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Though President Bush constantly is criticized and attacked by Democratic partisans for pursuing policies that benefit “the wealthy,” why are so many of what would be considered America’s superrich his political opponents?
In addition to the Hollywood mega-elite, which since the death of Sam Goldwyn have opposed the GOP mainly for cultural reasons, billionaire businessmen have stepped forward calling for the defeat of Bush or his policies.
Most prominent has been speculator George Soros, who has pledged to raise $75 million to defeat Bush, given millions to Democratic Bush-bashing groups such as MoveOn.org, and told the Washington Post that ousting Bush is “the central focus of my life” and “a matter of life and death.”
But investor Warren Buffett also has opposed many of Bush’s tax policies, such as estate-tax repeal and dividend tax cuts, calling them “class welfare for my class.”
The mass media never cease to talk about how “the rich” will benefit from policies such as estate-tax repeal, while overlooking what many economists have seen as the positive effects that will benefit the economy as a whole such as job growth, increased savings and preservation of family businesses.
Yet when a celebrated would-be plutocrat such as Buffett, Soros or William Gates Sr., father of the Microsoft billionaire and a wealthy lawyer in his own right, comes out against the estate tax or in favor of any other left-wing policy, their motives never are questioned.
These economic royalists regularly are described as acting against their interests, even though Insight has found that Buffett, for instance, has businesses that actually profit from the existence of the estate tax.
Tim Graham, director of media analysis at the Media Research Center, notes that Soros regularly is described as a philanthropist, whereas no such term ever is affixed to Richard Mellon Scaife, who gives to conservative causes and is portrayed by the liberal media as an agitator.
This was so even though the sums he gave to conservative and anti-Clinton groups were a fraction of his giving. Scaife gave mostly to ballet companies and other cultural institutions in his hometown of Pittsburgh, carefully keeping his economic interests separated from his philanthropy.
And analysts say economic interests always should be looked at when examining political players on both the right and left. Although both Soros and Buffett may be advocating policies that fit their worldview, it develops that both also stand to gain financially from the policy ideas they’re pitching.
“These aren’t just philanthropists, and these aren’t just political ideologues; these are people who stand to profit” says Tim Carney, a Phillips Foundation journalism fellow and author of the forthcoming book “Regulatory Robber Barons.’
“They’re making investments and expecting a return on it,” Carney notes.
Soros, for instance, is a currency trader, with reported vast holdings in unstable financial markets. He has taken a beating in the last few years on his positions in the Russian ruble. Coincidentally or not, Soros advocates global taxes to strengthen institutions such as the International Monetary Fund and World Bank to bail out unstable governments facing currency crises.
In his book “George Soros on Globalization,” the international speculator criticized an IMF/World Bank reform commission headed by noted conservative economist Allan Meltzer that called for sharply limiting bailouts.
Soros wrote that this was too strong a medicine and the proposal for a restructured agency was too restricted: “Contrary to the Meltzer Commission’s recommendations, it would be premature to terminate the existing lending operations of the World Bank. So-called middle-income countries like Brazil, and even Chile, have very uneven income distributions and great social needs. … The World Bank has an important niche to fill.”
But critics of these institutions note that their taxpayer-subsidized lending and bailout practices tend to benefit allegedly piratical speculators such as Soros more than the people of the Third World by giving the big boys the opportunity for a huge return with taxpayers holding the risk.
“Bailouts are a great way for rich people to make lots of money,” Carney says. “They’ll put money where no one else wants it, because it’s a bad investment, and then get big government to help them out.”
Carney adds that “bailouts are as likely, if not more so, under Democratic administrations.”
Much more likely, says former hedge-fund manger Andy Kessler. He points to the Clinton administration’s bailout of Mexico during the peso crisis in the mid-1990s, for which Wall Street banks lobbied, and contrasts that to the Bush administration’s refusal to bail out an Enron teetering on bankruptcy in 2001.
Robert Rubin, the former Clinton administration Treasury secretary who engineered the Mexico bailout, actually called the Bush Treasury Department to ask it to help Enron.
“The Bush people are more free market, and [John] Kerry is more likely to appoint a more interventionist Treasury secretary like Rubin,” Kessler says.
He thinks this is not unimportant to Soros because, Kessler speculates, Soros is “probably long and wrong in [his investments in] the entire Eastern bloc.”
It’s difficult to tell how exactly Soros would benefit, because there is little transparency in his holdings. Soros’ funds are held privately and do not have to be reported to the Securities and Exchange Commission.
In fact Insight got an unusually hostile response from Soros’ spokesman for even questioning whether Soros would benefit financially from his huge expenditures on political activity.
“I have no faith in the ability or desire of Insight magazine to portray George Soros’ activities in an unbiased manner,” said Michael Vachon, the spokesman for Soros Fund Management in New York City.
Pressed, he finally said, “There’s no relationship between the policy prescriptions George Soros recommends and his own financial holdings. He doesn’t make policy recommendations to increase his own personal wealth. That’s not what motivates him.”
Critics of Soros wonder if his spokesman doth protest too much but concede that liberal or statist billionaires probably aren’t motivated by money alone. After all, there’s power.
But the critics say it’s foolish to think that citizens who have amassed great fortunes suddenly put aside their financial interests and the heady perks of being an insider when it comes to politics and policy influence.
“They put up a great moral front, but they’re great money managers. That’s their legacy, and I suspect there’s always some economic underpinning to their policies,” says a close observer of this crowd.
Take Buffett. He, Soros, Gates Sr. and some of the Rockefellers got great press for joining with a group called “Responsible Wealth” that seeks preservation of the estate tax. Buffett was given laudatory press for remarks such as the one to the New York Times about “choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics.”
But one thing the laudatory articles didn’t say is that Buffet owns insurance companies that profit mightily from the threat posed by the estate tax.
Dena Battle, tax-policy analyst for the National Federation for Independent Business, or NFIB , says many of that group’s members have businesses worth $1 million or more, but have take-home pay around $50,000. Because the estate tax currently hits 55 percent of income over a certain threshold, the only way many small-business owners can pass on their businesses to their children is by buying a life-insurance policy to prepay the tax. The policy, of course, also includes hefty fees for the insurer.
And one of those companies is Safeco Life and Investments, a Redmond, Wash.-based company which advertises on its website that it provides “effective estate-tax planning” and “business-succession planning.”
Who owns Safeco? It was acquired recently by “an investor group led by Warren Buffett’s Berkshire Hathaway,” according to Reuters.
“This shows his fortune benefits directly from the estate tax on the backs of small businesses,” says William Beach, an economist at the conservative Heritage Foundation who points out that Buffett has other such life-insurance holdings as well. Berkshire Hathaway did not return Insight’s phone calls seeking comment.
The NFIB’s Battle points out that a typical small-business owner pays $27,000 a year for an estate-tax life-insurance policy.
“That’s [the cost of a new] employee,” she says, explaining that there would be no need for this type of policy if there were no death tax and that money could be used to help the economy by hiring more workers.
She points out that the superrich such as Buffett, Soros and Gates Sr. can afford to have experts set up trusts and other devices to deal with the estate tax; it’s the new entrepreneur who has trouble plowing through the red tape. Minority businessmen such as Black Entertainment Television’s Bob Johnson have echoed Battle’s view.
Kessler says that even with the superrich, when it comes to money, “there’s always a degree of uncertainty and sleepless nights,” and goodly outlays to politicians give them access to protection.
In Soros’ case, his theory of the “bubble of American supremacy” is something he has been preaching for nearly 20 years, as well as practicing in his investment philosophy, sometimes with disastrous results.
During the 1980s, he wrote in “The Alchemy of Finance” that he lacked confidence in Reaganomics and that Japan would replace the United States as the economic dominator. He sold his stock at the very bottom in 1987. He lost money betting on the strength of the euro in the late 1990s. Also in the late 1990s, his Quantum Fund lost a tremendous amount, shorting U.S. technology stocks. His fund finally got into the tech market just as the Clinton downturn was hitting in 2000 and lost even more.
Speculation has been rampant that Soros might try to flip the market in the weeks before the 2004 election in an effort to defeat Bush, and there has been much talk about how he could try this.
Economist Donald Luskin, who heads the firm Trend Macrolytics, says that part of this strategy may just be funding groups that talk down the economy.
If Soros has bet against American resurgence, this economy-bashing could benefit his holdings as well, Luskin says, “I think his most effective way is to talk it down by diminishing confidence, by enhancing a sense of risk, by playing up all this outsourcing sh-t, and saying ‘Don’t be fooled that you have a job now, it’s going away in two years, and John Kerry will prevent that.’ That’s very effective stuff.”
Of Soros’ successes Luskin says, “He makes money when there’s a dummy on the other side.”
On the other hand, Kerry supporters Buffett and Soros have about $50 billion worth of liquidity with which to play, and October can be a very volatile month in the markets.
John Berlau is a writer for Insight magazine.