shooting ourselves in the foot.

11) So if it’s unlikely to result in the passage of legislation that improves the economy, or to significantly enhance the President’s political standing in the absence of such improvement, or to shift the playing field on which economic debates occur, why do it? Because it’s the only option, other than going along with an approach that lines the pockets of a tiny portion of the country and screws everyone else.

In Defense Of The Rising

Gawker’s John Cook marks the tenth anniversary of the September 11, 2001 attacks with a post entitled “Against The Rising,” arguing that Bruce Springsteen’s 2002 album “is a failure.” The Rising’s popularity among both music buyers and critics makes the contrarian nature of Cook’s piece irresistible to Slate, which declares it a “must read for Springsteen fans.”

Nonsense. The only people for whom Cook’s piece is a must-read are those who will be surprised to learn that such a hackish and ill-considered argument can win high praise from a significant media outlet. If that sounds harsh and impolite, consider Cook’s own tone: “The problem with this is that The Rising is a terrible, bad, no-good record that cheapens us all.”

Cook insists “The Rising is a failure. It purports to document a nation's rupture and guide us toward salvation,” but fails to do so. It’s worth noting that Cook follows this assertion of what The Rising “purports” to do not with a quote from Springsteen about the album’s purpose, but with one from “one Catholic critic.” It is also worth noting that much of The Rising was written before the September 11 attacks occurred, and that Cook overstates the extent to which the album is a direct and literal response to those attacks.

In any case, Cook’s central argument is that the album wasn’t what “we” needed:

You can almost feel the weight of Springsteen's duty on the record—these are his people, these firefighters. This is his backyard. A nation turned its weary eyes to the Boss, and he keenly felt the need to answer. But the answer was overwrought, grandiose, bombastic. He went big. We didn't need anymore big things.

The grandiosity and bombast “we didn’t need” was, in fact, an absolutely essential form of catharsis for some of us. Not all of us, perhaps -- I don’t presume to speak for the nation quite as confidently as John Cook does -- but some, certainly.

In his one and only direct commentary on a song contained on The Rising, Cook contrasts the title track with an earlier Springsteen masterpiece:

The rousing, inspirational number is at the same time too on-the-nose and too off-key (does a dying man really grasp to a "dream of life... like a catfish dancin' on the end of a line" in his last moments? Just like a catfish?).

Contrast that with "Streets of Philadelphia," in which Springsteen obliquely and subtly addressed the AIDS crisis. There's no hammer in that song—no IVs, no pills, no gaybashing—just the pain of mortality and loneliness and the yearning for companionship.

Note that even Cook acknowledges “The Rising” to be a “rousing, inspirational number.” That he cannot, or will not, see that rousing and inspiring was exactly what some people needed at the time speaks volumes about his ability to assess what “we” needed. And that he would find it noteworthy that “Streets of Philadelphia” lacked “gay-bashing” probably says something about his familiarity with Springsteen’s work.

Now that Cook has explained how The Rising failed -- by being rousing and inspirational, but too on-the-nose -- he tells us how it could have succeeded:

If there's art to be found in the carnage of 9/11, it is at the periphery, among the ordinary and the living. Nobody alive knows what it was like to march to their death on 9/11. And a relative few know what it was like to lose a loved one on that day. Anthemic stadium-chants about those losses are empty exercises. But we all know the low-grade fear, the numbness, the confusion, the small heartbreaks. That's the territory that The Rising—or any album that seeks to do justice to that day as it was lived, as opposed to how it was televised—should have inhabited.

One record that did live there is the criminally overlooked Summer of the Shark, by Portastatic—Superchunk frontman Mac McCaughan's other band. Released in 2003 to little fanfare, Summer of the Shark catalogs the small moments, the mundane calamities that reverberated out from Ground Zero.

Again, what Cook derides as “empty exercises” provided, for some, a rousing, inspirational, and uplifting emotional release and a feeling of community. But look at what Cook wishes he heard on The Rising: Expressions of “the ordinary and the living” and a catalogue of the “small moments” and “mundane calamities” that followed September 11. Well, if that’s what Cook wanted, he would have been well served to listen to all of The Rising, not just the anthems.

Songs like “You’re Missing,” “Nothing Man,” “Empty Sky” do exactly what Cook says the album should have done. Here’s Cook’s praise for McCaughan’s work:

"In the Lines" (you can listen to it below) is about the near-universal experience of trying, and failing, to check in by phone on friends in New York City after the attack: "I got this woman on the phone, wrong number / Even she starts crying."

And here’s a passage from “You’re Missing”:

Too much room in my bed, too many phone calls How's everything, everything? Everything, everything You're missing, you're missing

Cook mocks “all of Springsteen's empty churches and grasping hands and na-na-nas” for failing to capture “what it was like to be an American in the weeks after 9/11.” Well, I attended eight shows on The Rising tour, and I don’t remember any fist-pumping or na-na-na-ing during “You’re Missing.” I do remember tens of thousands of people moved by Springsteen’s ability to capture what those weeks and months after September 11 were like, and tens of thousands of people grateful that rather than three straight hours of re-living one of the most emotionally wrenching experiences of their lives, they got the occasional na-na-na to lift things up a bit. Some of us needed both of those things. And that’s where Springsteen excels: He gives us both “Born to Run” and Nebraska.

Cook needn’t like The Rising -- maybe he finds “You’re Missing” and “Nothing Man” unsatisfying for one reason or another. That’s fine. Unlike Cook, I don’t presume to speak to what everyone needed at the time, or what everyone appreciates in art. But to ignore the existence of these songs while complaining that the album lacked anything like them is either stunningly dishonest or stunningly ignorant. Either he failed to listen to the album before declaring it “a terrible, bad, no-good record that cheapens us all,” or he intentionally misrepresented it.

(It must be noted -- as Cook does, near the end of his piece -- that Cook co-wrote a book with McCaughan, whose work he praises by misrepresenting Springsteen’s work.)

In the end, Cook’s portrayal of The Rising as a simply an album full of fist-pumping, na-na-na-ing anthem is as ill-considered as descriptions of “Born In The U.S.A.” as a flag-waving expression of Reagan-era Morning in America optimism. And, like those facile characterizations, it says more about the reviewer than about the album.