Liberals have historically painted the Republican Party as an exclusive club unapologetically propping up rich old white guys. Nobody is more the epitome of a rich old white guy than the Oracle of Omaha himself, Warren Buffett. Born of somewhat humble circumstances, Mr. Buffett has become the richest man in the world, or at least so close to it that the exact position on Forbes' list matters little.
Yet in the run-up to both the 2008 and the 2012 elections, Warren Buffett threw his financial weight and support behind Barack Obama. This unusual endorsement leaves one puzzled as to why. Barack Obama, a president who has earned a reputation as the most anti-business president in modern history is endorsed by the biggest businessman in the nation. It makes no sense on the surface. But peeling back the onion just a bit reveals some eye-opening explanations.
For a little bit of background, Warren Buffett was a capitalist from his boyhood, when he began delivering newspapers and selling golf balls. These facts are well known. What is not so well known, but what Warren admits, is that he stole the very golf balls that he sold for profit. In fact, he admits to stealing not only the golf balls, but golf bags, golf clubs and other salable items, directly from retail stores. He built up so much stolen inventory he began to lie about where it all came from. Some may say this is just a kid being a kid. May be; but at a minimum, it says something about his character. From an early age, he was willing to enrich himself through selfishness, dishonesty and deceit. Whether Mr. Buffett has been dishonest and deceitful as a man, I have no knowledge. But, he is no doubt as self-serving as ever, and he continues to use such means to enrich himself. This helps explain his support for a left-leaning president like Obama.
No matter how anti-business Obama actually is, there will still be businesses and industries that will benefit, even if the economy as a whole suffers. Buffett knows this, capitalizes on it, and is becoming a wealthier man because of it. Buffett will continue to become wealthier under Obama's policies, for the following reasons:
Insurance - Warren Buffett's vast wealth comes from his holdings in Berkshire Hathaway, whose primary business is insurance. One of the most lucrative products sold in the insurance industry is whole life insurance policies. Whole life (or variable life) policies have become less popular in recent years as tax rates have come down. Although dealers sell them as straight investments, they are primarily a tax savings vehicle. The higher the income tax rates, the more valuable they are. Thus, higher tax rates result in more profit for Berkshire's insurance business. Since Obama is a big supporter of high tax rates, Buffett is a supporter of Obama.
Railroads - A few years ago, Warren Buffett purchased one of the largest railroads in America, Burlington Northern. Railroads are attractive to him because they operate almost as a monopoly. One of the biggest boons in railroad revenue is the transportation of coal, and Warren realized he could purchase a railroad and charge nearly whatever he wanted to ship coal and other commodities. But, then a problem arose - a drop in natural gas prices drove down the demand for coal. Never fear, for Warren Buffett being a savvy businessman found a replacement commodity - oil! With the huge new extractions of oil from the Bakken fields in MT and ND, Buffett's wholly-owned railroad has been feverishly building infrastructure and capacity to ship this oil by rail. And, as long as oil pipelines are not allowed to be built across our country, shipment by rail will be the alternative. A vote for Obama is a vote against oil pipelines.
Tax Rates - So, you must be asking - "Okay, but why would Buffett want to pay high tax rates, himself?" This is an excellent question. The answer is Warren doesn't pay high rates. This is not George Bush's fault - he wouldn't be paying high rates no matter who the president is. Let me explain. We all file a tax return and pay taxes on our taxable income for the year. The key is term here is "taxable income." If it's not taxable income, there is no tax on it. Warren Buffett's wealth does not increase through taxable income, it increases through the value of his holdings. To illustrate, recall that Warren Buffett paid $34 billion for his railroad several years ago. Let's assume it's worth $44 billion today. His net worth has risen by $10 billion, but none of that is taxable because he hasn't sold it and, knowing him, likely has no plans to do so. Warren is a buy and hold investor, he's not a trader. He has built his fortune by buying and holding (some companies for several decades). So, although he may sell an investment here or there, his wealth increases each year and, in large part, is not taxable. Don't think for a moment that the "Buffett Rule" was proposed out of some nobility on his part. Obama could raise tax rates to 90% and it would have little effect on Buffett's wealth.
In summary, as long as Buffett can benefit from an Obama Presidency by shipping more oil, and by selling more insurance, all the while paying relatively little income tax, he will sidestep any morals his parents may have tried to instill in him as a boy. He will enrich himself and tout the need for higher taxes, knowing it's not good for the economy or for those of us in the 99.9%.