Warren Buffet, The Oracle of Omaha, has just made a really shrewd move or he really is nuts. He was recently vilified by the right for suggesting that people who make over a million dollars a year should start paying 35% tax instead of the current 15%. His new “questionable” investment was to put five billion dollars into Bank of America, the biggest of the big zombie banks. This pulls BoA back from the edge of the cliff and then some.
You might say he thought buying a stock that has lost 50% of its value was just an ordinary buying opportunity. But you might say that today's rumor about that big new jobs program Obama is going to introduce in September has something to do with it. The most successful capitalist in the world did President Obama a real solid by taking a principled stance against greedy right wingers. Did Obama return the favor with a hot stock tip? Or is Buffet just really smart?
The “secret” plan to revive the economy, if rumors are to be believed, is to finally refinance all of the outstanding mortgages to the new low interest rate which currently less than 4%. This would immediately start pumping cash into the economy, which when fully implemented would amount to 85 billion a year and would be high grade stimulus. This would continue for a generation until these loans are paid off.
The real kicker is that Congress can’t stop him from doing this and it won’t cost anything. Obama already has the authority to do this from laws passed in 2009. Buffet and BoA could benefit from the rewriting of the loans if they are allowed to do the paper work, and if nothing else it should take care of that trillion in bad mortgages BoA has on the books.
Why didn’t Obama do this before? Well, it’s going to really piss off those greedy millionaires and billionaires that Buffet has been publicly shaming. You need to understand about Freddie and Fannie, the government backed semi-private home loan holding companies, the ones that the right wingers want to “privatize” which really means “steal”. You see these companies have issued trillions of housing bonds that pay pretty good interest and are government backed, even if no longer AAA.
The rich people who hold these Freddie and Fannie bonds are suddenly going have them redeemed and they won’t have any place to put their ill gotten gains that pays anything. Not that these people are going to starve but they might need to invest in something productive for a change. These high interest bonds were simply an instrument for the rich lords to tax the peasants, and the rich didn’t pay any significant tax themselves as dividends, interest and capital gains are taxed at a maximum of 15%.
This kind of income is completely exempt from payroll taxes as well, not just the amount over 106,000. So while the self-employed Mercedes mechanic will pay 47% Federal tax ,including 12% for Fica, on the top slice of his income. The guy who has his chauffeur bring the cars in will sit home by the pool and whine about paying 15% maximum, not counting other tax loopholes.
The response from the right, “But, but, the rich pay more than half of the income tax and to be fair we need to tax the bottom 48% who don’t pay any taxes”. They don’t mention that rich (we are talking thousands of people compared to 150 million who don‘t pay), these rich people have more than half of the income as well. Plus the personal income tax only accounts for 44% of revenue while Fica is 41% and Fica is not paid by the rich. The rich pay about half of the actual income tax rate they paid in 1961.
The rich also benefit greatly from their ownership of massive corporations that provide them with all manner of lavish perks and the ability to wield raw power. No problem getting the 50 yard line seats for the big game with the company name on the stadium, and fly to the game on the corporate jet with the private five star chef. No problem getting George into Yale instead of trying to get him on at the sheltered workshop, and those criminal charges can just go away when the judge owes you his job. Corporations in the US pay the lowest actual tax rate in the developed world and it’s about a quarter of what they paid 50 years ago. It’s good to be rich, sucks for you teabagger. www.prairie2.com