Warren Buffett and trickle down

| 21/11/2010

Warren Buffett is indeed a very rich man. Unlike most of his peers and most of those who spend their lives trying to attain wealth of a similar magnitude, he would appear to be, above all else, an honest human being.

At a time when the sentiments and actions of those who are positioned to inform, shape and fashion public opinion in the United States and far beyond appear unswervingly committed towards the entrenchment of policies that would serve to sustain and further widen income inequality (currently at levels not seen the 1920’s), a billionaire who is forthright enough to go on national TV and say, “I think that people at the high end, people like myself, should be paying a lot more taxes; we have it better than we’ve ever had it”, is indeed an honest human being.

When Mr Buffett was asked by the program hostess how he was able to reconcile his stated position with the conventional wisdom that the very wealthy needed tax cuts to spur business and capitalism, Mr Buffett responded, “The rich are always going to say that you know, just give us more money and we’ll go out and spend more and then it will trickle down to the rest of you. But that has not worked thelast ten years and I hope the American public is catching on.”

It is not only the American public that needs to catch on to the colossal failure of the trickle down concept as a credible approach to sustainable economic development.

Here in the Cayman Islands, every elected official over the past three decades, regardless of group or party affiliation, every major opinion shaper, regardless of the economic sector he/she represents, has committed themselves to the shaping and promotion of policies that are rooted in the trickle down concept.

The reality on the ground suggests it is not a viable approach to the attainment of sustainable development for the “rest of us”.

Not unlike the United States, “the rest of us” here in the Cayman Islands would be naïve to believe that the entrenched power block is likely to exhibit the forthrightness and honesty of Mr Buffett any time soon.

As Mr. Buffett suggested, one would sincerely hope the Caymanian public is catching on.

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  1. 4o5r3 says:

    At times, the trickle-down way can work!  It all has to do with people having an open heart and spirit of giving.  If government somehow choose to look out for the less fortunate and do that spirit of giving, it is not going to be the same. Government tends to be more mechanical whereas a wealthy phalantrophists with a giving heart, tends to give and help those in need more naturally.

  2. Joe Average says:

    This from Huffington Post for all you believers in Trickle Down Economics:

    Though the unemployment rate remains near 10 percent with millions of Americans about to run out of their jobless benefits, one in five Americans are using food stamps to buy groceries and small businesses are being forced to slash their work forces to stay alive, Wall Street’s top bankers and wealthy investors are spending to excess, indulging their every whim.

    Ie. $40,000 jewel-encrusted cell phones, dog spas, million dollar bonuses, lavish parties, so good to hear they’re back.

    Consumer spending amounts to more than two-thirds of the American economy, so this return to frivolity at the top is– at least in theory–supposed to trickle down to less fortunate areas of life.

    Trickle down??? Not a chance.  It was theft spelled T.A.R.P

  3. Anonymous says:

    This has nothing to do with taxes and everything to do with politics & ideology.  If Mr. Buffett wants to pay more to the IRS all he has to do is send them a cheque – they will accept it. 

  4. Anonymous says:

    Warren Buffet is a damn hypocrite like most socialists.  Always proposing legislation them and their cronies are looking to be exempt from!


    Case and point Google, highly supportive of the Obama administration and their tax policies, increase in government’s role in every aspect of people live paid 2.4 PERCENT in taxes last year!  


    Most companies (C Corps) pay 35% and 25% cap gains.

    Do ANY of you think Warren Buffet with army of tax attorney actually paid that?????  PLEASE.  Yet that same freaking pirate, is proposing to increase taxes on the "rich"??  give me a break!!  What he and like minded people such as is partner Obama means by rich, is anyone who is self reliant and and "creating" revenue!  i.e. "non government dependents".

    What Caymanians need to understand ISN’T the incredibly flawed points of the Author of this article, NOR Warren Buffet.  Caymanians need to understand the impact of "Socialism" and the entitlement mentality which has destroyed the economy of Greece, France, Italy, Ireland, most of Europe and Slav countries.  And what IS destroying America.

    The tax the "rich" to _give_ to those whom have not earned.  That my friend isn’t spreading wealth, its spreading POVERTY!  its spreading crumbs and misery equally.  And just think how fast how quick and effective that system could spread poverty in the country the size of Cayman, if its managed to be sinking a country thesize of America and the economy the size of America.

    This fallacy that somehow the private sector and wall street create the housing meltdown is absolute nonsense.  This economical downturn is a government induced by hi taxation and the entitlements of loans to millions of people who could not afford them or over extended themselves.  

    Taxation on income is the root cause of decaying economies in ANY country, NOT the other away around.  Look around the world.

    People make the mistake of looking at things in a snippet of time.  Look at taxation over decades increments. every country in the world has somehow reversed or rebelled at some point because the governments ALWAYS over spends, and over promise entitlements.  ALWAYS.  

    And for those that thinks (like I read in earlier articles on this website)  that somehow government spending is the same as private sector spending towards improving the economy need to take a class on economics!!!  ITS NOT.


    Private sectors need to CREATE REVENUES in order to spend……

    GOVERNMENTS DO NOT!  All they have to do is TAX  YOU MORE in order to PAY THE DEBTS THEY CREATE.

    Huge difference!

    One is working to to create revenues and one is racking up a credit card! 

    When I read comments and articles as idiotic such as these it makes me cringe!!  There i’s a REASON Cayman has surpassed and sustained a world class economy!  And there is a REASON it finds its self all of a sudden in the worst financial times its ever seen (sure there are ups and downs but now like this)  And its SAME reason as America!  THE GOVERNMENT LARGELY CREATED IT!

    Economies can only trickle down!  it can’t up, and it can’t be spread!  its ONLY ACQUIRED via opportunity.  so instead of cursing and continually trying to punish the "rich" for their "eeeeevil greeeeeeeeed" why don’t you try to position yourself and provide a service to profit from their natural propensity to spend and create wealth!


    For crying out loud!  Unfreaking unbelievable!



  5. Anonymous says:

     Warren Buffett: another great atheist

  6. Anonymous says:

    I think there will always be certain amount of ‘trickle down’ effect if managed properly.

    But at end of day the fiscal responsibilities of leaders in the civil service and by the governement will continue to be inefficient due to waste of resources on our huge civil service, programmes that don’t work or should be privitised…….as long as we have an electorate who are uneducated in what the function/s of the government should be and the need to take responsibility for our own standard of life, making goverment accountable whenever necessary.

  7. Dennis Smith says:

    Andre, I always enjoy your posts and I know that you are dedicated to Cayman and the advancement of Caymanians, especially the ones with less advantages. Other than a general disbelief in economic improvement via the “Trickle Down” effect I am not entirely sure where or what you are leading towards in your viewpoint.

    If you are makinga statement that our history of economic development has been poorly managed, curtailed by protectionism (a built in excuse for Cronyism) and is replete with opportunities squandered, I must agree with you.

    With the exception of property ownership and real estate development for foreign investors, Cayman is a closed economic society and the vast majority ofour political preoccupation has focused on keeping it that way, i.e. immigration policies and the requirement for majority Caymanian ownership of local operating businesses (the type of businesses that actually employ people).

    Undoubtedly this has benefited those who found a way around the “rules” but for the most part it has driven business away from Cayman, especially those outside of our narrow vision of business opportunities and concepts.

    This “if it isn’t broke don’t fix it” mentality created a form of national tunnel vision that has kept us locked into our old and restrictive political/economic model long past the point of a strategic need for change.

    The current brouhaha over exemptions, planning shifts, immigration and special projects is the result of a broken system being patched ad hoc as every new “solution” presents itself. Because of the politically charged nature of our ad hoc approval process our future resembles our past. Not a very pleasant thought.

    A reordering of our wealth extraction system is not the answer. The answer is economic growth that provides for a way up for everyone involved. Easy to say but difficult to achieve. Every country in the world is looking for the same answer and the competition is tough, knowledgeable and increasingly competitive every day.

    In the past 10 years the world has opened up and expanded way beyond the imagination of all but the most visionary and the narrow Caymanian economy has being left behind. All of your concerns regarding the validity or lack thereof of the “trickle down effect” will be for not if we don’t have a prosperous and viable economy, one that generates a lot of foreign source income and employment, both local and foreign.

    Mr. Buffet’s diversified economic environment, the USA, even in the worst of times, makes thousands of new and very wealthy people every year. I’m going to suggest that he was thinking of those people when he made the statement that you are quoting.

    Cayman has always prospered because it either earned or attracted foreign income but the simple economic models of the 1970s are out of gas.

    The relaxed position that Cayman has on foreign investment in real estate, both personal and income producing, resulted in a long development boom that benefited many Caymanian investors and businesses and generally increased the quality of Cayman’s lifestyle.

    So in a way we have a successful and proven history of letting “Foreigners” own businesses in Cayman. The problem is that those businesses are only real estate based and we only benefit during construction and at the time of sale. After that they are just big pools of capital sitting on the ground which doesn’t produce any meaningful ongoing employment and economic benefit.

    I’m not proposing a tax on property, far from it, all I’m suggesting is that real estate development is not going to drive our economy forward and provide professional employment for our young and not so young Caymanians, yet we discourage foreign ownership in the kind of businesses that do. I think we have our thinking all turned around in this regard.

    Real estate development growth is stagnant and the profit potential has pretty much disappeared, and with our historical dependence on it, a gradual tightening of our economy is the result.

    Offshore finance is another area that provided strong economic growth for Cayman but the visible expansion and economic impact of that industry has slowed as well. Just look at all theempty office buidings in George Town.

    Its realistic to state that both of these industries have reached the top of the growth or yield curve; at least in so far as having a noticeable impact on our economy and youth employment goes, while tourism, once the pride of Cayman is traveling down the other side.

    We can’t just tread water and waitif we are going to provide jobs and incentives for all Caymanians as well as support the investments that have already here.

    As much as we nostalgically remember the old days when jobs and business opportunities were restricted to Caymanians, we forget that we then had a small stable labour pool that was easily consumed by our early growth spirit. Ironically it was foreign investment and foreign business ownership that provided all of those new jobs then and it will be foreign investment and foreign earnings that propels us forward.

    Now we have to find a professional way to be smarter, more inviting, attractive and wealth protective than the countries that we are competing with; at least for those businesses or industries that fit best with our long-term needs.

    If we pull that off our down will not be so down-and-out; they will be on their way up.

  8. PB says:

    Warren Buffet is a very old man – he has invested well and amassed a fortune, yet he has paid double and triple taxes by having his investments pay taxes, then taxes on dividends to Berkshire Hathaway which then pays dividends to shareholders who then pay taxes on the dividends – so his interests are already paying huge taxes.

    I’m surprised to see the remarks posted in this thread – people saying taxes are good? Saying that the Government can spend the money more wisely than the individual can? That’s rubbish!

    Remember, the Caymans flourished due to lack of taxes, and if taxes are introduced there will need to be a collection system – then a punitive system for those who don’t pay the taxes. Think of the massive cost of this collection and enforcement system, which is born by the taxes collected and is just wasteful and unproductive overhead.

    Keep the Cayman tax structure as it is, and control the budget through spending limits.



    • Anonymous says:

      You’ve got to be kidding me. 15% on his dividends is nothing. He has no "earned income" to speak of and probably hasn’t paid any capital gains tax in years on his massively appreciating billions of stock holdings.

  9. Anonymous says:

    Reading the many comments rejecting what Mr. Iton suggests is one of the most positive things I have seen regarding the future prospects of Cayman.

  10. EyesWideOpen says:

    No Trickle-down of wealth for Caymanians……

    Most of you have missed the point Andre is trying to make!!

    He’s merely tyring to oepn you eyes to the FACT that the wealth in Cayman is mainly staying at the top and contrary to what the past and present Govts have been telling us (that they are trying to look-out for the "small man"), that their trickle-down processes have failed to reach the Caymanians on a whole.

    Read the article again, particularly the point below……

    "Mr Buffett responded,  “The rich are always going to say that you know, just give us more money and we’ll go out and spend more and then it will trickle down to the rest of you. But that has not worked the last ten years and I hope the American public is catching on.”

    • Anonymous says:

      Actually I think that most readers do get what Andre is saying.  Most readers have the intelligence to recognise that the assumptions and the interpretation of Mr. Iton are simply wrong.

      The waste of public revenues by successive governments over the past 10 years and the uncertainty offered to investors by bad government decision making have created a climate in which people are unwilling to risk their savings and earnings. The way to increase the prosperity of Caymanians is to encourage people who have earned and saved money to spend and invest that money in the Cayman economy. Arguing that the way to increase prosperity is to take money from peoples savings/earning in order to give it to the government to waste is simply ridiculous. Taking even more money from the economy in order to waste it is the last thing that Cayman needs.

    • law says:

      I agree that it’s all about the greed – how much more you can get!

      But one thing concerns me about Andre; I hope he is not suggesting that the way to deal with capitalism is to start taxing everybody and the rich more than the middle/poor class. When you look at it, that is unfair. And I could see why some would call it theft. If you’re going to tax, make it a flat tax – across the board. 

      Also, do we really need to tax or do we need to create more jobs 

  11. Libertarian says:


    Open your eyes.
    Is there some government that you know that doesn’t “trickle down” its wealth on its citizens??? 
    Is there a government that you know that is not fueled by greed and portion of what it acquires goes back to the country? 
    Do you think that China doesn’t have a “trickle down” society? 
    Do you think that Cuba doesn’t have a “trickle down” society?  
    Does not the Venezuelan government return a portion of its wealth back to its people??? 
    Of course, you must be the only one here who does not trickle down what you make to your family and community. Think about what you are saying.  The world is run on individuals pursuing their destinies. And yes… for many people, getting rich or well-off is a result of ambition, hard work, creativity, and the desire to make a better livelihood not only for you but for others. 
    I will have you know that the greatest achievements of this world, has not come from governments! 
    Did government help Bill Gates create Microsoft? 
    Did government help Dart create foam cups and plates? 
    Was Henry Ford’s automobile industry a government invention? 
    You name one government that has contributed to the development of modern society? Look at how our government runs emergency customer care at the George Town Hospital? Did you ever wait for hours at emergency to be attended to by a doctor? Name one government that has created well-paid jobs and has not taxed and stole from the people? Name one government that has run a social program effectively? The record of history shows that the societies where the people are worse-off, are those societies that have been ran by governments with no regard for booming the economy through the private sector!
    And yes… Andre, the ills of capitalism are real. Many from the extremely wealthy clan don’t want to contribute or give to the less fortunate who can’t help themselves. It is true that you have some rich people who are evil and taken by vice and greed. It is true that you have corporations that exploit people, and use their wealth to manipulate politicians and the system in general. And yes… even some low-income Caymanians exploit their domestic helpers, threatening Immigration on them. Greed, self-centeredness, and ill-will against others come from the human nature. It is in Caymanian people too. 
    And there is really nothing one can do to change other people’s nature, but their own selves! The best one can do to make a positive difference in this world, is to with the wealth or little they have, promote peace, love, and goodwill to all mankind. But law can’t change human nature – only love!
    Whenever you had governments attempting to change other people, history has shown that oppression, persecution, totalitarianism on the masses was the result! A free and democratic’ capitalist country, my friend, with a small government that sticks to only the essentials  services of society like law and order, protecting the natural resources for the common good, and of course, ensuring that the market is fair for everyone, especially its own people – is the best right now we have for our future generation.
  12. Anonymous says:

    Andre, once again you are missing/camouflaging the main point – our fundamental problem is not public sector revenue, it is public sector extravagance and waste.

    It may come as a shock to you but the US economy and the Cayman economy are different.  I have no doubt that if anyone explained to Buffett the way that our recent governments have wasted tax revenues, Buffett would suggest cutting waste rather than simply giving the politicians more money to waste.

    The tax burdens on Caymanians would be less, and the job prospects of Caymanians would be better, if a reduction in government waste made possible a decrease in taxes and fees which would leave businesses with enough money to hire and spend.  

  13. Anonymous says:

     Absolutely right. "The rich get richer and the poor get poorer".

  14. Slowpoke says:

    I trust that you have had the pleasure of reading the incredible effects of the "trickle down" theory and its magnificent success in increasing wealth and benefits among the populace.



  15. nauticalone says:

    Once again i fully agree with you Mr. Iton….and Mr. Buffett.

  16. Alan Nivia says:

    XXXX So he is saying trickle down does not work.  OK I understand that as an argument.  But this is Cayman and we don’t have the option of raising direct taxation because we don’t have direct taxation and introducing it now would destroy Cayman’s main sources of income.  Cayman may have made what Mr. Iton considers a Faustian pact with the offshore financial service industry, but until he can offer us an alternative positive source of sustainable economic growth, there is no point in criticising the foundations of the fiscal revenue base.

    • Anonymous says:

      "Cayman’s main sources of income" are financial services and tourism.  Please explain why tourists would care about direct taxes.

      As for financial services, clients and service providers currently provide 60% of government revenue.  Please explain why they would not prefer the general public to pick up some of that tab?  Especially given that it is the general public of Cayman that elected the politicians that wasted the money, time after time after time.

      • Anonymous says:

        I’ll explain to you why tourists would care about direct taxes…

        If we lowered our outrageous duties and replaced them with some direct taxes, far more tourists would come here, and their money would go a lot further. Therefore they could do a lot more things and have a way better time here.

        Low income workers would benefit doubly. First, from the increased business to the tourism industry and second from the lowered cost of living. We need to give our young people a chance to rise out of crime and poverty. This isn’t another case of entitlement. This is about creating a system of taxation that is fair for everybody. Duties greatly favor the rich.

  17. Scrooge McDuck says:

    Yes, Mr. Buffett and Andre: it never was a viable excuse for greed. We are getting tired of being "trickled" on.