wealth gap
Wealth Gap essay
A major issue in America today is the growing gap between the rich and the poor, and the popular narrative is that the disparity is caused by capitalism run wild and only the firm hand of government can fix the problem. But what if this narrative has it backwards? What if the growing wealth disparity in America is actually caused by the government?
Take Warren Buffet, a man often at the center of this debate, as not only is he a billionaire, but also a vocal advocate for higher income taxes on the rich. Mr. Buffet’s focus on taxes on income is curious, as he didn’t become a billionaire by earning a high income, but rather from owning assets, like shares in Berkshire Hathaway. Many are aware of his acumen in making investments that have a “margin of safety” – or minimal downside – but few are aware of the greatest source of such safety for Mr. Buffet in recent years, the US Government.
During the 2008 crisis Buffet’s investment portfolio was full of wobbly financial companies like GE and Wells Fargo. In the span of 2 months Berkshire stock – and Mr. Buffets net worth – lost half their value. In response, Buffet invested more in collapsing financial companies like Goldman Sachs, then went public demanding a bailout. The Treasury Department and Federal Reserve responded with program after program to keep troubled financial entities alive, some of them invented specifically for Buffet holdings like GE. Just two years later, thanks to the impact of the bailouts and the Fed’s programs, Berkshire stock rebounded sharply. Mr. Buffet’s investment in Goldman Sachs, which he himself admitted was a bet on the bailouts, made billions and continues to earn him a profit years later.
Mr. Buffet wasn’t the only person that benefited from the bailouts, but wealthy citizens like him, who tend to hold the majority of assets in America, benefited disproportionately. The untold narrative of how Warren Buffet and others like him “get richer” is how they
A major issue in America today is the growing gap between the rich and the poor, and the popular narrative is that the disparity is caused by capitalism run wild and only the firm hand of government can fix the problem. But what if this narrative has it backwards? What if the growing wealth disparity in America is actually caused by the government?
Take Warren Buffet, a man often at the center of this debate, as not only is he a billionaire, but also a vocal advocate for higher income taxes on the rich. Mr. Buffet’s focus on taxes on income is curious, as he didn’t become a billionaire by earning a high income, but rather from owning assets, like shares in Berkshire Hathaway. Many are aware of his acumen in making investments that have a “margin of safety” – or minimal downside – but few are aware of the greatest source of such safety for Mr. Buffet in recent years, the US Government.
During the 2008 crisis Buffet’s investment portfolio was full of wobbly financial companies like GE and Wells Fargo. In the span of 2 months Berkshire stock – and Mr. Buffets net worth – lost half their value. In response, Buffet invested more in collapsing financial companies like Goldman Sachs, then went public demanding a bailout. The Treasury Department and Federal Reserve responded with program after program to keep troubled financial entities alive, some of them invented specifically for Buffet holdings like GE. Just two years later, thanks to the impact of the bailouts and the Fed’s programs, Berkshire stock rebounded sharply. Mr. Buffet’s investment in Goldman Sachs, which he himself admitted was a bet on the bailouts, made billions and continues to earn him a profit years later.
Mr. Buffet wasn’t the only person that benefited from the bailouts, but wealthy citizens like him, who tend to hold the majority of assets in America, benefited disproportionately. The untold narrative of how Warren Buffet and others like him “get richer” is how they