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JONATHAN CHAIT

Why give $31 billion to a few poor kids?

Buffett could get far more bang for his buck by funding a civic-minded business lobbying group.

July 02, 2006|JONATHAN CHAIT

I THINK IT'S really, really great that Warren Buffett decided to give away most of his fortune to the Gates Foundation, which will use it to fight Third World disease and help promote better schools, among other things. So don't get me wrong when I say that instead of lavishing the whole thing on malnourished or otherwise underprivileged children, he should be giving some of it to slick political operatives.

In his speech announcing the gift, Buffett said that he's "not an enthusiast for dynastic wealth." Unfortunately, as I have had occasion to point out in this space, the people who run the country are enthusiasts for dynastic wealth. The House of Representatives has just approved a bill that would slash the tax on inherited wealth, costing up to $774 billion over 10 years.

Now, let's put that number in perspective. Buffett is donating a staggering $31 billion to the Gates Foundation, which will spend a couple of billion dollars a year for eminently worthy causes. But here's the problem. In the global scheme of things, $2 billion is not that much money. The federal government spends a thousand times as much money every year.

So Buffett's gift matters as much as an annual increase or decrease of 1/10 of 1% of the federal budget. His gift amounts to a tiny fraction of what would be drained by the estate-tax cut. His gift is not unimportant; it just shows the limits of private fortune compared with public policy.

And, although Buffett may not be a raving liberal, he obviously believes in some notion of social obligation. As he said, "Huge fortunes that flow in large part from society should in large part be returned to society." This is the basis for progressive taxation, and the diametrical opposite of the view of conservatives, who believe that a private fortune "belongs to the people who earned it," to use one of their favorite phrases.

HOW MUCH WOULD IT cost to influence the political system to move 1/10 of 1% of the budget out of, say, wasteful subsidies and into the sorts of programs the Gates Foundation supports? I'm not sure, but it's way less than $31 billion.

Now, enthusiasts for the Gates Foundation point out that it has discovered highly efficient ways to make use of its money, which government -- needless to say -- does not always do. But some government programs do work. Moreover, private initiatives can serve as a model for how the government can use its resources more effectively.

One of the things the Gates Foundation does is sponsor disinterested research into which methods work and which don't. That's a great first step. Unfortunately, Washington doesn't always care what works. The president and Congress tend to listen more closely to corporate lobbyists than to dweeby public-policy researchers. (Personal note: My wife is a public-policy researcher and is married to a dweeb, but she is not a dweeb herself.)

The overarching problem is that American business has become rapacious and narrowly self-interested. In the 1950s and '60s, business leaders tended to see themselves as Buffett does: as community leaders with some responsibility to the greater public. They accepted, even embraced, reasonable regulations and taxes. During the 1960s, one business writer noted that "the American business community has finally and with unexpected suddenness embraced the idea of the interventionist state."

Starting in the 1970s, corporate profits began to tighten under growing foreign competition, and business leaders understandably started to fear the excesses of Ralph Nader and his ravenously anti-business outlook. Business grew more politically involved and more selfish in its goals. Almost all business involvement in politics today is an effort to get as much as it can from Washington while paying as little as possible. It's an obsessive focus on the short-term bottom line, with no attention to broader societal problems that affect business along with everybody else.

So, what if Buffett decided to start a foundation to rally fellow civic-minded executives? The purpose would be to educate and organize executives to push for things such as deficit reduction, investment in science and education, and healthcare reform. (Rising health costs are a huge problem for American businesses, but hardly any of them lobby Washington to address the problem.)

A good, slick campaign to create a public-spirited business lobby would help everybody in due time. Why should poor kids get all the money?

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