The Buffett Bust

Andrew Stiles
Washington Free Beacon

The Democratic-led Senate on Monday voted to reject President Obama’s most recent policy proposal—a tax increase on some 4,000 millionaires that would raise about $47 billion over the next decade.

The so-called “Buffett Rule” — named after billionaire Obama supporter Warren Buffett and rendered in bill form as the “Paying a Fair Share Act” — fell by a partisan vote of 51-45, failing to meet the 60-vote requirement to proceed to passage. The only Republican to vote for cloture was Susan Collins of Maine; the only Democrat to vote against was Mark Pryor of Arkansas. Democrat Daniel Akaka of Hawaii, Republican Mark Kirk of Illinois, Republican Orrin Hatch of Utah, and Independent Joseph Lieberman of Connecticut did not vote.

The vote’s failure was expected. Leading Democrats have all but admitted the Buffett Rule legislation is merely an election-year ploy to force Republicans to vote against tax hikes on “high earners.”

Even Obama himself appeared to admit that the rule was little more than a gimmick. “There are others who are saying: ‘Well, this is just a gimmick. Just taxing millionaires and billionaires, just imposing the Buffett Rule, won’t do enough to close the deficit,’ ” Obama said during a press conference last week. “Well, I agree.”

Numerous political commentators have slammed the rule as cheap politics.

It’s total gimmickry,” said Jim VandeHei, executive editor of Politico. LiberalWashington Post columnist Dana Milbank concurred.

“The problem is that when Obama thrusts these populist themes to the center of his narrative, he sounds a little desperate,” wrote New York Times columnist Bill Keller.

The Economist piled on in an editorial, writing: “What a pity that [Obama] is changing tack this time, bashing the rich via gimmicks such as the ‘Buffett rule’…it is a miserable portent for the future.”

Further complicating matters, ABC’s Jake Tapper reported that Obama, himself a millionaire and a member of the so-called “one percent,” paid a lower tax rate than his secretary in 2011 — the exact scenario the Buffett Rule was designed to prevent — even though the president himself would not be affected by the legislation as written.

Consequently, the rule’s proponents have struggled—and continue to struggle—to advance a coherent argument in its favor.

When Obama first proposed the concept of the Buffett Rule in 2011, he touted it as a means to “stabilize our debt and deficits for the next decade.”

In his Jan. 24, 2012, State of the Union address, the president argued that using the Buffett Rule to force wealthy Americans to pay their “fair share of taxes” was necessary to instill a “sense of shared responsibility. That’s how we’ll reduce our deficit.”

That claim was rendered laughable when the Joint Committee on Taxation, the agency that scores Congressional tax proposals, estimated that the rule would raise, on average, just $4.7 billion per year over the next decade, enough to cover about 0.4 percent of the projected budget deficit in 2012.

Even Buffett Rule supporters such as hedge-fund manager and “patriotic millionaire” Whitney Tilson have acknowledged that the projected revenue from the tax increase was “not even a meaningful small amount.”

Earlier this month, White House press secretary Jay Carney attempted to walk back Obama’s comments.

“The president—no one ever suggested that implementing the Buffett Rule would contribute in large measure to reducing the deficit,” Carney told reporters on April 10.

Just one day earlier, however, Obama 2012 campaign manager Jim Messina had done just that, writing on the campaign’s website: “The Buffett Rule would reduce the deficit while helping to pay for investments in education, clean energy, jobs, and other programs that will help our economy grow.”

As recently as Sunday, senior campaign strategist David Axelrod argued that the Buffett Rule “helps us stabilize the deficit.”

Messina’s comments highlight another critique of the Buffett Rule: Not only would it barely make a dent in the federal deficit, but the administration has also made clear that it plans to use the additional revenue not to reduce the deficit but to finance additional government spending.

Around the same time the president introduced the Buffett Rule in 2011, he proposed a massive new spending bill—the American Jobs Act — calling for $450 billion in new spending this year. On an annual basis, the Jobs Act was even larger than the much-maligned stimulus package of 2009, which authorized $787 billion over two years.

One year’s worth of revenue from the Buffett Rule would cover about 1 percent of the new spending Obama has proposed.

Proponents have changed tactics in recent weeks and are now defending the rule on the grounds that it promotes “fairness,” or in other cases, that its implementation would foster economic growth.

“It is a basic matter of fairness and economic good sense,” Carney told reporters on April 11. “The fact that the money saved by eliminating these tax advantages … does not by itself reduce the deficit doesn’t make it not worth doing.”

Sen. Sheldon Whitehouse (D., R.I.), author of the Buffett Rule legislation, echoed this sentiment in a recent op-ed in Huffington Post. “Implementing the so-called ‘Buffett Rule’ would restore some badly needed fairness to our tax system,” he wrote.

Obama has made the case in the last several days that the Buffett Rule is less about “fairness” than about promoting economic growth.

“When we have debates now about the Buffett Rule that we’ve been talking about where we say if you make a million dollars a year or more you shouldn’t pay a lower tax rate than your secretary, that is not an argument about redistribution—that is an argument about growth,” he said in Colombia on Sunday.

Obama suggested in his latest weekly address that new revenue from the Buffett Rule would fuel growth by funding increase government spending.

“This is not just about fairness, this is also about growth,” he said. “It’s about being able to make the investments we need to strengthen our economy and create jobs. And it’s about whether we as a country are willing to pay for those investments.”

But Democratic lawmakers have struggled to stay on message, and have even provided rhetorical ammunition for Republican critics who argue the Buffett Rule would do nothing to help the economy.

Speaking on the Senate floor Monday, Whitehouse conceded the point, made earlier by Senate Minority Leader Mitch McConnell (R., Ky.), that the rule “won’t create a single job or lower the price at the pump by a penny.”

“The minority leader is absolutely right that the aim of this bill is not to lower the unemployment rate or the price of gasoline,” Whitehouse said.

Rep. Tammy Baldwin (D., Wis.), who is championing a Buffett Rule bill in the House and has made it a central component of her bid to succeed retiring Sen. Herb Kohl (D., Wis.), was still echoing last week’s talking points on Monday morning.

“The bottom line is it’s about fairness,” she said on MSNBC’s “Morning Joe.”

Unfortunately for Baldwin, Wisconsin’s leading daily newspaper is not a fan.

“Obama’s Buffett Rule is a political gimmick,” wrote the editors of the Milwaukee Journal-Sentinel. “Like the president, we think fairness is important and are concerned about income inequality. But the Buffett Rule is more likely to spawn a new generation of tax dodges than to usher in a new era of tax fairness. It is, in fact, nothing more than a smoke screen that obscures the possibility of real tax reform.”

Another Democratic candidate for Senate, Tim Kaine of Virginia, criticized the Buffett Rule as a “little one-off proposal” that distracts from more important issues.

Republican critics have sought to portray the Buffett Rule as indicative of a lack of leadership and comprehensive economic agenda from the White House and Senate Democrats.

“The administration has yet to really make the case that the economy is so healthy that we can afford to have a tax hike,” former Sen. Jim Talent (R., Mo.) said Monday during a conference call hosted by Mitt Romney’s presidential campaign.

Talent was referring to comments Obama made in August 2009 suggesting that raising taxes on anyone during a recession was a bad idea.

“The last thing you want to do is raise taxes in the middle of a recession, because that would just suck up—take more demand out of the economy—and put businesses in a further hole,” Obama told MSNBC’s Chuck Todd in an interview.

Grover Norquist, president of Americans for Tax Reform, noted that if Democrats really believed the Buffett Rule was an economic necessity that would reduce the deficit and spur growth, they would have enacted the rule two years ago when they enjoyed complete control of Congress.

“If [Senate Majority Leader] Harry Reid or Obama wanted to do something, they would have done it in 2009, 2010,” Norquist told the Washington Free Beacon. “If they wanted they could have done tax reform. If they wanted to tax the rich, they could have done that for crying out loud.”

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