The "Buffett Rule" In Perspective

Tyler Durden's picture

We have extensively discussed the Buffett Rule before (which incidentally will achieve nothing to fix America's gaping deficit problem, but will certainly succeed in driving many wealthy people away from this country). We thought this issue was closed. Apparently it wasn't, and Obama is once again warming up the class divide wagon - remember: the number one rule in politics when electioneering is keep everyone as divided as possible - under the guise of tax reform. So here is a reminder on same simple issues of perspective, courtesy of Rick Santelli.

As a reminder, as we pointed out yesterday, the US just posted the largest ever March budget deficit in history of nearly $200 billion, which followed the single largest monthly budget deficit on record of $232 billion. Keep those numbers in mind, because they frame, in a very, very, very aggressive case, the bottom and top range of what the entire Buffett Rule would offset in terms of gained revenue. As rick explains, assuming one taxes an upper estimate of those eligible for the Buffett Rule (indicatively 225,000 people but realistically far less) an incremental $1 million, the offset would be $225 billion over the proposal's life. Which is not enough to even plug one month of US deficit. And that is what all the posturing is about.

Now don't get us wrong: America has a record deficit problem, and it will require both revenue and spending decisions to fix it, but in isolation, neither will make a dent, and with the government as bloated as it is, far more spending cuts will be required to match any revenue increases.

Finally, since the Treasury already funds over half of US funding needs, and the Fed is among the biggest monetizers, pardon holders, of US paper, why not just go ahead and print the money America needs? Surely all modern economic theories will agree that the once greatest country in the world can print itself into prosperity...

From Rick Santelli:

And while Rick's example is hyperbolic to the upside (in terms of benefit), here is a different more realistic perspective on things, via the Joint Committee on Taxation, courtesy of TaxProf.

Seriously, this may work... If America taxes everyone at about 1500%.

(which incidentally is not too far off: once again we remind people of the ominous reality that the BCG study predicted last September: take our word for it - a one time tax on all assets is coming).

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redpill's picture

that chart should really be about 2 pagelengths tall to appreciate the scale of absurdity

hooligan2009's picture

i agree...the 31 billion gives it an optic of being a block rather than a flat line lying on the x axis

MillionDollarBonus_'s picture

Rick Santelli is overexaggerating as usual. The debt is not that large, and Obama has managed to get the budget under control. This doomer fear mongering is getting tiring. What is it the doomers are so angry about?? We have a strong recovery, low inflation and firm fundamentals for economic growth, but you will never get a doomer redneck to admit this. Why don’t you morons learn economics and stop whining.


TWSceptic's picture

Why not make it obvious if you want to be sarcastic.

Temporalist's picture

Because then nobody would care. I am voting MDB for president...of Syria.

Rahm's picture

You just want him to yell out "INCOMING!"

AldousHuxley's picture

Buffett Rule is not to pay for the deficit.

Buffett Rule is there to equalize opportunities between income earners versus lottery winners earning more than $1,000,000/year.

Because if you don't give that smart but poor kid an opportunity, dumb but rich kid like George Bush gets elected and makes deficits even bigger by spending money on wars rather than fixing anything. Wasting American middle class potential will increase the deficit.


People who earn $1,000,000/year don't give a shit about the deficit. Rich have enough money to abandon America and they will. It is the poor who will be stuck.


Don't listen to Rick Santelli. He doesn't add anything to society except making gambling look legit. Time for him to get a real job and not shilling for CNBC = GE = bailed out shysters.


You and your children will never get ahead when:

capital gains tax (THE RICH) < income tax (YOU)

Spigot's picture

The whole "equalize opportunity" line is BS, pure and simple. It is ment to obfuscate the real issues and misdirect the passions of the electorate.

tahoebumsmith's picture

MBD, just goes to show how clueless you are when you make the statement "Obama's got the budget under control." FYI Million Dollar Douche, They haven't passed a budget in 1084 days! The last time they passed a budget was on April 29, 2009 and since then we have gone an additional 3.5 Trillion dollars in debt! So for those wondering about future QE? Of course there will be more because without the FED monetizing our debt through QE and POMO PONZI, we would have defaulted by now and probably actually would have done something!!!

economics9698's picture

The politicians always blame capitalist and speculators.  Nothing new.

rcintc's picture

MDB hasn't gone food shopping inflation my arse!

Bob Sacamano's picture

Go ahead.  Double the capital gains tax.  I know what I will be buying for that scenario. 

But BHO will not do it -- he just wants to talk about things he can't or won't do.

sun tzu's picture

Is that you Barry?


The fact is that raising the already high taxes on the successful will do nothing to help anybody.

My solution is to cut spending and raise tax rates back to the levels of when Bill Clinton was in office. We allegedly had a balanced budget then. Stop the bailouts. Problem solved.

sof_hannibal's picture

The Buffett rule is merly a distraction. The wealthiest need to pay more both in capital gains and income; but who gives a fuck right now... it's like dropping a cup of water on an inferno... don't waste your time debating Obama policy... you might as well call AM radio and bitch about the NAFTA super highway.

Since the dawn of time, the game remains the same throught history-- it has always been and will always be about a few people collecting and hoarding power at the top-- chieftons, pharos, kings, queens, industrialists, the rentier class, and more recently the cast of the jersey shore, etc... this goes on until the system topples itself... Rome, Napolean, Great Britian, the 3rd Reich... this time it's central planning, zombie banks, liquidity traps, paper money, facebook IPO's, and chipolte away...

And Now/ currently is no different then any other time from the past, that is-- eventually the debt will collapse and we start over. I say tax the rich until they bleed, but it won't happen... Buffett rule is nothing more then sheeple/ muppet/ puppet opiates and CNBC fodder, right next to "Stand your ground,"race wars" type distraction(s)...

maximin thrax's picture

So, what opportunities do you think government will purchase for my kids with that fresh wealth confiscation? Road construction? Pushing paper at the unemployment benifits office? Hauling millions in custom-made furnishings to the dump from failed companies like Solyndra?

Federal government income-to-debt ratio is about 1 to 7. I think all we get from each new dollar in tax is seven new dollars in debt. What kind of opportunity does that portend for my children?

Koffieshop's picture

Yeah at this point is is better to go deeper into debt. If the debt would be in the quadrillions, less people would talk about it as it would be beyond the reach of any sane conversation.

AldousHuxley's picture

China and Russia are unhappy because US is getting into debt with extra low interest rates.

China and Russia are not your friends. They want US not be able to borrow so that they can buy US assets cheap and own your ass.


Stop printing and see Great Depression 2 in minutes. Or Bernanke says in "15 minutes"


Fight about how the money gets used, but don't argue that when Uncle Sam gets laid off, he shouldn't use credit cards to buy food to keep on living and applying for jobs especially when the interest rate is lower than inflation.

Spigot's picture

Because he's not being sarcastic, he is really that stooopid.

The scale of deficit spending by governments is beyond the ability of taxation to heal. Why deficits work (somewhat and in the short term) is that the various Central Banks are printing the money to fund sovereign debt purchases to keep interest rates below reality, enabling these States to attempt to keep their economies from imploding outright.

Santelli's point both that the scale of ongoing deficits and the growth of cumulative deficits will indeed destroy the future. Numbers do not lie and their resutls can not be avoided.

MillionDollarBonus_'s picture

"to keep interest rates below reality"

No. Interest rates ARE low. This is the reality. The ten year is at 2% despite the constant whining about how deficits are too large. The fact that interest rates are at all time lows refutes this proposition entirely. 

To quote Neetzsche:

"Sometimes people don't want to hear the truth because they don't want the illusions destroyed"

Seer's picture

Who the hell is "Neetzsche?"

Anyway... Interest rates are low because growth has died.  Kind of hard to be cheerful when one is accustomed to an ENTIRE system that's predicated on growth.  And THAT is the Truth!

knukles's picture

Neetzsche is Keen-O's brother. 

knukles's picture

Oh, and they have a sister, Peachy.

They're the Neetzsche Peachy Keen-O family of Dubuqe, the largest growers of Yellow Zonker Teriaki Parakeet Meat Treats in Iowa.  

rcintc's picture


If there is so much demand for our Bond Auctions, how come the FED is purchasing bonds?

If there is so much demand for our Bond Auctions, the FED doesn't need to purchase bonds.

The FED is making these purchases in order to keep the Interest Rates artificially low or else our debt service will explode.

Who in their right mind would lend our government money @ 2% for 10 years?

The Bernak's in a Box

Barometer's picture

It's spelt "Neitzsche" you condescending fuck. And quoting him is gay.

Better_late_than_never's picture

Fuck, I can't figure out who's trolling who with all these spelling errors.

narnia's picture

If the Fed contracted its balance sheet by about $3 trillion tomorrow & the 10 year remained at 2%, you may have a point.  

The price of money is not a living organism.  It is a statue.  If you knew anything about the interest rate swap market, you'd understand why the price of money has to be gamed.  

dougngen's picture

interest rates are low because the fed buys 60% of the treasury bonds!!

MeelionDollerBogus's picture

Somehow it's just not MDB's style :D Someone mentioned "Poe's Law" ...

thanks for subscribing (youtube)

besnook's picture

you are so right. the debt is only 100% of income. the interest rate is zero and we only have to pay the interest.  a lot of people with 3-400% debt to income rastio do fine. we have a long way to go before there is trouble

Matt's picture

The DEFICIT is only just over 100 percent of income.

The DEBT of ~$15.6 Trillion is nearly 800 percent of the ~$2.2 Trillion tax revenues.

Interest-only payments with a current average of 3 percent equals ~21 percent of Income.

Imagine if you were making $60,000 per year and making $12,000 per year in interest-only payments. That's $1000 each month, out of a $5000 income, going to interest only.

Now imagine that you are spending $130,000 per year, borrowing the extra $70,000. How long could you keep this up? Now imagine your interest rate could double or triple in the future.

Seer's picture

"Now imagine your interest rate could double or triple in the future."  AND also imagine loosing your job!

john39's picture

thanks, that one actually made me laugh.  i needed it.

Tsunami Wave's picture

Rick looks like if he keeps up with that attitude, he'll be fired by CNBS.

NotApplicable's picture

He's the last draw they've got. Can him and the last six viewers will leave!

chunkylover42's picture

MDB, you are running out of material if that's the best you can do.

I will say you have been one of the more entertaining trolls around (although I think ZH'ers had more fun with Harry Wanger and Leo Koli-whatshisname)

withnmeans's picture

As a matter of fact I did learn ECONOMICS "both Macro and Micro"... Oh, and I ACE'd Banking too, thank God I didn't go into that field...

MDB, I don't care about you education, religion, or anybody else's for that matter. Yes, we are all entitle to our opinions "we all hope it stays that way".

I think I could speak for the majority on here anyway, we love our country and we don't want to see it go down the crapper so to speak. I have traveled to several other countries, I still like knowing we still have it somewhat good here, saying "somewhat", because we have lost some of what used to make us shine.


In closing, one day we all hope you will crawl out from beneath that rock you call home !

MillionDollarBonus_'s picture

"I ACE'd Banking too, thank God I didn't go into that field"

Why not? Investment Banking professionals are in high demand at the moment. I believe the top tier investment banks had a record intake of top graduates last year. Crazy smart, these guys - almost all Ivy League educated.

Widowmaker's picture

"all Ivy League educated [bag-holders]."

The Alarmist's picture

You've presumed admission to an Ivy requires intelligence. You've presumed the same about banking. You clearly don't have much experience with either.

NotApplicable's picture

You've presumed MDB is serious. You clearly don't have much experience with MDB.

withnmeans's picture

MDB, greed is not the answer, and sometimes the good guy does win!

Like my "handle", I live withnmeans, love my family, love life. I may not have everything, I do have what I need "not want".

When MSM figures out there is more to life then a SH%TTY fiat currency, they too will find peace.

Good luck, P.S. I do find your writings a bit amusing, bordering on the psychotic side, but amusing just the same.

WonderDawg's picture

About 20 years ago I had a girlfriend whose motto was "If I want it, I need it." We dated for a couple of years, but she was high maintenance and I was struggling through graduate school and couldn't afford her, so she moved on. I saw her a couple of times over the years, and she later got married and had a couple of kids. I met her husband at my best friend's funeral. She was there because when we dated, she'd been friends with my buddy's wife, and they'd remained friends after we broke up. Anyway, a few years went by without any contact, and I ran into her about a year ago. She was divorced, and she and her husband had lost their home. They'd done the same thing millions of others had done. Upgraded to a home they couldn't afford during the height of the real estate mania. Her husband's business was struggling in the recession and they filed BK.

She'd maintained that same philosophy over the years, and it ended up bankrupting her and her family. The thing is, I think it became a commonplace attitude in our society, that if you want it, you need it, and if you can't afford it, you borrow the money so you can have it now, rather than save and buy it when you can afford it. It became the zeitgeist of the 90's and 00's. And now we see the consequences.

Hulk's picture

Correction O WonderDawg, we are starting to see the consequences. What we witness today is just the beginning...

WonderDawg's picture

Agreed, Hulkster. Just the beginning.

How you doing? I hope life is treating you well, my brotha.

Hulk's picture

Going good WD, one of these days, this devil is going to have to get down to Georgia...

WonderDawg's picture

Come on down. The weather is pretty close to ideal right now. The pollen is pretty much gone, temps in the 70's, low humidity, and the bugs haven't come to life yet. Perfect.