Kevin Price On The Oracle Of Omaha's View Of Ben Bernanke

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Warren Buffett on the Business and Government Connection Warren Buffett rolled up his sleeves on  the Fox Business Network in a very candid interview with the channel’s Liz Claman, in which he discussed CEOs of failing banks, reconfirming Ben Bernanke, and his Berkshire  company. On the Bank Situation: “You’ll always have banks that are too big to fail. We can’t operate in this world without  very big banks…If they are toppling the government will have to do something about it.” This is contrary to conventional wisdom and of this writer. After a year we see that banks  had more money than expected (witnessed in the pace in which they paid off their bailouts)  and these government programs have done little to increase the pace of loans, since banks  have found a way to get “money for nothing.” Why risk their resources if they are washed  in capital from Uncle Sam? Furthermore, these policies have only undermined moral hazard at a time it is so greatly  needed. The US cannot be in the business of rewarding bad decision making. "If I were running things and a bank had to go to the government for help, the CEO and  his wife would forfeit all their net worth…I think you have to change the incentives.  The incentives a few years ago were try and report higher quarterly earnings. It’s nice  to have carrots, but you need sticks. The idea that some guy who’s worth $500 million  leaves and only has $50 million left is not much of a stick as far as I’m concerned." This was actually the highlight in the Buffett interview. " We need a restoration of moral hazard in banking and that will only come when those  responsible for bad decision making suffers for those choices. The CEO has to be the chief  risk officer for a bank.”  This is a great observation and a view that needs to be restored. This is best achieved, in my opinion, by letting banks fail.  Any executives behind such will find themselves  looking for something else to do for a living. On members of Congress who feel Ben Bernanke should not be reconfirmed: “They ought to get down on their knees every night and thank the Lord that Bernanke was  there through this. He took some unprecedented actions…He took the actions that were  necessary to prevent panic from paralyzing this country.”  “Unprecedented” often means unconstitutional and has led to the expansion of government  like we have never seen in our history, even in the Great Depression. What he has done  is created instability in our monetary policy by pumping dollars into the economy at a  pace we have never seen. Furthermore, his bailouts of large corporations have undermined  the normal functions of a free market economy, such as moral hazard. He has created an  economy without risk, which is far from free market in design. What he has done is criminal… two thumbs up for those members of Congress who wish to see him go. On the future of Berkshire Hathaway’s business acquisition: “We’ll keep buying businesses, as long as I’m alive we’ll keep buying businesses…we’ll try  to buy them for cash, sometimes we may have to use some stock, but we’ll use as little stock as possible.”  If the US economy continues to reel from the unstable monetary and  fiscal policies of the Obama administration, large corporations like Berkshire Hathaway will continue to benefit from them. It should be no wonder that, when questioned about Tim Geithner, he replied “I think he’s terrific.” Maybe for Buffett, but not the rest of the country. ____________________________________________________________________________________________________ Kevin Price is the host of “Price of Business”, M-F at 11 am on CNN 650 and CBS Radio and can  be frequently found in the “Strategy Room” at FoxNews.com. A syndicated columnist whose  article appear at Reuters, Chicago Sun Times, USA Today, and other media, his BizPlusBlog.com  is ranked in the top 1 percent of all blogs by Technorati. His articles also appear regularly  at AmericanDailyReview.com and RenewAmerica.com, Examiner.com, and others.

Who Owns Our Government?

Ron Paul Speaks Out On The Financial Crisis And The Reappointment Of Ben Bernanke

Why Do Environmentalists Oppose Alternative Energy?

Environmentalists claim that our use of carbon-based energy is altering the climate, making us more vulnerable to climate disasters. Human survival, they insist, requires the immediate abandonment of fossil fuels in favor of carbon-free sources.

So why do environmentalist groups vehemently oppose projects involving every alternative form of energy ever proposed to replace fossil fuels--including wind farms and solar power plants? And why do they ignore the dramatic degree to which industrial development under capitalism has reduced the risk of harm from severe climate events?

Before we rush headlong into drastic climate policies and energy rationing, a critical examination of these policies is urgently needed. Stay connected as we explore these issues that are so critical to our future.

It's Tax Time Again

Let’s Talk Taxes

It’s almost that wonderful time of year in America. The period between the holidays and the first signs of spring when we take stock of our contribution to the free world. The time when we sit down with a pile of papers and try to figure out what we owe Uncle Sam this year. We are either taking the dangerous route of doing our own taxes or setting up the documentation to give to a CPA that will charge at least $500 to prepare them for us.

The problem we have with taxes in the U.S. could be called our perverse attitude toward success.

Instead of a simple, fair system for everyone, with something like an across-the-board 15% income tax, what the U.S. does is place a higher rate of federal tax on those who earn higher incomes. This is called progressive taxation.

Human beings, like any living creature, are driven by incentives. If they do something and get rewarded for it – through more money, more friends, or whatever – they will do more of it. It‘s really very simple logic.

Progressive rates of taxation send the signal that the more you produce and succeed, the more you'll get robbed. It's a little stupid to punish success, to punish productive behavior. It ultimately leads to decay.

If a business person produces something everybody wants and he makes $1 billion a year from it, why should he have to pay 50% of his earnings to the government, when someone making $25,000 pays just 15%? All the billion-dollar businessperson did was produce something people wanted, and he is punished with the higher tax rate. It's not like he gets 35% more government in return for his greater contribution. (which he prays he won’t get anyway)

Progressive taxation supporters – let's just call them “idiots” for short – defend their position by saying, "But the rich can afford the tax... So they should pay more."

Yes they can. But that is ignoring the real issue. The real issue is a moral one. It's an issue of treating all people fairly. As long as you're not stealing from others, if you produce a service or product people are willing to pay a lot of money for, you should be rewarded commensurately. If you produce a product or service people are not willing to pay a lot of money for, you should also be rewarded commensurately.

To take more from those who succeed by serving others is a corrosive policy. It's the heart of the reason why the Soviet Union collapsed. People will only put up with extremely perverse incentives for so long. As Margret Thatcher, former Prime Minister of Great Britain said, “Eventually, you run out of other people's money.” We're not at Soviet levels of taking from the productive, but we could get there, and sooner than you might think.

I believe progressive taxation is a policy enacted and encouraged by lazy, jealous, uncreative people wanting to take away from successful people. It's people wanting to take things they have not earned. And when you institutionalize this policy, it corrodes the spirit of a nation. Politicians (especially the brand we have in charge right now) have traditionally used the tax system to gain power. They rob Peter to pay Paul and then ask Paul to vote for them every election cycle. When you do that, you will build a large political base of Pauls and eventually run out of Peters.

That's what we're currently doing in the U.S. I worry that if Barack Obama and the Democrat controlled Congress gets their way, it will get much worse. It's obvious progressive taxation and socialism are some of Obama’s core beliefs.

If he is allowed to go whole hog with his crazy socialist plans, you will truly see Ayn Rand's novel Atlas Shrugged play out in real life. You will see hard working, successful people say, "I'm not willing to pay 60% of what I earn so others can enjoy the fruits of my labor." They will stop working or leave the country.

I deeply love the idea of America... I think the founding of this nation is the greatest thing in the history of mankind. My grandfather and my father were capitalists and provided me with a foundation and a work ethic I take very seriously. But we are so far from the ideas the Founding Fathers believed in – low, fair taxes; small government; no foreign wars of aggression – I will seriously consider leaving if it gets worse, if we turn into a communist or socialist nation. I will not serve as a milk cow for those who refuse to work or produce.

Men like Theodore Roosevelt, Woodrow Wilson, Franklin Delano Roosevelt, Lyndon Johnson, and Barack Obama have trashed the ideas and memory of men like Thomas Jefferson and George Washington. It's really very sad. The progressive mindset that dates back to 1900 has done more to erode the social structure of this nation than anything.

But I always try to find the positive side of things... so I keep the hope that early on the road to American socialism, there will be a rebirth of American ideals and the basic concepts of life, liberty and the pursuit of happiness, and it will once again discredit the belief that you can run a society based on rewarding failure and punishing success.

Life just can't work properly that way. And it has nothing to do with "Democrats" or "Republicans." It's a simple, common-sense notion our nation's founders believed in.

Jim Getten

Capitalist Tools

January, 2010