Warren Buffett’s Berkshire Hathaway recently announced its net income had surged 62% in the second quarter. Buffett, the world’s second richest man, made headlines earlier this year when he announced he would be donating the bulk of his fortune to the foundation established by the world’s first richest man, his friend, Bill Gates. Buffett has been an outspoken critic of plans to eliminate the estate tax and of supply-side economics in general.
But a review of Berkshire’s performance indicates that the very policies Buffett criticizes have played a major role in creating the fortune upon which he stands to deliver those denunciations. Berkshire Hathaway didn’t start as an investment company. It began as a typically struggling Northeastern textile firm. Buffett bought it, and when he failed to make a go of it in textiles, he shut down the plant and fired the employees.
Under the anti-growth polices of the 1970s, Berkshire generally shared the weak performance of the rest of the stock market. It wasn’t until the Reagan tax cuts that Berkshire really took off. The company also had very strong growth after President Clinton signed a capital gains tax cut in 1997. Berkshire underperformed the market during the recession of 2000-2001, took off to some degree during the partial Bush tax cut of 2001, and has done extremely well since the full implementation of the Bush cuts in 2003.
Ironies abound in Warren Buffet’s career. He is a denouncer of corporate greed who began his corporate career by firing workers, a critic of supply-side economics from which much of his wealth is derived, and a supporter of inheritance taxes which he will personally avoid by donating most of his fortune to a tax-sheltered foundation. The fact that the establishment media fail to point out these ironies is, perhaps, one of the rewards he receives for fighting the system which has served his shareholders so well.
Sign up to the Human Events newsletter