Billionaire Warren Buffett got it wrong in his New York Times opinion column that chastises Washington for coddling the super-rich.
The mess that America has gotten itself into isn't because of Buffett's so-called "extraordinary" tax breaks for high-net-worth Americans. The nation's economic decline is instead the result of decades of social welfare programs that have created a permanent, self-perpetuating welfare state.
To be sure, some Americans need welfare benefits to get them through challenging periods of unemployment. But many within the welfare system never seem to leave it. They have made slacking off, refusing to search for a job, and collecting welfare payments into an art form.
Buffett says that the super-rich generally face a 15 percent tax rate on most of their earnings. But he fails to tell the entire story: The super-rich, because of their vast wealth and resources, are always several steps ahead of the taxman. Private bankers know the drill full well -- they stash their clients' wealth in off-shore tax havens and are always on the lookout for new ways to escape the debilitating effects of taxes on their clients' holdings.
Who can blame them? Why should the super-rich -- or the middle class, for that matter -- be required to cough up an increasingly fatter share of their hard-earned cash to foot the bill for a segment of society that has been trained to sit back and expect the state to take care of them?
Big-government presidents like FDR and LBJ envisioned welfare as a temporary, stop-gap measure that would cushion a worker when times got tough. Never in their wildest dreams did they want to establish an entire class of American citizens that suck the financial resources out of society on a permanent basis.
Several decades ago, a prominent business journalist who once worked at Fortune magazine caused a stir when he set forth the following controversial theory: that if every male on welfare were to be castrated, the welfare state would fade away within a generation or two. That is to say, the system is set up so that welfare recipients largely beget more welfare recipients.
Not only are welfare families financially incentivized to have more babies, but, as his theory goes, these babies are far more likely to grow up within a self-perpetuating welfare state and have welfare babies of their own.
Theoretically, the welfare cycle never ends. Perhaps the reason this theory struck a chord was because the urban decay and rapidly growing welfare state in American cities in the 1960s and '70s supported his thesis.
There's no doubt that Warren Buffett and many of his well-heeled friends love America. But if they truly want to make a difference and improve this nation, they'll use their immense wealth and clout to hire lobbyists and convince Obama and Congress to lower taxes on every American. Workers will be freed up to use their earnings to start businesses, foster innovation, and help American industry compete on the global stage.
Buffett and his super-rich pals should urge Washington to find ways to incentivize the members of the permanent, entitled welfare state to get out of the vicious cycle that enslaves them. Margaret Thatcher once said that the problem with socialism is that eventually you run out of other people's money. That's exactly what's happening in America today, and the economy is a reflection of this tragic phenomenon.
Whether the tax rate on the earnings of the super-rich is 15 percent or 17 percent or even 50 percent won't change the fact that the system is broke. In fact, requiring the wealthiest citizens to pay more into this system will only make it worse.