Charlie Munger, the No. 2 at Berkshire Hathaway, said Bernie Sanders had won the ‘income inequality’ debate by default
Berkshire Hathaway Vice Chairman Charlie Munger said liberal Sen. Bernie Sanders could claim victory in the fight against income inequality in the U.S.
But the victory comes just ‘by accident,’ Munger said, because booming stock markets fueled by stimulus mean it’ll be harder for the younger generation to get rich.
With assets inflated to such a degree, millennials and younger people will find it harder to buy low, hold for years and then sell high. In the long-term, that will narrow the wealth gap simply because there will be fewer wealthy people.
‘With everything boomed up so high and interest rates so low, what’s going to happen is the millennial generation is going to have a hell of a time getting rich compared to our generation,’ Munger said during the meeting.
The S&P 500 index, the broadest measure of US stock market performance, is up more than 47 percent so far this year – giving an indication of just how much stimulus money and ultra-cheap interest rates have helped drive asset prices even as some parts of the economy have cratered under the stress of the pandemic.
Munger, 97, joined billionaire Buffett for Berkshire’s annual meeting on Saturday when he made the remarks. For the second year in a row, they were broadcast virtually because of the COVID-19 pandemic.
That pandemic has led to a rush of money from the Federal Reserve and from Congress to prop up markets and income.
‘The difference between the rich and the poor in the generation that’s rising is going to be a lot less,’ he adds. ‘So Bernie has won. He did it by accident, but he won,’ Munger said.
Berkshire Hathaway vice chairman Charlie Munger (right) lauded Vermont Sen Bernie Sanders as the victor in the fight against income inequality in the US
Buffett, left, and Munger usually attend the annual meeting of Berkshire Hathaway in person in Omaha, where the company is based. They’re pictured there at the last in-person meeting in 2019; the last two meetings have been held virtually because of the COVID-19 pandemic
However, Munger’s recent remarks are a stark contrast from what he said about Congresswoman Alexandria Ocasio-Cortez and Sen Warren in 2019.
‘I don’t think [Ocasio-Cortez] knows who Adam Smith was,’ Munger told Yahoo at the time. ‘The people screaming about it are idiots. It’s going to go away by itself.’
Smith was a Scottish economist from the 1700s known by some as the ‘father of capitalism.’
Munger said it’s ‘a problem if enough politicians are screaming about it. That makes it a problem’.
In 2019, when Sanders was an independent presidential candidate, he proposed raising taxes 0.5 percentage points on companies paying top executives more than 50 times the median salaries of workers.
Tax penalties would’ve risen from there, up to a maximum of 5 percentage points for firms whose highest-paid official earns 500-plus times median worker pay.
Sanders said his income inequality tax plan would’ve apply to all private and publicly held corporations with annual revenues of $100million. His campaign estimated that it would’ve raised $150billion over a decade, which could’ve been used to eliminate medical debt nationwide.
Meanwhile, President Joe Biden is in the process of implementing his own tax plan that he has said would combat income inequality. The idea is twofold: First, to help pay for Biden’s trillions in proposed spending — for everything from roads and bridges and green energy to internet access, job training, preschool and sick leave.
Munger said of Sanders (pictured): ‘The difference between the rich and the poor in the generation that’s rising is going to be a lot less. So Bernie has won. He did it by accident, but he won’
And second, to shift more of the federal tax load onto companies.
‘The burden,’ said Thornton Matheson, senior fellow at the Tax Policy Center, would ‘fall predominately on wealthier individuals.’
Conservatives and others have slammed the proposal as typical tax-and-spend liberal policy and warned it would cause inflation to spike and growth to slow.
The president has said he wants to stop companies from stashing profits in countries with low tax rates. To do so, he’s proposed a 21 per cent minimum tax on multinationals’ foreign earnings and is urging other countries to follow suit.
His plan would also rescind what the administration sees as international loopholes in Trump’s 2017 tax legislation.
The administration has also proposed adding $80billion to the IRS budget over a decade to bolster the agency’s underfunded enforcement team. He’s also proposed raising the tax rate on long-term capital gains for Americans who earn over $1million a year.
Munger downplayed concern that Congress and the White House might raise the corporate tax rate to 25 per cent or 28 per cent, saying it wouldn’t be ‘the end of the world’ for Berkshire.
Meanwhile, Buffett, Berkshire’s CEO, said the US economy has been ‘resurrected in an extraordinarily effective way’ by monetary stimulus from the Federal Reserve and fiscal stimulus from Congress.
‘It did the job,’ Buffett said. ‘This economy, right now, 85 per cent of it is running in super high gear.’
Buffett has run Berkshire since 1965, and Munger has been vice chairman since 1978.