Charlie Munger: 'Bernie Sanders has basically won' on income inequality
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Berkshire Hathaway (BRK-A, BRK-B) Vice Chairman Charlie Munger on Saturday declared progressive Vermont Senator Bernie Sanders (I-VT) the victor in the nation's political fight over income inequality. The hot economy and loose monetary policy will end up narrowing the nation's wealth gap, Munger predicted.
"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 says.
"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 says.
President Joe Biden enacted a $1.9 trillion stimulus in March, and is pursuing nearly $4 trillion in additional spending to improve the nation's infrastructure and provide further support for U.S. households. Meanwhile, the Federal Reserve has kept interest rates near zero to help spur economic growth.
Speaking with NBC News, Sanders praised Biden for recognizing "the enormous crises facing this country and the degree to which people have been suffering as a result of a pandemic."
'The people screaming about it are idiots'
The remarks from Munger about Sanders contrast with critical comments Munger made in 2019 about two other progressive leaders: Queens Congresswoman Alexandria Ocasio-Cortez and Massachusetts Senator Elizabeth Warren.
Munger questioned the severity of income and wealth inequality, belittling the intelligence of politicians like Ocasio-Cortez and Warren who have drawn attention to the issue.
"I don't think [Ocasio-Cortez] knows who Adam Smith was,” Munger told Yahoo Finance Editor-in-Chief Andy Serwer. “The people screaming about it are idiots. It’s going to go away by itself."
It’s “a problem if enough politicians are screaming about it. That makes it a problem," he adds.
Biden has taken a number of steps to reduce income inequality. In a primetime speech to Congress on Wednesday, Biden called on corporate America to pay its "fair share," referring to a tax hike embedded in his $2 trillion infrastructure proposal that would raise the rate for corporations from 21% to 28%.
Plus, Biden proposed tax hikes on the wealthy that would pay for his $1.8 trillion American Families Plan, which includes universal pre-school, two years of free community college, and a host of other initiatives.
Those measures would come on top of the recent $1.9 stimulus bill, which provided $1400 checks to many Americans and provided a $300 federal supplement to weekly jobless benefits, among other measures.
Data released by the Bureau of Economic Analysis on Thursday showed that the U.S. economy grew at an annualized rate of 6.4% in the first quarter, buoyed by the stimulus and a gradual reopening.
The first-quarter data showed that consumer spending leapt at a 10.7% rate, owing to a massive influx of $2.36 trillion in household income.
While the stimulus has helped many lower- and middle-income Americans, the wealthy have also prospered during the recession — thanks in part to a heathy stock market and the fact that many industries like tech were unscathed by the coronavirus.
Overall, billionaires in the U.S. added $1.6 trillion to their net worth during the coronavirus outbreak, according to an analysis from Americans for Tax Fairness and the Institute for Policy Studies released on April 15. Berkshire Hathaway CEO Warren Buffett's net worth, now $103.7 billion, increased 50% during the pandemic, the report found.
The ultra-rich accumulated that wealth while tens of millions of workers have lost their jobs, exacerbating inequality that had already reached heightened levels before the pandemic.
Buffett's commitment to philanthropy
For nearly a decade, Buffett has been an outspoken supporter of tax increases for wealthy individuals.
In 2013, amid an economic expansion that brought strong investment returns but lagging wage growth, Buffett called for higher taxes on the wealthy, saying his tax rate shouldn’t be lower than his secretary’s.
Buffett, a Democrat, endorsed former Secretary of State Hillary Clinton in her 2016 presidential race and hosted a fundraiser for former President Barack Obama in 2011. Buffett spoke privately with Biden during the 2020 campaign but did not endorse him.
As Buffett’s net worth has grown, so too has his commitment to philanthropy. In 2006, at age 75 with a net worth of $44 billion, he partnered with the Bill and Melinda Gates Foundation to begin giving nearly all of it away. The Giving Pledge, which calls on wealthy individuals to give away more than half of their wealth, came about in 2010.
Today, more than 200 of the world's wealthiest people have made the pledge, among them Airbnb (ABNB) CEO Brian Chesky, Netflix (NFLX) CEO Reed Hastings, and Facebook (FB) CEO Mark Zuckerberg.
Update: This story has been updated to reflect that the Institute for Policy Studies co-authored a report about the wealth added by U.S. billionaires during the pandemic.
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