How To Solve The Increasing Wealth Gap (Warren Buffett)

June 8, 2015

First, Why:
In Lessons of History, Will Durant mentions that whenever the rich get richer and poor get poorer, there are two outcomes.

A. Violent Redistribution
(civil war, violence, death, overthrow of government, & forced redistribution of wealth to the masses. French Revolution)

B. Peaceful Redistribution
(politicians tax the wealthy & give to the poor. Like FDR did with social security, fair taxation, protection of workers, etc via the New Deal)

In The Foundation novels, Isaac Asimov talks about the growth and decay of empires. Despotism, concentration of wealth, and unfairness lead to civil unrest and destruction of the powerful.

Even Henry Ford paid his workers five dollars per hour while they were making fifty cents per hour at other places. Because he wanted highly motivated employees. Also, he needed people who could afford the cars he was selling.

Lastly, Warren Buffett says that a country as prosperous as America needs to take care of the less fortunate. He argues that if our society had been sports-based, he would be a loser no matter how hard he tried. Similarly, our current capitalistic, technology-based economy rewards some and leave rest of our brothers & sisters behind. It’s not their fault.

Next, How:
Minimum Wage Increase vs Earned Income Tax Credit

Warren Buffett wrote an op-ed saying he supports the Earned Income Tax Credit as the best way to help folks who are left behind while the rich get richer.

He argues that raising the minimum wage will have a net negative effect of more job loss & outsourcing to cheaper countries. It would also stifle economic growth.

In 1982, the first year the Forbes 400 was compiled, those listed had a combined net worth of $93 billion. Today, the 400 possess $2.3 trillion, up 2,400% in slightly more than three decades, a period in which the median household income rose only about 180%.

Meanwhile, a huge number of their fellow citizens have been living the American Nightmare—behaving well and working hard but barely getting by. In 1982, 15% of Americans were living below the poverty level; in 2013 the proportion was nearly the same, a dismaying 14.5%. In recent decades, our country’s rising tide has not lifted the boats of the poor.

Better Than Raising the Minimum Wage