Warren Buffett is certainly one of the most successful Capitalists, and he says we need to make some changes.
Proposed: Let’s consider what Warren Buffet has to say.
In an article from MoneyWise, Mr Buffet points out that people at the bottom of the capitalist pyramid are feeling the squeeze. He also points out that younger voters tend to view the Free Enterprise system upon which America is founded from an increasingly jaundiced and skeptical perspective. The best and highest paying jobs go more and more to highly specialized workers, which leaves too many in the bargain basement of Capitalism.
My Conservative friends will be glad to note that Mr. Buffett does not recommend raising the minimum wage as a solution. “I believe in having a higher income for people — not necessarily a higher minimum wage,” Raising the minimum wage would certainly lead to increases in the unemployment rolls.
Mr. Buffett instead recommends one or both of two possibilities: Increased income tax credits at the bottom of the pyramid and/or increased taxes at the top.
In economics “capital” means labor-saving technologies but it has also come to mean the money used for investment. People usually define “capitalism” as a system where the means of production are privately owned. Socialism is where the government owns and operates businesses. Socialism is also called “state capitalism.”
Economic fascism is socialism with a capitalist veneer where private ownership is permitted but government distorts markets with dictates and subsidies.
The opposite of Free Enterprise (private property capitalism) is unfree. The Heritage Foundation’s annual Index of Economic Freedom shows the top four most free economies to be Singapore with a score of 83.9, Switzerland 83.8, Ireland 82.0, and Taiwan 80.7. The least free economies are North Korea 2.9, Cuba 24.3, Venezuela 25.8, and Sudan 32.8, places people try to escape.
Oil-rich Venezuela equaled the world average score of 57.4 in 1999 just before socialists were elected.
Heritage ranks the USA 25th with a score of 70.6 down from a 4th place score of 81.2 in 2007.
Mr. Buffett is a focused genius who helps many people to be financially secure—he truly earned every dime, but his political solution would lower economic freedom and further damage the people he would like to help.
Tax credits are subsidies that incentivize people to keep doing that which maintains the subsidies, in this case, remain in low-income jobs. Higher taxes on the rich suppress investments which in turn reduces the demand for jobs and lowers wages.
The best way is more economic freedom. Abolish taxes on jobs and earnings. Instead, tax consumption by enacting the FairTax Act of 2023. Workers will keep their whole paycheck. The demand for labor will increase and push up wages. See fairtax.org for details and analyses.
We need more economic freedom, not less; more Buffetts and fewer bureaucrats.
Thank you for your insightful economic analysis, Jim. Your analysis is very accurate and also very professorial.
You said, “Tax credits are subsidies that incentivize people to keep doing that which maintains the subsidies, in this case, remain in low-income jobs.” My question is this: Isn’t it possible that you are under considering the desire of people to get ahead in life. You imply that people, once having received a tax credit, will never try to do more with their lives. Answer me this: If people are pre-determined to always take the path of least resistance, doesn’t that, in some way, give the lie to the whole Free Enterprise system? Isn’t it just as likely that people will use a tax credit today to fund and bankroll their success in the future?