Economic Poison: The Obama-Buffet Idea Destroys Communities
Economic patriotism – President Barack Obama’s newest tax-the-rich agitprop – reminds me of an old rapport between two conservatives: The story begins in the 18th century when Samuel Johnson averred, “Patriotism is the last refuge of a scoundrel.” To which stalwart Roscoe Conkling, a century later, would reply, Johnson “ignored the enormous possibilities of reform.” Obama’s latest platitude blends both patriotism and reform, providing refuge for the greatest scoundrel – the Scoundrel in Chief – and his refuge has been bulwarked by a slightly less scurrilous scoundrel, billionaire Warren E. Buffett.
To begin with, this economic patriotism thing is only new in the sense that it has been dug out of old social progressive tombs and rebranded as a glossy idea worth considering in 21st century America. The germ of this economic patriotism, to be sure, has inhabited the core of the American progressive movement since it arrived at the dawning of the 20th century. Progressive statists like Woodrow Wilson and Theodore Roosevelt brought about the practical enlargement of federal prerogative, but it was the early progressive philosophers, like Herbert Croly, who articulated the transcendent impetus for disinterested devotion to Big Government – a.k.a. economic patriotism. In contrast to conservative thinkers like our Founding Fathers or French writer Alexis de Tocqueville, who saw the Republic’s national good as the aggregation of individuals pursuing self-interest rightly understood, the progressive thinkers sought to redirect the energy of the democracy toward a unifying national idea.
In his 1944 State of the Union Address, FDR said that the nation had recognized a new understanding of rights and ought to adjust our Constitution accordingly. He argued that the mere constitutional rights had “proved inadequate to assure us equality in the pursuit of happiness.” Thus spreading the wealth to become not just a sometimes legitimate means for social amelioration, but a desirable end unto itself. FDR’s rights reformulation included guaranteed employment with a livable wage, education, freedom from unfair competition and monopolies, social security, housing and medical care. This paternalistic vision of American government has largely come to fruition since the New Deal, and President Obama’s legacy may well be having brought the progressive vision to its apogee vis-à-vis Obamacare. But Obama’s economic patriotism, which is required to fund his legacy, goes far beyond FDR’s economic rights, striking at the very core of what it is to be a good American.
According to Obama’s economic patriotism, Americans have a transcendent duty to the state that commands economic sacrifice for the greater good of the whole – which ostensibly is equality of wealth. Yet whereas every American is able to aspire to and achieve regular ole flag-waving, troop-venerating, Uncle Sam-loving patriotism, only those with piles of untaxed treasure can become true economic patriots. For according to Obama’s perverted patriotism, your contribution to the self-governing experiment that is America depends on whether you are poor or rich; for only the well-off are really capable of attaining the sacrifice this new patriotism commands. Obama’s patriot, then, is less like WWII General George Patton and more akin to bloviating billionaire Warren Buffett, as seen in his apparently self-sacrificial desire to volunteer more of his wealth for federal confiscation.
However, Mr. Buffett is far more averse to taxation than he pretends. While he purports taxation does not deter investors from doing the type of things that lead to economic growth, his handling of the now-defunct Maine-based Dexter Shoe Co. demonstrates the contrary. Indeed, the case of Dexter Shoes demonstrates not only Mr. Buffett’s tax-sensitive investing strategy, but also the deleterious impact high taxes have for America’s small businesses, entrepreneurs and workers. For after Mr. Buffett was through with Dexter Shoes the company and the community it supported were left in ruins. Indeed, as one of Dexter’s native sons whose father and grandfather worked at Dexter Shoes, I know all too well that Mr. Buffett’s brand of economic patriotism is not only self-interested and tax-evasive, but ultimately poisonous for American communities.
Mr. Buffett purchased Dexter Shoe Co. in 1993 from Harold Alfond for $433 million in Berkshire Hathaway shares. Those shares are now worth $1.5 billion. Perhaps this is why Buffett tells all who inquire that buying Dexter Shoe was one of his worst investments. “To date, Dexter is the worst deal that I’ve made,” Buffett has said.
After purchasing Dexter Shoe, Buffett, being the economic patriot that he is, relocated its operations to Puerto Rico because of a competitive advantage derived, in large part, from the territory’s lower tax rates in comparison to Maine’s. Although Buffett believed that he had found a profitable model in shifting the world renowned shoe-making operation into Puerto Rico’s lower tax environment, in 2001 he cut his losses and ran, closing, selling or rebranding all U.S. and Puerto Rican operations.
“What I had assessed as durable competitive advantage vanished within a few years,” Buffett said. “By using Berkshire stock, I compounded this error hugely. That move made the cost to Berkshire shareholders not $400 million, but rather $3.5 billion. In essence, I gave away 1.6 percent of a wonderful business — one now valued at $220 billion — to buy a worthless business.”
However terribly Buffett suffered from his decision to buy, dismantle and outsource a decade’s old flourishing shoe factory in northern Maine – in his words, “a worthless business” – the thousands of Mainers who lost their jobs as a result of Buffett’s business practices surely suffered more. While some of Dexter Shoe’s old stores still operate under the name Super Shoes, the factories in Dexter would never again produce shoes—or fruitful opportunities—for thousands Mainers set adrift by Buffett’s, er, economic patriotism. And Dexter never really recovered, as evidenced by the steadily declining population and the fact that the largest employer in the town is the public school system.
Fast forward to 2012 and this same Buffett patriot says taxes have zero impact on America’s competitive advantage. In a January 2012 interview with Time Business’s Rana Foroohar, Buffett brushed aside the suggestion that taxes affect businesses. “The idea that American business is at a big disadvantage against the rest of the world because of corporate taxes is baloney in my view.” In stating the foregoing, Buffett either betrayed his geriatric brain’s nascent dementia or else he lied. I lean toward the former. The reason a successful businessman like Buffett would make such a foolish and asinine statement has to do with President Obama, the Key Stone XL pipeline, and Buffett’s large stake in Genesee & Wyoming – the largest short line and regional rail operator in the North America.
Genesee & Wyoming ships petroleum and related products all over the continent. As such, the Keystone pipeline would seriously threaten the value of G&W and Buffett’s shares therein. Buffett has an obvious interest in preventing the pipeline from being built. Obama has an obvious interest in securing Buffett’s allegiance. (Honestly, who better to champion Obama’s tax-the-millionaires-and-billionaires campaign shtick and now agenda than one such billionaire? A semi-celebrity billionaire to boot!) So in return for a few interviews, public statements and Wall Street Journal op-eds from Buffett defending redistributive tax policy, Obama blocks Keystone, effectively protecting his billionaire pal’s interest in Genesee & Wyoming.
But while both Obama and Buffett get their backs scratched, the American people get the shaft: The hundreds of thousands of jobless Americans who could be constructing the Keystone pipeline right now remain needlessly unemployed, not unlike the thousands of Mainers whose lives were cast asunder, whose communities irrevocably destroyed, by the Buffet-Obama brand of economic patriotism.
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S.E. Robinson, a Maine native and graduate of Bowdoin College, is an investigative reporter with a passion for fishing, firearms and freedom. His work has been featured in Human Events, National Review Online, and TheBlaze. A version of the column was originally posted at TheBlaze.
