"If the individuals on the Forbes 400 list of richest Americans pledged half their net worth to charity, that would amount to $600 billion"
Perspective: The US national debt is increasing by over $4b per day. If the $600b was used just to keep the debt from increasing it would last less then 5 months.
When considering that the national debt is directly related to inflation, this"$600 billion" might not be, as it is "their net worth". The public debt is $8.63 Trillion and this pledge could reduce that significantly, boosting the dollar and reducing the debt increase rate a corresponding amount.
On the other hand, maybe I don't understand what I'm talking about, and if so, please correct me.
> When considering that the national debt is directly related to inflation
Actually, it's not. Inflation is related to interest rates and the "value of the dollar", both of which affect our ability to pay off the debt, but the debt itself, the number of dollars owed right now, is independent of inflation.
> this pledge could reduce that significantly
It's less than 10% of the admitted debt, $8T, and that number is significantly less than the unfunded liabilities (SS, Medicare that folks think that they have pre-paid).
And most of those folks are giving their money to charity, not to govt, so it's not providing govt revenue that can be used to pay off govt debt.
The debt is not indexed to inflation or GDP. So, 13.3 Trillion * 3% = ~400Billion per year so an 400B "increase" would represent zero increase in inflation adjusted debt.
In other words if the debt increased 0$ in a given year we would have effectively paid off ~3% of it.
PS: The actual increase in debt over the last few years has still been ridiculously fast. Defense-related expenditures outside of the Department of Defense constitute between $216 billion and $361 billion in additional spending, bringing the total for defense spending to between $880 billion and $1.03 trillion in fiscal year 2010.[7] (http://en.wikipedia.org/wiki/Military_budget_of_the_United_S...) Basicly we are putting the entire DoD budget on Credit Cards.
"The public debt is $8.63 Trillion and this pledge could reduce that significantly, boosting the dollar and reducing the debt increase rate a corresponding amount."
Wouldn't it be funny, if at the end every nation/bank has the same debt to each other?
If a rich person gave 50 percent of his money to the US Treasury, it would be the equivilent of a 50 percent asset levy on the money. I suspect a generally-imposed 50 percent levy could be regarded as an economically-destructive thing. A specifically-imposed one would be the same, on a smaller scale.
It comes down to whether the billions of dollars fund businesses or bureaucrats.
I'd MUCH rather that they pledge to donating half of their wealth to economic development. We are in desperate need of investment capital here at home. Wouldn't that $600B be better spent investing in alternative-energy and other high growth fields?
We've given these folks huge tax breaks with the idea that they'd reinvest that money in our economy. The article is somewhat light on details about where this money ultimately ends up, but I firmly believe that it's best spent helping tomorrows billionaires (all over the world) get their start.
A lot of what modern relief organizations are doing these days is called "capacity building", where instead of just airlifting American doctors into Haiti to bandage up the injured on a short-term basis, they work on creating more and better Haitian doctors.
The Gates Foundation, for example, has a strong focus on education, which is all about "teaching boys and girls to fish" and is really a prerequisite to a strong economy.
I'd like to see this money used to establish a scholarship program for struggling countries. The first wave of students is brought to the US, Canada, UK, France, Japan, etc. and taught a range of subjects with a mandatory teaching course added on, the only contingency is that they return to their own (or another underdeveloped country) and remain there for a minimum duration of X years so we're not just adding a new migration path. The second wave (in say 5 years) is an in-country scholarship where this new generation can be taught by the first wave (remember 1 student /= 1 teacher, however you don't need 1 teacher to teach 1 student), those that didn't become teachers will likely be establishing businesses or supporting their local economy.
A significant portion of the scholarships should also be going to fund apprenticeships to get people certified as competent electricians, plumbers, brick layers, mechanics, etc. There's no point putting someone through university if there's going to be no one around to help build a university in their country, or their business office, etc.
One of the struggling points of our own economies is that we're vastly short handed in the skilled trades to the point that many countries (Australia) basically hands out citizenships to people with these skills. It would be asinine to play economics and screw up right off the bat. We need to educate in controlled proportions from the top and to the bottom of our own skill ladders.
I know people who are incredibly smart who can't use a hammer. Who would build their house, repair their roof, reside their property, replace their windows, etc. We're talking about regions with a high proportion of natural disasters, and they'd need a good supply of skilled workers to ensure a tragedy like Haiti doesn't happen because buildings aren't constructed to modern codes.
Here in Kenya there was such a program in the 60's and was known as the "Kennedy Airlift".One of the earliest beneficiaries was Barrack Obama's dad. The other notable beneficiary was the 2004 Nobel Peace Prize winner Prof. Wangari Maathai. The program seems to have petered out after the end of the cold war.
Many of those whose studied under the program came back to Kenya when the country needed them most.
Is money better spent feeding/clothing a bunch of Africans and preventing aids _or_ on research, bio-engineering, space/ocean exploration, education etc. here at home?
Which one is short term and which one is long term?
As a Kenyan who falls under the OP's definition of "a bunch of Africans" I do not want American philanthropy to "feed or cloth" Africa.
Most African economies are agricultural and it is therefore alarming that the EU uses 40% of it's budget(about 48B Euros annually) on agricultural subsidies. The US uses about $20B every year on the same.Ending these subsidies would enable Africa to export more, buy more products from the US and Europe as well as form the basis for industrialization.
We need more trade and less aid. Is that asking for too much?
Farm subsidies are a serious inefficiency, yes. But I can't help feeling that getting rid of them would be worse, because they're there partly for the same reason many other inefficiencies exist: risk mitigation.
Nobody wants to put all their eggs in one basket, especially if it's someone else's basket. And from what I hear of high-yield food production, the good baskets all have problems down the line. Meat has disease and animal rights activists, fish has chemical pollution and overharvesting, fruit has pollination and insecticide issues, grain has crop rotation neglect and nutritional deficiencies.
Add to that the issues global trade is facing, such as rising fuel costs, treat of piracy, troublesome weather, looming threat of magnetosphere and solar interference, and politicians, and you can understand why I'd be reluctant to designate Africa as the world's breadbasket. Perhaps I've just watched too much TV, but food is one of the last things I want outsourced.
This sounds great in principal, and ending American and European food subsidies would be great for Africa. Additionally, food subsidies distort the market by, for example, making corn syrup cheaper than sugar in the US.
The problem is that many Americans (I don't know as much about Europe) aren't actually that wealthy. Without food subsidies, our food quality would probably increase, but so would our costs. Poor Americans are overweight today because the distorted food costs make it cheaper to eat processed food (that is more expensive to make overall) than to eat basic fruits and veggies and grains. Without subsidies, they would be starving, or at least calorie deficient.
Nixon put in our current system of subsidies because "food should never be an issue in a presidential race". And since then, it hasn't. America may be wealthy, but the wealth is very unevenly distributed. Without social programs, many of our people would be starving as well.
I respectfully disagree. The same prophesies of doom were advanced when in 1984 New Zealand's Labor government took the dramatic step of ending all farm subsidies.
Productivity and efficiency have increased much faster than when subsidies were in place.
And one result of those subsidies being cut is the US erecting trade barriers to protect US dairy farmers from the now hyper-competitive NZ dairy farmers.
is a bunch of money better spent investing in US or creating stronger economies that can actually buy what is produced there? The post WWII marshall plan comes to mind.
The continued existence of the entire human race may depend on space exploration and subsequent colonization. One comet or black-swan type disaster could wipe out humanity as a whole. This is not without precedent (dinosaurs).
The ongoing space exploration efforts will also serve to inspire up and coming young scientists. Their efforts will help to advance technologies across the board.
In response to this reply:
Ok, I'm not the original poster, but here goes.
The continued existence of the entire human race may depend on space exploration and subsequent colonization. One comet or black-swan type disaster could wipe out humanity as a whole. This is not without precedent (dinosaurs).
Each time we leave this planet we punch a whole in our ozone layer that can't be repaired! Some things were meant to be left alone. Simple education like teaching man to fish and read (not like our socialist education system here in America) will improve life and decerease deficits on this earth! Socialism is not the answer!
I am sure you will be happy if Obama spent all tax dollars in making sure world doesn't end in 2012 (after all, it could wipe out humanity as a whole) than fixing health care, education and so forth. I am not against space exploration or anything, I just believe saving lives today is far more worthwhile than worrying about the black-swan type disaster that could happen.
Sounds straight out of science fiction, I'm not saying that this would never happen but personally I'd rather live in the present rather than be worrying about something that may never happen in the near future.
>Is money better spent feeding/clothing a bunch of Africans and preventing aids _or_ on research, bio-engineering, space/ocean exploration, education etc. here at home?
I had always had more respect for Bill Gates than anybody because of his contributions for welfare of humanity. Now, I have 39 more in the list. This is just awesome. I hope there were more people like them and you don't have to be a billionaire to give back to the world. Keep up the good work.
I think perhaps HN readers don't know that Sallie Mae is the quasi-private entity that originates a large portion of student loans in the US. http://en.wikipedia.org/wiki/SLM_Corporation
The joke is that he is $50,000 in debt, so half his net worth is -$25,000, so he will donate that debt to the United Way.
I thought it was funny in the "clever-funny" way that usually garners upvotes.
While 25K is nothing compared to what these billionaires might donate, it's still a lot of money and the United Way would be happy to accept your funds.
It also opens up the discussion of what burden 'normal' folks assume when their most basic needs are taken care of. How many HN readers donate at least 10% of their earnings?
I was slightly disappointed that the article made no mention of the fact that where you give your money is probably more important than how much you give, that the current charity market has multiple orders of magnitude differences in return on investment -- ie in how much human suffering can be alleviated per marginal dollar.
I'm sure Gates and Buffet already understand this well, and have said so, but I wish it were making it into the coverage.
Yea, Ellison's my biggest surprise there. I'm sure Jobs & 3 googlers would join the list at some point. But where the fuck is Ballmer!? He pretty much got his un-deserved billions handed to him.
Say that the value of money holds and that this goes forward without corruption or inefficiency. You still are looking at a situation where a huge amount of money needs to be invested in a such a way as to return more than it originally was. If it takes me 40 years to build $1B in wealth, what makes me think I can efficiently or intelligently deploy that amount back into "society" or "the community" in far less time? If I band together with other $1B people, doesn't that bring even more competition to the give-it-all-away party and make my job even harder?
> what makes me think I can efficiently or intelligently deploy that amount back into "society" or "the community" in far less time
It's simple to invest billions of dollars with the intention of increasing your wealth: you hire people at some well-respected financial institutions and pay them a good amount to do it for you. (let's overlook recent history here)
In the same way, there are many excellent charitable and non-profit institutions that have the infrastructure and knowledge in place to turn monetary investments into social good.
Some material things make my life more enjoyable; many, however, would not. I like having an expensive private plane, but owning a half-dozen homes would be a burden. Too often, a vast collection of possessions ends up possessing its owner. The asset I most value, aside from health, is interesting, diverse, and long-standing friends.
My favorite is from Larry Ellison, who basically says "Warren Buffet told me to write this, so I did." That's what I inferred from his message, which is pure Ellison.
AFAIK, he's been quoted a number of times in the past saying things to the effect of "I don't want to leave that much to my kids" i.e., most of it will go to charity anyway.
Nice PR for the billionaires involved, but I doubt this project changed any of their plans. The article states:
"The pledge is a moral commitment to give, not a legal contract. It does not involve pooling money or supporting one cause or organization. It's up to each person who signs the pledge how to divvy up their wealth."
Also, reading the pledge letters, it becomes clear that these folks won't be giving away their fortunes today or tomorrow, it's about what happens to the remainder of the funds after they die. For all we know, they could've spent it all on hookers by then.
None of this money will go towards empowering people. It will be used to reinforce the status quo. A lot of people will get suckered by the publicity, and they will buy into how this kind of movement can change the world. Meanwhile, they will continue to be rice pickers serving their billionaire overlords.
I don't buy any of this. What charities are going to handle this kind of money without the majority of it being misappropriated? This sounds more like a set up for a giant scam and huge distraction than anything that might actually be useful to other human beings.
The Rockefeller foundation funded the argonomists behind the green revolution, which has hugely improved world nutrition and has been credited with saving more than a billion lives.
I think that's a terrible attitude to have. The Gates foundation has done great work and I'm sure the Gates' and Warren will do their best to ensure that the money they donate goes a long way.
I hope they'll give some of it away while they're still alive, along with a significant effort in time and effort to ensure it's well applied. And with an open enough mind to identify and recognize the value in things outside of "mainstream business" (e.g. "pure" R&D as well as the public domain and public property (e.g. libraries, as an an old school example)) -- something I assume they mostly have or they would not have achieved such levels of success.
We need enabled intellectual prowess as much as outright cash.
The bottom line is what the money actually does in the end. It is much more difficult than most people assume to help people or solve problems with money.
Pulling that much money from where it is invested now means less money for startups, etc. It could easily be a net loss to society to have that funding diverted to charities unless they were some pretty awesome / above average charities.
This is admirable, but I'm a bit worried that a lot of donated money will fall into some black hole. Money matters, yes, still I would much prefer successful people donating their smarts to the world instead of their money.
that really gives hope. We are at a tipping point of selflessness. At the infinite limit Selfessness is our best self interest (I help people so that one day when I would need help other do the same)... for the moment, it is still an asymptote which requires a leap of faith.
So I have a question - doesn't this effectively take billions of dollars that was (via investment) essentially going to capital expenditures to increase productivity overall and make it go instead to consumer expenditures? Doesn't that make the country worse off overall, despite helping a few people in the short run?
I used to paint all the rich with the same brush. When reading the Forbe's list and the astronomical numbers I would be at first amazed, then jealous and then think of them as thief's and cheats.
Although I still think that the wealthy have a vastly disproportionate influence over government and at times to the expense of the greater public and that many of the super rich would short the public to increase their bottom line, reading the letters written on http://givingpledge.org has entirely reformulated my perception. I am now much more likely to give any rich person the benefit of the doubt and even perhaps view them slightly favourably rather than default to their status being illegitimate.
I have been inspired and it is absolutely amazing to see what the captains of industry are doing with their wealth. There were many of them committing 90%, 99% of their wealth, even to die broke. Not only so but committing their time and experience too. Some of the most experienced and I would think of intelligence individuals dedicating themselves to such great causes as Socratic methods of teaching, many scholarships, medical research, clean water, libraries, homeless, social programmes for the young... I think is very inspiring and motivating to become rich.
What is inspiring also is reading things such as Greek immigrant, orphanage, all our worth at the back of a Ford's car, an average American.
There is much that can be improved with the working of democracy, but with people like these I have faith in that country and trust much to be good.
I can now once more view them as role models. They are great people doing great things and I am inspired to become as great if not more.
They OWN the fg charities. This is more consolidation of power in the hands of the same people while also giving them great PR. They are having a laugh at you.
Good stuff. Could we immediately stop taking taxes from anyone who takes this pledge? Considering the high percentage of the government that's full of corrupt and incompetent bunglers running questionable programs, I have immensely more faith in talented and driven people deploying their resources better to improve the world. The idea that $300M would go into the U.S. government sending "aid money" directly to a dictator's government in Africa instead of Gates deploying it to wipe out malaria is no good, for instance.
Easy to say for a guy who built his wealth starting with an insurance company, which uses government regulation to make most of its money. Wealthy people put their money into the insurance company because life insurance payouts aren't taxable but estate taxes are. Then Buffet's insurance company gets to invest that money in low risk bonds to get basically free money before paying it out. This only exists because of insurance company lobbying - it only adds friction to the system and wastes time and resources, while insurance companies get rich extracting money from the system. This is how Buffet built much of his starting capital.
Then he keeps most of his earnings in the holdings company, and only occasionally pays capital gains. The guy's gamed huge loopholes in the U.S. tax system his whole life, and then has the audacity to say that "the rich" should pay more taxes? Physician, heal thyself.
Edit: Reply instead of downvoting? There's a bunch of not commonly known facts in this comment and it's getting some downs, a non-fact progressive viewpoint is getting some ups... that's got to be the most disappointing thing about HN lately, the trend towards up/downvoting based on politics and not content in a comment.
And what should he do? He plays the system that's there. At least he's honest enough to say the system that's there is tilted in his favor. But, I do ask the question seriously? Run for government? Fund progressive candidates who would raise tax on higher incomes?
Stick to business and stay out of trying to be a folk hero? Or pay higher tax rates voluntarily to set an example? Campaigning for a tax increase when a lot of his money came from helping people use a tax loophole created by his industry doesn't seem particularly righteous.
That does nothing to solve the overall problem, though. It would give us back Buffett's taxes, but they pale in comparison to the aggregate taxes being avoided by the thousands of other super rich.
As a businessman, he's required to exploit these loopholes, much like a lawyer is required to defend a client they know to be in the wrong. What makes Buffett special is that he, unlike so many other super rich, is choosing to publicly draw attention to the system they all know to be broken.
Also the Gates family seems honest about it too. Bill Gates Sr. (co-chair of the Gates foundation) also advocates changing tax policy, on the logic that every software or biotech company benefited from federally funded research, which they got for free, not to mention those just renting office space to them.
Theoretically that makes sense, but it doesn't address the real issue. If you cut taxes for the rich, everyone else just pays more, unless you directly address government inefficiency/corruption. Until that's done, no amount of tax cuts or tax hikes will make a smidge of difference.
Chances are these billionaires are pledging to make these donations specifically to avoid taxes. I agree that the government would probably waste the tax money anyway, but ultimately the government needs some way to pay off its debt, and taxing the rich makes more sense than expecting the middle class to foot the bill.
Of course if these billionaires put significant amounts of money toward various respectable aid programs it may reduce the amount that the government needs to spend, allowing it to direct more money toward paying off the debt.
This is a common misconception about donations. Donating money never makes you better off financially because donations are eligible for tax deductions, not credits.
Choosing where it goes is a cool benefit. It's like you can pay a smaller percent and they will choose, or you can pay a bigger percent but you get to choose where it goes? It's very possible that I'm totally misunderstanding the rules.
That's just brilliant. Lets give people who have more money than they can spend a mechanism by which they can (a) remain wealthy and (b) get out of paying taxes ever again. That will be especially good because the top, say, 30% probably pay more in taxes than the remain 70% have.
You're not under some silly impression that if the government suddenly had less money that they would cut spending are you?
Perspective: The US national debt is increasing by over $4b per day. If the $600b was used just to keep the debt from increasing it would last less then 5 months.
http://www.brillig.com/debt_clock/