Warren Buffett's Wild Idea for the Debt Ceiling

Here's Warren Buffett on CNBC this morning, discussing a possible solution to keep the government current if we can't raise the debt ceiling by Aug. 2 -- the day the Treasury says the U.S. will default if no deal is reached:

You could have corporations like Berkshire Hathaway (NYSE: BRK-B  ) voluntarily prepay some of the corporate tax they're going to owe in a few months anyway. If you really knew [that a deal was coming] and you just had a one-day gap, or a two-day gap, I mean, we're going to be paying a lot of taxes on Sept.15, and Jan. 15. ... I don't think there would be a problem in getting a number of corporations to prepay a couple of their quarterly payments if they felt they were doing something patriotic and they really felt that the crisis would be over in a few days. That would be something that would be sensible to do.

"And you'd do that?" asked host Becky Quick.

"Yeah, Berkshire Hathaway would do it. And I'd make a few phone calls."

Technically, this probably could work. The Treasury's monthly cash deficit has averaged $123 billion over the past seven months, or about $4 billion a day. If a few big corporations like Berkshire, Wal-Mart (NYSE: WMT  ) , and AT&T (NYSE: T  ) prepaid just one quarterly payment, you could probably keep the Treasury current for a day or two.

In dollar amounts, corporate taxes are fairly concentrated -- Buffett in the past has noted that Berkshire alone pays about 2% of all corporate taxes -- so there are probably only a few companies out there that could make a dent. Complicating things is that plenty of corporations have large loss carryforwards from the recession and don't owe U.S. corporate taxes. Plenty more use offshore tax shelters to avoid it altogether. In reality, there are probably fewer than 10 companies whose prepayments would make a difference.

And would those companies feel as patriotic as Buffett? Who knows. Tell me what you think below.

Fool contributor Morgan Housel owns shares of Berkshire, Wal-Mart, and AT&T. Follow him on Twitter @TMFHousel. The Motley Fool owns shares of Berkshire Hathaway and Wal-Mart Stores. Motley Fool newsletter services have recommended buying shares of Wal-Mart Stores, AT&T, and Berkshire Hathaway. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On July 07, 2011, at 1:50 PM, pondee619 wrote:

    So, did he prepay his taxes, or was he just talking?

  • Report this Comment On July 07, 2011, at 2:44 PM, DukeTG wrote:

    I think it's pretty clear from the quote that he would only prepay if 1) there was no deal by August 2, and 2) it would actually make a difference, i.e., there's a deal in the works that's a day or two from being signed and we need some stopgap funds.

    If there is no deal and we have to start "prioritizing" where funds go, can we all agree that Congressmen should not get paid until said deal is reached?

  • Report this Comment On July 07, 2011, at 2:53 PM, kirkschu wrote:

    First to not get paid: Republican Senators, Second, Republican Representatives, Third, house majority committee staffers, fourth Setate minority committee staffers, fifth, military contractors, starting with Halliburton and Blackwater (whatever their new name is) sixth, Social Security recipients in states with two Republican senators, seventh, SS recipients in states with a majority of Republican representatives, eighth, armed forces personnel in states with a majority of Republican Senators and Representatives. That should be enough to get by until the Republicans get the message.

  • Report this Comment On July 07, 2011, at 3:03 PM, azzir80 wrote:

    I would gladly pay my share of the deficit if I believed the government would actually use it to pay down the debt.

  • Report this Comment On July 07, 2011, at 3:09 PM, VoiceintheCrowd wrote:

    If Congress thinks that a deal really is imminent, then it would be fairly easy for them to pass a continuing resolution or equivalent thereof authorizing an extra two days' worth of borrowing or so (easily equal to however much this prepayment plan might raise and more).

  • Report this Comment On July 07, 2011, at 3:36 PM, Bootlegger22999 wrote:

    kirkschu: a bit partisan are we? how about we apply the same for all the dems & their constituent states? if they would even consider stopping spending like a bunch of drunken sailors we wouldn't be having this discussion. all they want to do is raise taxes. every one's. it's a spending problem this country has. anyone who's ever taken econ 101 knows that you cannot tax/spend your way out of recession or debt. how did the (now-laughable) "shovel-ready programs do towards solving our economic & unemployment woes?

  • Report this Comment On July 07, 2011, at 3:53 PM, adisbeliever wrote:

    Bootlegger229099: Partisan? You bet! What else has been going on since November 2008 but pure partisanship, garnished with a heavy dose of racism? The Fat Elephants have gorged themselves in partisanship. Look at the facts.

  • Report this Comment On July 07, 2011, at 4:30 PM, DanPoz wrote:

    Bootlegger is so misinformed of econ 101 and history it's scary. Biggest bunch of drunken sailors were the Republicans over the last 10 years. How did we get out of the great depression? Government Spending! The biggest of which was WW II. Additionally the "New Deal" programs TWA etc. basically infrastructure spending was pulling us out. Look at the facts and you will see every time Roosevelt bended a bit for the Republicans the recovery slowed. That's not partisan, that's history not rewritten by your Kool -Aid dealers. Lowering taxes and starting wars is the wrong way to go. the stimulus was screwed up by guess who? the Republicans who demanded that tax breaks be a part of it.

  • Report this Comment On July 07, 2011, at 5:00 PM, saximan1 wrote:

    @DanPoz, you contradicted yourself by saying

    " How did we get out of the great depression? Government Spending! The biggest of which was WW II."

    Then later saying, "starting wars is the wrong way to go." Gotta make up your mind.

    I agree, infrastructure is SO badly needed in this country, a New New Deal would be nice for all the unemployed, but how many would actually take the deal? Additionally, prior to WWII, the US was not a world super-power. China didn't exist, trade-wise. It's a different world today than Roosevelt. You just can't compare the two anymore.

  • Report this Comment On July 07, 2011, at 5:08 PM, titus77 wrote:

    Its not like this is a surprise! This date has been foreseeable for years. Now that it is actually here everyone is in blame-the-other-guy mode.

    Each party has had the opportunity to fix this, but neither of the options available -- spend less or tax more -- will win you any votes and so its not prioritized. Its despicable and irresponsible.

    Warren Buffet's offer is laudable, but its not necessary if Congress actually cared about fiscal responsibility.

    Soon enough the debt ceiling will get raised (this will be over the 70th time in the past 50 years) and we will forget about it until the months before the next debt ceiling is reached.

  • Report this Comment On July 07, 2011, at 6:01 PM, moneyman35 wrote:

    @ bootlegger

    After your statement i'm quite certain you didn't take Econ 101. You missed the entire concept...

    Keynesian economics?? Employing monetary policy? Government spending in the bad times, pay back the debt in the good times?? Any of this ringing a bell?

    The US spent in the bad times and then spent more in the good times and now you gotta spend in the bad times again, so that you can spend in the good times... Except the good times might not come this time.

    Of course this is all theoretical, it is Economics afterall. But you knew that right?

  • Report this Comment On July 07, 2011, at 9:01 PM, neamakri wrote:

    Prepay the fed ~ that is exactly the same as a payday loan.

    If the government does not balance the budget, giving them another 30 days free is just encouraging them to NOT do the right thing ~ balance the budget!

    Sorry, bad idea. I can't believe Mr. Buffett would take the bait on this one. He is surely smarter than that. Maybe someone caught him in a weak moment.

  • Report this Comment On July 07, 2011, at 11:29 PM, chapoyelena wrote:

    It is about time the government started listening to a businessman. We need to elect one for president in 2012. Mitt Romney best represents us baby boomers.

  • Report this Comment On July 08, 2011, at 12:17 PM, David369 wrote:

    Anybody ever figure out how much each person would get if the government made a cash payment to each taxpayer instead of giving bail out money to the banks, and giving money for clunker cars, giving tax credits for buying a house, and paying unemployment for dang near forever not to mention credit for growing biofuels as well as credit to the oil companies for selling biofuels. I don't have a calculator that can add that much but I bet we'd all have enough to stimulate the economy more than anything else has. Some would blow it, some invest it, some would pay off bills but there would be money going all over the place and to top it off the government would get to tax most of that money.

  • Report this Comment On July 08, 2011, at 12:39 PM, mm5525 wrote:

    LOL, whatever happened to the Warren Buffett who complained about buying his house for $31,500 because those dollars would be worth $3,150,000 a few decades later? So much for the snowflake turning into a snowball and the power of compounding interest based on his views today. Warren has softened his views through the years, which is understandable, but very few corporations are going to take the "nobility route" to pre-pay taxes any more than they have to when the cash can be used for better purposes, even with paying a penalty.

  • Report this Comment On July 08, 2011, at 1:02 PM, CluckChicken wrote:

    "but very few corporations are going to take the "nobility route" to pre-pay taxes any more than they have to when the cash can be used for better purposes, even with paying a penalty."

    I disagree. I think there are a good number of companies that would happily trade one months worth of interest/investment for the ability to add a line to their advertisments that states they helped save the government from defaulting.

    You hear stories about Homedepot trying to have congress change all these laws so that they can get more stuff from China, that is bad press, but if they prepay some taxes a month early, bad press be-gone.

    If I was head of one of the banks that got some bailout funds, I would be first in line to follow this idea and speak the words "the government helped us out in our time of need, this is the least we can do."

  • Report this Comment On July 08, 2011, at 1:46 PM, showalter08 wrote:

    @ Dan POZ

    FACT: FDR seized all the privately held gold in the U.S. The Government then used this gold to fund their government programs. Maybe we should do it again? Except this time we can use your private gold stash to pay for my medical bill. FYI government seizure of private assets to pay public debt is called socialism.

    FACT: Government spending was 5% GDP before the New Deal. After the new deal and WWII it was 40%. Sound familiar to our problem today?

    America was the only world dominating economy at the end of WWII. You could argue Russia…but they were socialist and everyone knows econ 101 right? Socialism kills incentive to work. What is the number one rule in economics—people react to incentives. Fail.

    Furthermore, after WWII America experienced all the great spoils of war and was the world’s newest superpower. Where are the spoils of war from Iraq and Afganistan? There are none for “Big” government--just individuals that work within the government.

    Let’s just keep giving the poor handouts and standardize stagnation. History has never repeated itself.

  • Report this Comment On July 08, 2011, at 2:09 PM, CluckChicken wrote:

    @showalter08

    Very misleading.

    "FDR seized all the privately held gold in the U.S. The Government then used this gold to fund their government programs."

    The government ordered everybody to turn in gold but they were paid 20.67 per troy ounce (the exchange rate at the time), so this was not a seizure. Also not all gold was required to be turned in, like most government actions there are dozens of exceptions. Then because the government could they later changed the exchange rate from 20.67 to 35 per troy ounce.

    See Executive Orders 6102, 6111, 6260, 6261 and Gold Reserve Act of 1934.

  • Report this Comment On July 08, 2011, at 2:59 PM, mm5525 wrote:

    The government "ordered everybody to turn in gold but they were paid $20.67 per troy ounce (the exchange rate at the time), so this was not a seizure" yet you can legitimately claim that's not a seizure in any way, shape, or form? Dare I ask what other claims you have? If you order me to sell my house to someone, is that not a seizure, too? I sure hope for that exception....

    Try a seizure at "fair market value" at the time when the government knew the price would increase and get back to us when you have some facts to back you up. I assume you will admit key details that only World War II got us out of the fiscal mess created by one FDR, but, then again, I'm not sure you're going to admit anything.

  • Report this Comment On July 10, 2011, at 3:23 PM, davidinMi wrote:

    For pity's sake. Walter the confused said "FACT: Government spending was 5% GDP before the New Deal. After the new deal and WWII it was 40%." Yes, Walt, and before the new deal poor people and old people starved and we were not a military superpower. Ah for the good old days? please.

    There was civil unrest prompting fears of government overthrow. The army was sent in to roust Veterans camped near DC. It is precisely this type ignorance about what "economic indicators" correlated with in lived experience that is so frighteningly common today. People might say they are "for" restraint and deficit or even debt reduction, but when you put that into action, turns out the rhetoric is divorced from it's meaning. People want to balance the budget by cutting foreign aid - roflmao. That's like losing your job and deciding to balance your budget by eliminating cotton candy purchases.

    Then you say "You could argue Russia…but they were socialist and everyone knows econ 101 right? Socialism kills incentive to work." Sorry, but they were communists not socialist. Communism - at least as practiced by the soviets, did kill incentive, socialism as practiced by most of Europe - not so much.

    Socialism works much like insurance. You Tax good fortune to mitigate bad fortune. This stabilizes society while still rewarding initiative and hard work.

    Really, so many post here citing Econ courses they didn't take or don't remember. Is it any wonder our politics are the mess they are?

  • Report this Comment On July 10, 2011, at 6:44 PM, haystrust wrote:

    Very interesting to see all this foolish speculation. AS my Dad used to say when we would argue some of these ideas, "THe country would be better off if you and I ran it."

  • Report this Comment On July 10, 2011, at 6:46 PM, hardnokgrad wrote:

    It would be nice if we could depend on the public spirit of the largest corporations whose payments could make the most difference,but maybe I'm too cynical by now to hold out for this, BUT HOW ABOUT AN ALTERNATIVE THAT APPEALS TO SELF INTEREST- If you've ever seen a typical business invoice,on the bottom you'll see something like 'Terms 2%NET10" e.g. You can take a 2percent discount if you pay earlier than 10 days" Standard practice in business,but have you EVER seen anything like that on tax bills (actually my dad's county tax bill in PA has that)? Meanwhile Government at all levels has to do LOTS of short term borrowing,because expenses are constant,but revenue peaks around days like April 15, etc. Offer prepayment discounts by some or all of the borrowing cost, and at least trim that expense out of the cost of government. What would Mr. Buffet say to that?

  • Report this Comment On July 11, 2011, at 2:16 PM, rayintexas wrote:

    The debt ceiling is my comment. The Republicans have stated how great it will be for the country to cut spending and not raise taxes. If this is so great then lets only cut funds going to those House districts for Republicans congressman. They say they are listening to thier local voters so they should have no problem going home with that as a huge victory for them. We can do really large spending cuts that way 4 trillion or 6 trillion. This should make thier districts really prosper if they believe what they are saying. If it is not good enough for your community then how can it be great for the country. I think if the debate gets put in these terms I think we will be able to get a balance approach. This way the people who voted for thier elected officials can feel the effects of thier vote. As a member of the House you represent your district so let your vote only effect your district.

  • Report this Comment On July 11, 2011, at 2:47 PM, TSIndiana wrote:

    What I don't see disccussed is repayment for his loan to the government. Is he simply hedging because he knows that cuts won't be enough and taxes will be going up.

  • Report this Comment On July 11, 2011, at 3:47 PM, IUbacker wrote:

    As I see it, this whole mess was created corrupt business exec's, misguiding government control and pure and simple greed. And I am talking greed from everyone. Mr. Buffett's idea of asking for the big corporations to pay their quarterly taxes earlier would just become another cluster #*%!. What needs to happen to fix this situaton, and fix it for good, is three simple steps. #1- Set taxes at a flat percentage rate for everyone, weather you gross 40,000 or 400,000 dollars a year you pay one flat rate. No deductions, no loop holes just one flat rate for everyone. #2- Set tax rates on companies at flat rates determined by how many people your company employ's, the more you employ the lower your rate. The theory there is by employing more people the more revenue the government receives from individuals. Also place a 50% tax on executives bonus's. #3- Reduce government by 30 to 40%, and start from top down. We have way to much overlaping of government it is no wonder we are going broke. And by reducing government pass some of the agency's and departments we have to the private sector. Put it in the hands of business men, not politicians. We pay them to govern not run bussiness's. I have one final note, as we do with the president we need to put term limits on congressman and senators, two terms and your done. Thomas Jefferson said " Build a government big enough to give everyone what they need and you have a government big enough to take it away"

  • Report this Comment On July 13, 2011, at 10:11 AM, UncleUgly wrote:

    Maybe the banks can bail the government out.

  • Report this Comment On July 13, 2011, at 2:55 PM, chaz572 wrote:

    @IUbacker, what a recipe for disaster. Idea #1: a flat tax is actually more oppressive the poorer you are and more forgiving the richer you are. In order to get equivalent income tax revenues to what we collect now from a flat tax, rich people's taxes would drop and poor people's taxes would rise -- a lot. You'd literally be taking the food out of their mouths and the medicine out of their veins to pay those tax increases, because the poor don't have discretionary income. A wonderful way to destroy what little remaining base we have of low-wage menial labor and turn it into a pitchfork-wielding revolt. Idea #2: tax companies with fewer workers more??? Way to put startups out of business. In case you haven't been reading the jobs reports, nearly all net job growth in this country comes from small businesses -- those with 50 or fewer employees. They are constantly struggling. Most of them fail. But some succeed, and grow into larger businesses, hiring like gangbusters in the process. While they're small, however, and fighting to survive and grow, they are extremely cash-strapped because they don't have any of the clout or economies of scale that large businesses do. They get tax breaks because they need them to survive, and deserve them because they are the job creation engine of this economy. If you reverse that, and tax them more than large businesses, you've just guaranteed falling job creation and rising unemployment in perpetuity. Nicely done. Implement both of those ideas fully, and the U.S. could turn into a third-world country in no time flat.

  • Report this Comment On July 14, 2011, at 12:36 PM, ChemBaby wrote:

    "THe country would be better off if you and I ran it."

    What an interesting thought. How about all of us that are bellyaching about our elected officials from our computer chairs and get involved in the political process? Not just vote for another crook, but actually get involved in the caucus process or run for office ourselves. Throw the bums out and get some honest, intelligent folk in?

    If we are too lazy to get involved then we deserve to be governed by the corrupt.

  • Report this Comment On July 14, 2011, at 2:20 PM, DJDynamicNC wrote:

    @Chapoylena - I mean, George Bush had an MBA. How'd that pan out?

    I'm sure all those tax cuts for billionaires surely had nothing to do with our ongoing budget crisis, and surely stimulated tons of jobs just like we were promised which is why the unemployment rate is so grand right now.

    Yes, it's good to have the government listen to a businessman - if you're a businessman.

  • Report this Comment On July 14, 2011, at 6:34 PM, CassandraSays wrote:

    George applied to the "family u" after failing to make the cut at an obscure backwoodsy college that turned him down.

    The Ivy League has its little ways of looking after the sons of its big donors/alumni -- the MBA program is one of them.

    Even then, has a handwriting expert ever looked at George's exam papers?

  • Report this Comment On July 15, 2011, at 12:32 PM, golfer121501 wrote:

    @CassandraSays

    REALLY?

    You are going to waste our time arguing over a previous president's exams when the nation is at the brink of collapse? How about you come back when you have something constructive to say like:

    both parties need to stop trying to borrow time and actually agree to STOP spending money we don't have and won't have in the next 50 years.

  • Report this Comment On July 15, 2011, at 12:37 PM, promommyfool wrote:

    Goodness we are seriously partisan in here. The truth gentlemen is that both parties put us in this postion and it was ignorning government regulations that would have stopped banks from leveraging themselves to the moon that also contributed. Both parties spend everything they can get their hands on when they are in power and no party wants to that "party" to end. The country is in this position because there is too much "what's in it for me?" going on. No political party is immune to it or innocent of it.

  • Report this Comment On July 15, 2011, at 12:58 PM, ibuildthings wrote:

    promommyfool seems closer that some of the others.

    The 1999 congress, and Prez Clinton became an enabler for the fiscal wreck when they abandoned the part of the Glass-Stegall Act that forbids a "personal / small-business" bank to also be an "investment" bank. The levels of risk an investment bank takes aren't copacetic with the ma and pa savings/checking/home-loan functions of a personal bank.

    But it didn't stop there. Fannie Mae was a government-sponsored lender that bought up loans written by other lenders and banks. Fannie Mae was cooking their books, doing it for years. Retail banks took advantage of this. They created "liar loans" and other ways to lend fat money to people who couldn't repay, charged fat fees, then sold the loans at face value to Fannie and Freddie. The CEO of Fannie, Franklin Raines, structured his bonus package by the number of loans under management, not the number of loan under management that were actually being repaid. See the difference?

    All those folks who blame Bush for deregulation probably haven't read the stories about Bush accusing Fannie and Freddie of cooking the books. He asked Congress for a new oversight agency just for Fannie and Freddie. He was accused of racism and hating the poor, very publicly, by all the same Democratic luminaries who now blame him for Fannie's crash.

    This is a link to a NYT story dated Sept 2003:

    http://www.nytimes.com/2003/09/11/business/new-agency-propos...

    It is even slanted to give the Democrats the last word, defending Fannie and Freddie's purpose and soundness.

    But Fannie and Freddie were managed by Democratic Party luminaries, and were paying fat campaign donations to enough folks in both parties that they never got the oversight. Bush was accuses of hating the poor, and being a racist (head of Fannie was black). Even when the Democrats retook Congress, Barney Frank, head of the House Banking committee was defending Fannie and Freddie, while they were hiding massive losses and selling stock to you.

    This is a component of the financial crash that should never be forgotten, lest it happen again. But financial reforms didn't fix anything that would prevent this again. Also, at least Bush prosecuted financial criminals. All that fraud, followed by new rounds of bonuses, no prosecutions yet.

  • Report this Comment On July 15, 2011, at 1:18 PM, interdependent wrote:

    I heard Bernanke on the radio, "Not raising the debt ceiling is like going on a spending spree with your credit card, and then refusing to pay the bill!"

    The Republicans are saying that unless we stop spending money, we will not pay our bills. But they spent the money already.

    It's nice to know that with all the extreme and contradictory opinions boiling over on TV, with the gamesmanship playing out in DC, when it comes to the economy as a whole, most of us, Republicans and Democrats and Warren Buffett too, now realize that...

    There is no way to fix the US budget without both cutting spending and raising taxes.

    How we get there? That's the game we're all watching. But now that they've got the nation's attention, both sides need to score points or save face. It's the Play of the Month. Who will win? Who will lose?

    But the agreement, when they reach one, won't truly fix our budget or pay down the debt. It might not even make a dent. At best, they might preserve the status quo, and let both sides claim victory.

  • Report this Comment On July 15, 2011, at 1:27 PM, ibuildthings wrote:

    All the spending excesses during Republican years are dwarfed by the last 3 years. When Paul Ryan suggested going back to the 2008 spending levels, the levels the democrats ran against in 2008, he was accused of starving the poor and throwing grandma over a cliff. Strange. The difference between 2008 spending levels and today's spending levels is a Trillion dollars. Tax rates are the same. Only the spending level is different.

  • Report this Comment On July 15, 2011, at 1:38 PM, TMFHousel wrote:

    <<Tax rates are the same. Only the spending level is different.>>

    Tax receipts in 2011 will end up nearly half a trillion dollars less than 2008 amounts. Tax revenue as a percentage of GDP is the lowest in modern history.

  • Report this Comment On July 15, 2011, at 1:49 PM, ibuildthings wrote:

    <<Tax rates are the same. Only the spending level is different.>>

    Tax receipts in 2011 will end up nearly half a trillion dollars less than 2008 amounts. Tax revenue as a percentage of GDP is the lowest in modern history.

    ==========

    The percentage of GDP is a red herring. Cops and teachers are paid in dollars, not percent coupons. Taxes likewise. If your economic activity level was five times higher than it is today, are you seriously saying that we need five times the cops, teachers, or we would have five times the wars?

    Also, the economic activity level is where the tax take comes from. Goosing the economy is where the activity comes from. They always say, "soak the rich", but if they killed off the rich and took their money, that wouldn't even pay for the year of spending. Then who will risk a nickel of their own, once they know that if they actually make a profit they will be blamed for the plight of someone or another?

    I am not saying to cut more taxes. I am saying that if government spending was such a wise allocation of resources, the Fools Hero, Warren Buffett, would have parked his $50 Billion tax-deductible donation in the Treasury Debt Reduction Fund, instead of the Gates Foundation, where he controls how the money is spent.

  • Report this Comment On July 15, 2011, at 1:56 PM, TMFHousel wrote:

    <<The percentage of GDP is a red herring>>

    It's not, but I'll give in. In dollar amounts, taxes are over $400b less in 2011 than 2008.

    <<If your economic activity level was five times higher than it is today, are you seriously saying that we need five times the cops, teachers, or we would have five times the wars?>>

    Not quite five, because there is real growth beyond inflation. Probably 3.5x, and minus the wars.

    As for Buffett: http://www.fool.com/investing/general/2010/10/13/why-warren-...

  • Report this Comment On July 15, 2011, at 1:57 PM, TMFHousel wrote:

    ^ That should be beyond population growth, not inflation.

  • Report this Comment On July 15, 2011, at 1:58 PM, ibuildthings wrote:

    If you want your extra half-trillion dollars in revenue back, figure out how to make business folk feel confident to invest in the US instead of other places. The cash is on the sidelines for a reason. They fear the next shoe dropping from the government.

    How do Fools evaluate investment prospects again? Risk versus reward? Would you start a new risky venture if at any time someone can come along and lay a bunch of new rules on you, or they will jack up your taxes at a whim?

    Economies are only part balance-sheet. The other part is psychology and trust of the other members of the economy.

  • Report this Comment On July 15, 2011, at 1:59 PM, ibuildthings wrote:

    Where is Jeff Immelt investing GE resources again? Hmm ... who is making those new light bulbs, oh yes, China. Why there and not here? You tell me.

  • Report this Comment On July 15, 2011, at 2:02 PM, TMFHousel wrote:

    <<Would you start a new risky venture if at any time someone can come along and lay a bunch of new rules on you, or they will jack up your taxes at a whim?>>

    There has never been a time in history when this was not the case. If you refuse to start a business until it's 100% certain the future will be crystal clear, you'll never start a business. Further, starting a business when overall business activity is down and competition is depressed is usually the best time.

  • Report this Comment On July 15, 2011, at 2:02 PM, TMFHousel wrote:
  • Report this Comment On July 15, 2011, at 2:04 PM, ibuildthings wrote:

    The first rule of economics: People act in their own perceived self-interest. So you structure an economic system to channel the self-interest into a way for everyone to get paid.

    Then you skim enough to pay for NECESSARY services, defense, roads, etc. But once there is a big pot of money, out come the hands.

  • Report this Comment On July 15, 2011, at 2:07 PM, ibuildthings wrote:

    We could argue all day, but you are at work at TMF and I work elsewhere. Best regards ...

  • Report this Comment On July 15, 2011, at 2:50 PM, Skyblue172 wrote:

    Warre Buffet is a class act. He thinks outside the box. Paul Ryan is a hard headed problem and needs to go. All of the "no tax increase pledge signers" need to go, they signed away their right to think and act to eliminate ridiculous tax breaks.

  • Report this Comment On July 15, 2011, at 3:02 PM, Skyblue172 wrote:

    It looks like the tax increase dollars of the very affluent that would have gone toward reducing the deficit are being invested in overseas jobs, overseas manufacturing, emerging markets funds, and the many new funds betting that the US stock markets will go down. (?) When college endowment funds like Harvard commit major portions of their funds to overseas investments vs investing in America it makes you wonder. And the air force ademy buying 26 trainer planes made in China is just wrong; our military is not interested in creating jobs in America. This is less than patriotic it's just plain wrong.

  • Report this Comment On July 15, 2011, at 3:28 PM, slamwork wrote:

    If Mr. Warren Buffet could lead a survey of fortune 500 companies, as to where they all stand on the issue of raising taxes, (67% of people surveyed have favored the idea so far) It would give some clear vision to the Law Makers in proceeding further constructively on further negotiations.

  • Report this Comment On July 15, 2011, at 4:19 PM, ibuildthings wrote:

    If Mr. Warren Buffet felt so strongly about raising taxes, he could have started with his own. But rather than donate his 50 Billion tax-deductible dollars to the Treasury Debt Reduction Fund, he chose to donate it to the Gates Foundation, where he can control how the money is spent. Raising your taxes is the easy play. Raising his own, not so much.

  • Report this Comment On July 17, 2011, at 9:44 AM, myother1 wrote:

    Let's quit doing the Rep/Dem dance every 2 to 4 years. It is a one party system that only purports to be a two party system to maintain the status quo. The Reps and Dems biggest threat to power is a "third" party. They avoid this threat with their loud rhetoric which drowns out any sensible reform related to taxes and budgets. I'm voting for the third party good, bad, or otherwise until the current power base is removed. Only then will the country be able to move forward.

  • Report this Comment On July 17, 2011, at 10:04 AM, TechMBA wrote:

    It is not government spending that will get us out of this mess, but government investing. If our children have no future, cut spending on schools. If the war is pointless, end it and bring the men and women home. The national debt now stands at $40,000 per man woman, and child in this country, that is a big hole. Stop the politics, start electing smart people for smart government.

  • Report this Comment On July 17, 2011, at 5:39 PM, JSMBAPhD wrote:

    If corporations were paying taxes at the rate they were paying in the prosperous 1950s and 1960s, there would be no long-term debt problem. They are paying about half-a-trillion less in taxes now than they were then.

    So, if Buffett wants to do the patriotic thing, he can tell his fellow toffs that they're living large at the expense of destroying the country that made them.

  • Report this Comment On July 18, 2011, at 9:47 PM, critter88 wrote:

    I agree with promommyfool that both political parties and most of us, directly or indirectly, benefitted from the government largesse that's behind the deficit. New York Times columnist David Leonhardt probably summed it up the best: "Eventually, the country will have to confront the deficit we have, rather than the deficit we imagine. The one we imagine is a deficit caused by waste, fraud, abuse, foreign aid, oil industry subsidies and vague out-of-control spending. The one we have is caused by the world's highest health costs (by far), the world's largest military (by far), a Social Security program built when most people died by 70 -- and to pay for it all, the lowest tax rates in decades." Our individual tax rate is low when compared to other industrialized countries, but tax receipts are driven lower by all the tax deductions that our elected leaders got for us. Most countries do not allow a deduction for mortgage interest. Not only do we enjoy such a deduction, we borrowed more in the past decade to buy nicer homes, so we got even bigger mortgage interest deductions. We receive a deduction for giving our unwanted stuff, often at inflated values, to charities. Our corporate rate is the highest among industrialized countries but many U.S. multinationals don't pay U.S. taxes because they shift their profits to tax havens and receive tax credits for conducting research.

  • Report this Comment On July 20, 2011, at 2:15 PM, Gorilla1966 wrote:

    People need to remember companies don't pay taxes, people do.

    They also need to remember what Frederic Bastiat said back in the 1800's: "Everybody wishes to live at the expense of the state, but they forget the state lives at the expense of everybody." Where does federal/state/local monies come from? People just like you and me, we pay taxes. Corporate taxes are also paid by you and me when we buy their products and services. The federal government has been likend to a person who has run up his credit card debt and then goes out and gets another to pay the payments on the others. We need to stop waste fraud and abuse, quit paying for everything everybody wants. We cannot do it forever. Prioritize spending, worth checking, etc. Just like anyone, "Oh that would be nice to have" then reality sets in do I need or will I use it enough to justify it? If not don't buy it. Or you buy a Chevrolet instead of a Caddilac, or any similar type--buy used, rebuilt instead of new....or just do without. I don't have an e-reader, or tablet PC, or an i-anything. Can't justify the expense.

  • Report this Comment On July 21, 2011, at 1:46 PM, jimjohns1 wrote:

    It's kinda like kiting a check, why do we not have the big boys bail out the country as we did for them awhile back instead of the big bonus check they are giving out to themselves.

  • Report this Comment On July 28, 2011, at 9:15 AM, dhfries wrote:

    Buffett is slowly lossing it. I wish he would go back tp paying attention to his business at hand. He is trailing the S&P's by 20% this year. He needs to prove himself again. Is he a has been?

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