Juggling Dynamite

Warren Buffett’s Op-Ed in the New York Times this weekend offers some important historical facts and context on how incredibly low average tax rates are for the wealthiest Americans today. Policy rates are low even if the country was experiencing the best of economic times, but is especially indefensible given the past 12 years of mammoth military commitments and corporate bail-outs while average families have lost 40% of their net worth. Unfortunately, paying more to rebuild fiscal health over the next few years is a necessary investment for future strength. The good news is that the country has the resources in its population to do so. It would be a lot darker if this were not the case.

“Between 1951 and 1954, when the capital gains rate was 25 percent and marginal rates on dividends reached 91 percent in extreme cases, I sold securities and did pretty well. In the years from 1956 to 1969, the top marginal rate fell modestly, but was still a lofty 70 percent — and the tax rate on capital gains inched up to 27.5 percent. I was managing funds for investors then. Never did anyone mention taxes as a reason to forgo an investment opportunity that I offered.

Under those burdensome rates, moreover, both employment and the gross domestic product (a measure of the nation’s economic output) increased at a rapid clip. The middle class and the rich alike gained ground.”

The whole article is worth a look, see: A Minimum Tax for the Wealthy.

Here is more of this discussion from The Daily Ticker.

We went to see Spielberg’s new movie “Lincoln” yesterday and found it worthwhile. The drama reminds us of the cavernous divide that America faced in ending slavery and the Civil War and banding disparate sovereign states into the ambitious ideals of the United States of America in April 1865.

The bulk of the film focuses on the heated and seemingly impossible negotiations between Republican and Democratic representatives to pass the Constitution’s 13th amendment to abolish slavery. Improbable and yet, a majority vote was finally achieved and the amendment passed. This happened even though many people and businesses had a deep vested economic interest in continuing to use slave labor. In the end, the benefits to the nation and its leadership in democracy and humanity so clearly outweighed the costs. This history should serve as inspiration today as different sides seek consensus on a new path forward. It can be done. Here is a direct link to the trailer.

Half a trading day in the US, has risk markets up on the lowest Black Friday volume since 2007. The same ‘two guys trading’ we have noted for many months now, as over-valued assets continue to repel serious investment capital. Meanwhile this segment gave me a chuckle. While bankers where lauded as “genius” saviors up until the credit bubble burst in 2007, today apparently they are embarrassed to admit their trade at dinner parties. Poor babies. Historically this is a step in the right direction, as we move toward the repulsion phase necessary to finally end the secular bear market. No one arrested yet though…so not there yet. Here is a direct link.