Admittedly, I have a difficult time editorializing around Ray Dalio’s missives these days.
Ray seemingly puts quite a bit of effort into what he writes, and his earnestness is unmistakable — it comes through in his written musings, his television cameos and in the “Ask Me Anything” sessions he conducts on Reddit.
I can’t lampoon somebody who’s earnest in the pursuit of knowledge. That goes double when somebody is genuinely keen on sharing what they discover along the way. Throw in Dalio’s openness to conversing directly (and respectfully) with random netizens, and satire is rendered wholly uncouth, even as the jokes are multitudinous (Dalio isn’t very adept at using paragraph breaks, for example).
That earnestness and disarming humility extinguishes my zeal for sarcasm, even when Ray makes sweeping claims that would sound ambitious even if they emanated from a suddenly reincarnated Aristotle.
Take Dalio’s latest. If you haven’t read it, it’s essentially a comparison between Joe Biden and FDR. Dalio isn’t the first to draw the parallel, but he is the first to begin by making the grandiose claim that through extensive study, he can say “that most everything that is happening now has happened many times before for basically the same reasons.”
Not even the most accomplished historian on Earth would make such a sweeping claim, and yet true to form, Dalio tosses it out casually as though the sheer grandiosity of what he’s just said didn’t occur to him in the slightest.
The rest of the first sentence is no less ambitious. Dalio claims to have studied “many cases” on the way to developing a “deep understand[ing]” of what he calls “the timeless and universal cause/effect relationships” that render the present indistinguishable from the past, when countless historical instances of the same events we’re currently experiencing unfolded for the same reasons.
Whether Dalio thinks this applies to all events or just big events isn’t clear, but he notes that because “the most important things that are happening now come along only about once a lifetime,” he had to study 500 years of history in order to get a firm grasp on it all.
That, in essence, is the setup Ray offered for his comparison between America’s reality in 2021 and what he calls “the most recent analogous period,” which for him is 1930-45.
There’s nothing proprietary about the charts Dalio uses to illustrate the point, and what he includes next are just verbatim quotes from Roosevelt and Biden. Given that, I don’t see any utility in recreating them or otherwise repackaging them. Instead, I’ll present them below as Ray did.
I do think this is a useful exercise. Irrespective of whether you, like me, find Dalio’s efforts to fuse philosophy, history and investing laborious and a bit too ambitious, the Biden-FDR comparison is likely to be a mainstay in the public discourse going forward, so the compare and contrast exercise is well worth a skim.
The Charts That Show the Analogue
Roosevelt & Biden on Taxation
- Roosevelt, 1935: “On the basis of these studies and of other studies conducted by officials of the Treasury, I am able to make a number of suggestions of important changes in our policy of taxation. These are based on the broad principle that if a government is to be prudent its taxes must produce ample revenues without discouraging enterprise; and if it is to be just it must distribute the burden of taxes equitably. I do not believe that our present system of taxation completely meets this test. Our revenue laws have operated in many ways to the unfair advantage of the few, and they have done little to prevent an unjust concentration of wealth and economic power.”
- Biden, April 2021 Speech to Joint Session of Congress: “It’s time for corporate America and the wealthiest 1% of Americans to pay their fair share. Just pay their fair share.”
- Biden Campaign Website: “As President, Biden will require corporations and the wealthiest Americans to finally pay their fair share. He won’t ask a single person making under $400,000 per year to pay a penny more in taxes, and will in fact enact more than one-dozen middle class tax cuts that will finally give working families the financial support they deserve.”
- Treasury Report on Biden Tax Plan, 2021: “The President’s Made in America tax plan is guided by [six principles, including] building a fairer tax system that rewards labor. In recent decades, the share of national income derived from labor has declined relative to that derived from capital. The plan would counter the incentives in our tax code that contribute to that trend.”
- Roosevelt, 1935: “Social unrest and a deepening sense of unfairness are dangers to our national life which we must minimize by rigorous methods. People know that vast personal incomes come not only through the effort or ability or luck of those who receive them, but also because of the opportunities for advantage which Government itself contributes. Therefore, the duty rests upon the Government to restrict such incomes by very high taxes.”
- Biden, April 2021 Speech to Joint Session of Congress: “20 million Americans lost their jobs in the pandemic, working- and middle-class Americans. At the same time, roughly 650 billionaires in America saw their net worth increase by more than $1 trillion…Let me say that again. Just 650 people increased their wealth by more than $1 trillion during this pandemic. They are now worth more than $4 trillion. My fellow Americans, trickle-down economics has never worked. It’s time to grow the economy from the bottom up and middle out.”
- Treasury Report on Biden Tax Plan, 2021, “Toward a Fairer Tax System”: “The labor share of national income has been declining for years, representing a worrying trend for workers and a contribution to rising income inequality…This trend has implications not only for the division between labor and capital income, but also for aggregate income inequality. Since capital income is disproportionately concentrated among wealthier taxpayers, tax preferences for capital relative to labor imply benefits for upper-income taxpayers relative to those with lower levels of income. The concentration in capital income is stark: in 2019, the top 5% of the income distribution earned just 26% of labor income, but 71% of capital income.”
- Roosevelt, 1935: “We have established the principle of graduated taxation in respect to personal incomes, gifts, and estates. We should apply the same principle to corporations. Today the smallest corporation pays the same rate on its net profits as the corporation which is a thousand times its size.”
- Biden, April 2021 Speech to Joint Session of Congress: “Recent studies show that 55 of the nation’s biggest corporations paid zero in federal income tax last year. No federal taxes on more than $40 billion in profits. A lot of companies also evade taxes through tax havens from Switzerland to Bermuda to the Cayman Islands. And they benefit from tax loopholes and deductions that allow for offshoring jobs and shifting profits overseas. That’s not right. We’re going to reform corporate taxes so they pay their fair share and help pay for the public investments their businesses will benefit from.”
- Treasury Report on Biden Tax Plan, 2021: “The President’s Made in America tax plan is guided by [six principles, including] requiring all corporations to pay their fair share. To ensure that large, profitable companies pay a baseline amount of taxes, the President’s plan would impose a minimum tax on firms with large discrepancies between income reported to shareholders and that reported to the IRS. It would also provide the IRS with resources to pursue large corporations who do not meet their tax obligations, reversing a trend toward fewer corporate audits.”
On inheritance taxes…
- Roosevelt, 1935: “My first proposal, in line with this broad policy, has to do with inheritances and gifts. The transmission from generation to generation of vast fortunes by will, inheritance, or gift is not consistent with the ideals and sentiments of the American people…I recommend, therefore, that in addition to the present estate taxes, there should be levied an inheritance, succession, and legacy tax in respect to all very large amounts received by any one legatee or beneficiary; and to prevent, so far as possible, evasions of this tax, I recommend further the imposition of gift taxes suited to this end.”
- Biden, August 2006 Senate Debate on Estate Taxes: “Every day our basic needs, from homeland security to our retirement savings to our children’s future—those needs are ignored. That is the setting, that is the background, those are the circumstances in which we are now asked to cut taxes on just 7,000 of the wealthiest heirs in our country—at a cost of over $750 billion in the first decade it is in effect. All of that will be borrowed. It is a transfer of $750 billion to the wealthiest two-tenths of 1% of Americans, borrowed from China, from Japan, from our own Social Security system. Somebody will have to pay that back. Our children and our grandchildren will pay that back. It is a transfer from those with no voice of their own in our system, a transfer to those whose wealth speaks the loudest. Under current law, the estate tax will affect fewer than 7,000 estates in the whole country by 2009. That year, a couple will be able to exempt a $7 million estate from taxes—a $7 million estate will pay no estate taxes. None.”