In today’s New York Times Warren Buffett makes the case for higher taxes on the rich writing:
Our government’s goal should be to bring in revenues of 18.5 percent of G.D.P. and spend about 21 percent of G.D.P. — levels that have been attained over extended periods in the past and can clearly be reached again. As the math makes clear, this won’t stem our budget deficits; in fact, it will continue them. But assuming even conservative projections about inflation and economic growth, this ratio of revenue to spending will keep America’s debt stable in relation to the country’s economic output.
Buffett’s target numbers are close to historical reality. Since World War II, federal spending as a percentage of gdp has averaged 19.7 percent and taxes have averaged 17.9 percent. But what Buffett doesn’t tell you, as the American Enterprise Institute’s James Pethokoukis noted earlier today, is that Obama’s budget sends federal taxation and spending far above Buffett’s targets. In fact, Buffett’s ideal numbers come much closer to the Ryan budget than they do to the Obama budget. Here is a chart comparing the Buffett, Obama, and Ryan numbers on taxes:
And here is a chart comparing the Buffett, Obama, and Ryan budgets on spending:
If Buffett truly believes that his 18.5 percent taxes/21 percent spending ratio is the key to solving our fiscal problems, then he is writing editorials supporting the wrong party.