Warren Watch: 'The Optimist'

Premium ContentMouse over Home then click on Premium Content for information.

Warren Buffett's usual cheery optimism cracked when he talked with Time magazine reporter Rana Foroohar about the 2004 death of his first wife, Susan Thompson Buffett.

"He bursts into tears," Foroohar wrote in the most recent issue. It is Buffett's first appearance on the magazine's cover.

"Her death is — it's just terrible. It's the only thing that's really up there," he says, his voice shaking. "I still can't talk about it." It takes several moments, as we sit together at the table overlooking the golf course at the Happy Hollow Club, for Buffett to recover. I put my hand on his arm. Eventually, we move on to an easier subject — his investments.

The article, based on an inverview over a Sunday brunch, recounts Buffett's life and his political and economic views, including shock that Republicans would "play a game of chicken" over the U.S. monetary and debt policy, and it describes his disappointment "that so many financiers who'd supported Obama and received the benefits of the financial bailouts were unwilling to support higher taxes to help close the deficit."

Buffett's views are radical, the story says, because he believes in strong capitalism yet insists that government can help solve problems. He's optimistic about the United States' future but worries that the wealthy are accumulating too much power.

"We can rise to any challenge, but not if people feel we're in a plutocracy," he said. "We have to get serious about shared sacrifice."

The article says Buffett favors a complete overhaul of the health care system, calling it "a tapeworm in America." The article also says Buffett is "only half joking when he says he'd like to see private schools banned so that rich families would be forced to invest in the public K-12 system. (No Buffett in Omaha has ever gone to a private school, he notes proudly.)"

Capitalism should be supported and encouraged because it creates wealth and unleashes human potential, he said, but "we need a tax system that essentially takes very good care of the people who just really aren't as well adapted to the market system but are nevertheless doing useful things in society."

Buffett said he doesn't worry about speaking out.

"If you are a CEO or you have to deal with a conservative board or you have a boss that might get upset by what you say, you can't do what I do. But I don't have a boss. It's hard to hurt me. If you don't speak up now, when are you going to? As my partner Charlie (Munger) told me, it's like saving up sex for your old age!"

Laffer a critic

Credit Buffett with invigorating — if not initiating — the perceived conflict between the wealthy and the rest of us, which, according to a new survey, has become America's biggest source of internal conflict — bigger than immigration, race relations or issues between the young and the old.

Buffett's article in the New York Times in August called for higher taxes for people who make millions of dollars in income but pay low tax rates. The piece triggered reactions that were both immediate and so long-lasting that the issue has become a regular part of the political debate in this presidential election year.

Of 2,048 adults surveyed last month by the Pew Social & Demographic Trends Project, two-thirds said there are "strong" or "very strong" conflicts between the rich and the poor, up from 47 percent in a similar survey in July 2009. The "very strong" percentage is double the 2009 results and the biggest since the question was first asked in 1987.

The perception of rich-poor conflict has increased among both political parties but is far more likely among Democrats and political liberals, the Pew survey indicated. The biggest increase was among independents.

The latest critic of Buffett on the question of taxing the wealthy is economist Arthur Laffer, an influential adviser during the Reagan administration, in a Wall Street Journal opinion article last week. Laffer called Buffett's idea part of "the progressive intelligentsia's obsession with tax increases on the rich to raise revenues and achieve social justice."

Counting gains on Berkshire stock that Buffett owns — known as unrealized capital gains — Laffer said Buffett's true tax bite is 6/100ths of 1 percent, not the 17.4 percent Buffett listed in his Times article last August calling for the higher tax.

Buffett's 17.4 percent calculation reflects the fact that capital gains are not taxable income unless an investment is sold, but Laffer said the $10 billion gain on Buffett's Berkshire stock in 2010 was "part of his total income by any standard definition, including the one used by the Congressional Budget Office."

Laffer wrote that if the government assesses the surtax proposed by President Barack Obama, called the "Buffett Rule," Buffett's true tax rate would rise to 12/100ths of 1 percent, still an infinitesimal rate.

Laffer also questioned Buffett's call for a "shared sacrifice" by the rich at the same time he takes tax deductions for his annual contributions to the Bill & Melinda Gates Foundation.

Laffer argued that the proposed surtax would worsen the budget deficit and weaken the economy. "Everyone would suffer," he wrote, citing times in the past when tax rates affecting the wealthy were reduced and economic booms followed.

Buffett's response, in the Time magazine interview:

"Well, I had a net unrealized loss last year. But if Arthur has a plan for how he wants to tax unrealized gains, I'd love to hear it. It's an interesting thing for a Republican to put forward!"

Greeting only

Buffett will make a greeting but not music for the Chinese New Year.

Earlier reports that he would sing and play guitar on a video for the official government-sponsored celebration went beyond the actual plans, according to the Wall Street Journal.

Wu Zheng of the Chinese media company Sun Media Investment Holding Ltd. had contacted Buffett's family about taking part in the program, and Buffett made a video wishing viewers a happy New Year. Wu planned to mix in a video of Buffett playing the ukulele and singing "I've Been Working on the Railroad" at a charity event in Beijing a year ago.

When Buffett objected, Wu pulled the musical video portion. But Wang Pingjiu, a production executive for the broadcast, didn't get the latest word and told a press conference that Buffett would sing and play.

Instead, the program's estimated 700 viewers will have to settle for the greeting, which Wu said is "great."

The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.

Contact the writer:

402-444-1080, steve.jordon@owh.com

twitter.com/buffettOWH

« Money

Share