Warren Buffett Fixes Congress! (Part 1: Ending the Deficit in 5 Minutes)

Another email chain-letter landed in my inbox today, just like the one I got in July. Back then, I was too busy to post anything about it. But, now, with “fiscal-cliff” disinformation running high, it’s a good time to comment.

The email quotes Warren Buffett as recommending a law that would make all sitting members of Congress ineligible for re-election whenever the federal deficit tops 3% of GDP. Then it quotes a proposed Congressional Reform Act of 2012. Or is it a proposed constitutional amendment? It’s not clear. Finally, it says Buffett is asking everyone to forward the email to twenty people on their mailing list.

Of course, with the endorsement of Warren “Oracle of Omaha” Buffett, who could object?

But an almost identical email has been circulating since 2009, pushing the same legislation labeled each year as the reform act of 2009, 2010, and so on. None of these earlier versions even mentions Warren Buffett. Buffett had nothing to do with the current email and certainly did not say you should pass it on. This much of the story is well documented (e.g., here and here).

In context, when Buffett proposes the new law, it’s clear that he is at least half joking . He was interviewed by CNBC’s Becky Quick during July, 2011 (video available here—hat-tip, Barry Ritholz), when House Republicans were holding the legislative process hostage over what should have been a routine vote to raise the federal debt ceiling.

Here’s how the interview begins:

Quick. These discussions over the debt ceiling seem to be front and center not only for Washington but also for Wall Street. How big of an issue is this? How dangerous is it really if they don’t raise the debt ceiling?

Buffett: We don’t know exactly what will happen. But if you gave me a six-shooter and stuck a bullet in one chamber, and said spin it, five time out of six nothing bad is going to happen. But we haven’t done this before, so we’re not sure what’s going to happen if the sixth one is pulled—it’s just silly to do.
We raised the debt ceiling seven times during the Bush administration. Now in this administration they’re using it as a hostage, and you really don’t have any business playing Russian Roulette to get your way…We should be more grown up than that

Why won’t Quick or Buffett mention political parties by name? Really, it’s obvious who Buffett is talking about. It’s the House Republicans. In the next segment, he locates the Republican game in its historical context:

Buffett: We had debt at 120% of GDP—far higher than this—after World War II, and no one went around threatening we’re going to ruin the credit of the United States, or something, in order to get a better balance of debt to GDP. We just went about our business then. People did it in a cooperative way. They didn’t do it by sticking guns to each other’s heads.

Soon after this, with a smile and a chuckle, Buffett offers his recommendation:

Buffett: I could end the deficit in five minutes.

Quick: How?

Buffett: You just pass a law that says that, any time there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election [both Quick and Buffett are laughing]. Now you’ve got the incentives in the right place [Buffett is still laughing]. So, it’s capable of being done….

(Notice that Buffett is now talking about the federal deficit, not about  the national debt and debt ceiling as before—see Part 2 of this post.)

This is how the email looked that I got in July (Figure 1)—the current version is almost identical:

Supposed Buffett email

Figure 1

That last bit about pensions is the first of seven punitive reforms that make up the proposed reform act or constitutional amendment. The people at factcheck.org print the whole email and perform their customary review. Their conclusion? The reform proposal is written in “profound ignorance” of the actual benefits and privileges that members of Congress enjoy. The originator of the email has no idea of what he or she wants to reform.

But that’s not the point I want to make. What interests me is the status of this email as a piece of raw political anger and resentment circulating in a digital medium.

Not only is the email clueless, it’s also deceptive. The yellow hi-lighting makes it look as if Buffet endorses everything that follows. Also, the repeated mention of a constitutional amendment should be a red flag. Republicans in Congress have been trying to push through a balanced budget amendment for years, and the email has all the marks of stealth advocacy for exactly that.

Forcing Congress to maintain a balanced budget may sound good. But it’s not an innocent proposal. Republicans, with their no-tax-increase pledge, make no secret of wanting to restrict the fiscal and regulatory authority of the federal government in favor of expanded state sovereignty and a free-market free hand for the private sector.

By no coincidence, that’s what the recent Supreme Court decision on the Affordable Care Act (aka Obamacare) was all about. Chief Justice Roberts’ surprise move, ruling that the individual mandate is valid based on Congress’s taxing power, but not on the Commerce Clause, complements Republican strategy. Yes, it did hand a win to the Obama administration, but at a troubling cost. Of course it’s too early to tell, but Roberts’ opinion—read as precedent—could open the door to the Court placing tighter restrictions on Congress’s reliance on the Commerce Clause to deal with troubles in the national economy. And that’s not good for the country.

In a parallel narrative, the inevitable effect of a balanced budget amendment would be to handcuff government economic policy. It would be like confining the U.S. in the same box that euro-zone casualties like Spain and Ireland are in. Like them, the U.S. would be deprived of the necessary fiscal tools for dealing with economic challenges that only the national government, not the states or the private sector, is competent to deal with.

The chain-letter email, finally, is a good example of how a newly hardened Republican ideology echoes public resentment at “elites” and “Washington”, thus gaining acceptance as a plausible account of the way things are and how they got there. Cynically exploiting people’s frustration and anger at the financial crisis and Washington’s response to it, Republicans during the election campaign pushed a say-anything-that-works (or, more exactly, bullshit) message that blames government for everything that has happened. And they did it as if they were all reading the same script. For instance, in March, both Mitt Romney and Louisiana governor Bobby Jindal, on separate occasions (reported here and here), loudly blamed President Obama for rising gasoline prices. As if the President controlled the global petroleum market. Really? Are we that ignorant?

At the end of the day, it’s easy to dismiss this bogus email as a minor annoyance, like stuff we find every day in our inboxes.  But consider its closing happy-talk picture of the political process (Figure 2):

This is how you fix Congress!

Figure 2

Yes, ideally, in just six and a half iterations—a little over twice a day for three days—the message reaches 286,216,702 people, about 90% of the U.S. population. That’s the beauty of a geometric series: 20, 400, 8,000, 160,000, 3,200,000, 64,000,000. Then, with a final half-iteration, you have 286,216,701 recipients. And it’s a lot cheaper than a TV attack ad.

(Seven iterations gets you 1,280,000,000 recipients, almost the population of China.)

The chain-letter email assumes that everyone receiving it actually bothers to read it, let alone signing on to its message. But all it takes is a bare majority—a resentful, clueless majority. And that’s what Mitt Romney was counting on.


3 responses to “Warren Buffett Fixes Congress! (Part 1: Ending the Deficit in 5 Minutes)

  1. Please sign my petition to End the deficit! If the US deficit exceeds 3% of GDP, all sitting members of Congress become ineligible for re-election

    Warren Buffett, in a recent interview with CNBC, offers one of the best quotes about the debt ceiling: “I could end the deficit in 5 minutes,” he told CNBC. “You just pass a law that says that anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election. The 26th amendment (granting the right to vote for 18 year-olds) took only 3 months & 8 days to be ratified! Why? Simple! The people demanded it. That was in 1971 – before computers, e-mail, cell phones, etc. Of the 27 amendments to the Constitution, seven (7) took one (1) year or less to become the law of the land – all because of public pressure.

    Pressure your Representatives & demand they make it happen today!


  2. Pingback: The Clueless Petitioner (Yet again, the Buffett Deficit “Fix”) | not an economist

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