They are both dead wrong on economic policy.
The great advantage of competition in markets is that it exhausts all gains from trade, which thus allows individuals to attain higher levels of welfare. These win/win propositions may not reach the perfect endpoint, but they will avoid the woes that are now consuming once prosperous economies. Understanding the win/win concept would have taken the Pope away from his false condemnation of markets. It might have led him to examine more closely Spain’s profligate policies, where high guaranteed public benefits and extensive workplace regulation have led to an unholy mix of soaring public debt and an unemployment rate of 20 percent. It is a tragic irony that papal economics mimic those of the Church’s socialist opponents. The Pope’s powerful but misdirected words will only complicate the task of meaningful fiscal and regulatory reform in Spain and the rest of Europe. False claims for social justice come at a very high price.
On this logic, lower capital gains rates generate more tax revenue for the federal government. Yet Buffett doesn’t grasp the point when he writes:In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.
I’d take 2008 any day. In 1992, the country’s top 400 earners paid a total of $4.9 billion in taxes, which is a nifty sum to come from so few. But 16 years later, that amount rose to about $19.55 billion, leaving those most successful investors with an extra $71 billion in cash to invest in new ventures that could promise greater returns. This is win/win with a vengeance.