When you’re called “the Oracle of Omaha,” ranked as one of the wealthiest people in the world, and speak with a kind of folksy directness, people listen.
That’s Warren Buffett, the head of Berkshire Hathaway, the huge investment company that seems to operate as a personal extension of the man.
Last week, the firm held its annual shareholders’ meeting in Nebraska, where it is headquartered, and tens of thousands of people attended. The meeting, recalling the hippy gathering decades earlier, is known as the “Woodstock of Capitalism.”
They listened to Buffett answer questions for about five hours, an appearance unlike that of any other corporate leader.
He was asked about his attitude to the tax cuts passed by Congress. He is well known for opposing tax reduction, especially for the wealthy. He complains that his tax rate is less than his secretary’s and generally supports Democrats.
But Buffett had warm words for the Republican tax overhaul. Why? It’s aimed at helping corporations and Berkshire Hathaway more than most.
He said that he does not mix his personal and professional views. He willingly discusses his thoughts on tax cuts, but as the keeper of shareholder interests, he supports tax measures that boost profits, in his company’s case by tens of billions of dollars.
Under the U.S. free enterprise system, profits are the reward investors receive for the risk they take in backing corporations. If the outfit is well run – Buffett is a star at Berkshire – they may expect to see profits boom. His investors are well rewarded.
Buffett made clear that he sees his responsibility as gaining profits for today’s investors. Thanks to his success, investors expect more of the same in the future. But that means Buffett won’t endanger their investment return for his view of taxes, even if he believes tax cutting is contrary to the national interest.
His views echo much of the Trump administration’s economic policy. Across the government, from taxes to the environment to banking, the administration favors corporate interests over policies to fight poverty or climate change or to protect borrowers.
Take environmental policy. President Trump pulled the U.S. out of the Paris climate accord because American participation might limit the use of fossil fuels, especially coal. Companies engaged in extracting and processing these fuels are the chief beneficiaries of his move. Their short-term interest is profits.
When a shareholder raised environmental issues at the Berkshire meeting, Charlie Munger, Buffett’s sidekick, feigned falling asleep. You cannot produce good profits, it seems, if you worry too much about air quality.
Any harmful effects of Trump’s environmental policy are simply denied or delayed, while profit gains may come before the next election. If your constituents are corporate operators, you favor them now and don’t allow views of the long-term effect of climate change to influence your policies.
Though Buffett buys and holds his investments in the belief they will remain profitable for years, Trump does not take the long view. It matters little that coal is fading as it gives way to natural gas and renewable energy, if it can provide an immediate and politically profitable boost.
At least one analyst has pointed out that the Trump policy is not market oriented so much as business oriented. Promoting coal undercuts increased economic efficiency, which is what the market should produce. Helping coal is only about immediate profit and the false promise of retaining jobs in a dying industry.
The effort to promote business over the individual’s interest runs through Trump policy. The tax bill has given the false impression of cuts for average taxpayers. Their withholding has been lowered in hopes of influencing their votes in November.
But next April, when the expected tax refunds for many don’t materialize, they will learn the hard way about short-term fixes. Far greater corporate tax benefits will continue.
The soundness of the banking system, the level playing field of the Internet, and the protection of the shoreline are all being sacrificed to business interests. That’s all right, in theory, because booming business should add jobs, though unemployment is now about as low as it can get.
Buffett is a chronic optimist. He believes the U.S. will survive and flourish, because it always has. He notes the country survived the Civil War. Tell that to people who suffered under Jim Crow laws for another century after the war ended.
Buffett divorces his personal integrity from investment decisions. For a man who invests for the long run, that approach seems to be short-sighted.