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Old 01-22-2013, 02:08 PM   #1
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Buffett: U.S. debt on its own ‘not a problem’

NEW YORK (MarketWatch) — Billionaire Warren Buffett believes the federal deficit should be stabilized in relation to U.S. economic growth, but that the nation’s $16.4 trillion in red ink is not trouble in and of itself.

“It is not a good thing to have it going up in relation to GDP, that should be stabilized, but the debt itself is not a problem,” the CEO of Berkshire Hathaway said in an interview broadcast Sunday on the CBS “Sunday Morning” news show.

The nation’s debt is “a lower percent of GDP [gross domestic product] than it was when we came out of World War II. You’ve got to think about it in relation to GDP,” added Buffett, a vocal advocate for increased taxes on the nation’s wealthiest, a stance he alluded to in the broadcast.

“I would say in a country with $50,000 of GDP per person, that nobody should be hungry, nobody should lack a good education, nobody should be worried about medical care, you know, nobody should be worried about their old age.”

But the 82-year-old Buffett hastened to add that he wasn't advocating shared wealth to the point of erasing a motivating force for innovation, with Buffett saying his stance does not mean “looking for equality results.”

Listing the co-founders of Apple Inc., Hewlett-Packard Co. and Microsoft Corp., Buffett said, “You want great inequality results; you want the Steve Jobs to be working in those garages, or the Dave Packards or Bill Gates, or you name it. But you do not want anybody going to bed hungry or having medical care denied to them or just the basics of life.”

As for the discouragement Americans might feel in looking at the political bickering and persistent stalemates on Capitol Hill, Buffett sounded an optimistic tone, saying “what is right about America just totally dwarfs what’s wrong with Washington. 535 people are not going to mess up 315 million over time. I know it.”

http://www.marketwatch.com/story/buf...lem-2013-01-20
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Old 01-22-2013, 02:25 PM   #2
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I can agree with some of his statements
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Old 01-22-2013, 03:47 PM   #3
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Someone should probably tell Mr. Buffett that it is ridiculous to compare the current state of the country to WWII, when we had a wartime economy and the American people, en masse, voluntarily gave up civilian consumption in order to contribute to the war effort.

The debt can easily become a huge problem, especially once interest rates rise to their historical norms.
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Old 01-22-2013, 04:28 PM   #4
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Someone should probably tell Mr. Buffett that it is ridiculous to compare the current state of the country to WWII, when we had a wartime economy and the American people, en masse, voluntarily gave up civilian consumption in order to contribute to the war effort.

The debt can easily become a huge problem, especially once interest rates rise to their historical norms.
+1

90-95 percent of the nation's federal budget went to the war effort in 1943 and there were no social programs like we have today.

And in WW2 we were fighting for our survival. Debt was not a problem because if we lost the war, we would not have to worry about repaying it.
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Old 01-22-2013, 04:33 PM   #5
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Someone should probably tell Mr. Buffett that it is ridiculous to compare the current state of the country to WWII, when we had a wartime economy and the American people, en masse, voluntarily gave up civilian consumption in order to contribute to the war effort.

The debt can easily become a huge problem, especially once interest rates rise to their historical norms.
This. Also, is anyone surprised that Buffet would make these claims given his tie to the Obama administration?
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Old 01-22-2013, 04:42 PM   #6
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This. Also, is anyone surprised that Buffet would make these claims given his tie to the Obama administration?
Did you ever think that some people form political allegiances based on how they think, rather than think based on their political allegiances?
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Old 01-22-2013, 04:54 PM   #7
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Did you ever think that some people form political allegiances based on how they think, rather than think based on their political allegiances?
Yes.. people often align themselves with like minded individuals. But, in this case, the administration reached out to Buffet for support in years past.. he has formed a pretty close relationship with Obama so I don't think it's outrageous to think that it would impact his political philosophy.

It's either a slip of the mind or a political move.. Buffet can't actually believe this.
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Old 01-22-2013, 04:55 PM   #8
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I think he has some decent points in there, but our economy now is nothing like the economy of WWII & the post-war era.

This is a decent article with regards to his discussion of debt-to-GDP ratios......the keys to getting out of it are this according to the IMF:

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1. Support growth while cutting your debt. Fiscal consolidation (i.e. budget-cutting) doesn't work well if an economy isn't growing. "Structural issues need to be addressed and monetary conditions need to be as supportive as possible," the fund says. The U.K. in the 1920s kept monetary and fiscal policy too tight, exacerbating its debt problem even after it created a primary surplus (that is, excluding interest payments). Japan in the 1990s needed to overhaul its banking sector before it could control its debt.

2. Focus on long-term measures, not temporary fixes. Belgium and Canada proved to be more successful than Italy in reducing their debt because they focused on structural reforms to their economy rather than short-lived measures.

3. Be patient. Deficits were quickly reversed only in post-war periods, the IMF found. "Widespread fiscal cutbacks, retreat by the private sector, population aging, and the aftermath of the financial crisis mean even countries that follow the guidebook will have to moderate their expectations for reducing debt," the fund concluded.
http://blogs.wsj.com/economics/2012/...ebt-economies/

Now, getting politicians to do something, well......I won't hold my breath.
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Old 01-22-2013, 07:35 PM   #9
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I think he has some decent points in there, but our economy now is nothing like the economy of WWII & the post-war era.

This is a decent article with regards to his discussion of debt-to-GDP ratios......the keys to getting out of it are this according to the IMF:



http://blogs.wsj.com/economics/2012/...ebt-economies/

Now, getting politicians to do something, well......I won't hold my breath.
I'm a fan of your responses. Cool and logical without insult.
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Old 01-22-2013, 07:47 PM   #10
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Yes.. people often align themselves with like minded individuals. But, in this case, the administration reached out to Buffet for support in years past.. he has formed a pretty close relationship with Obama so I don't think it's outrageous to think that it would impact his political philosophy.

It's either a slip of the mind or a political move.. Buffet can't actually believe this.
Don't confuse what you believe with what Buffet believes.
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Old 01-22-2013, 08:01 PM   #11
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I'm a fan of your responses. Cool and logical without insult.
You've also described my testicles. Should I send you an autographed picture?
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Old 01-22-2013, 08:15 PM   #12
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Buffett agrees with me.
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Old 01-22-2013, 08:33 PM   #13
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Originally Posted by busa article
I would say in a country with $50,000 of GDP per person, that nobody should be hungry, nobody should lack a good education, nobody should be worried about medical care, you know, nobody should be worried about their old age
1.) The debt is a problem.

2.) This is the first time I have found corroboration with my own hand calculation. I took the entire US income base and divided it by the total taxpayers - and it comes out to ~$55k/year. That is hardly a great case for "redistributing the massive wealth of the USA".

Like I said many times over, I don't think we can just "equalize" our current economy into prosperity. We are going to have to rebuild a middle class that MAKES something to increase our GDP. We can't have 50% of the population working unskilled, minimum wage jobs. And we can't make a minimum wage job worth $80k/year. This is a tough thing to reinvigorate, after we have wh()red ourselves out to globalization.

I don't think the income disparity contributes significantly to our economic woes. I would gladly welcome good references that are contrary to my theory.
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Old 01-22-2013, 08:39 PM   #14
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You've also described my testicles. Should I send you an autographed picture?
You're such a weird man...care for a beer if I am ever up your way?
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Old 01-22-2013, 09:10 PM   #15
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I'm still trying to figure out why he makes these comments. The overwhelming majority of people in finance and wall street strongly disagree with him. It must have to do with his age Far as I know for America to be innovative people have to be motivated.
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Old 01-22-2013, 09:11 PM   #16
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You're such a weird man...care for a beer if I am ever up your way?
I'm always up for a beer. The more the merrier.
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Old 01-23-2013, 10:59 AM   #17
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I'm a fan of your responses. Cool and logical without insult.
same to you.

I try not to sling insults, but sometimes it's hard not to, lol. I imagine most of the people in this sub-forum are fairly reasonable in real life.....hell, I think I would buy almost anyone a beer in this subforum.
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Old 01-23-2013, 11:17 AM   #18
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Someone should probably tell Mr. Buffett that it is ridiculous to compare the current state of the country to WWII, when we had a wartime economy and the American people, en masse, voluntarily gave up civilian consumption in order to contribute to the war effort.
Well, we have been in a wartime economy for much of the last decade, two wars in fact with both being longer than WWII, except that they were essentially put on a credit card by the previous administration that, rather than asking us to give up consumption or pay greater taxes to support those great expenses, did just the opposite: significantly cut taxes (especially on those best able to shoulder the added financial burdens of two wars) and extolled consumer spending to support/prop-up our economy during that period.

As for the rest of Buffett's statements, I think, in full context, they are basically true, but only in full context. He, as evidenced by his extensive wealth, does demonstrably seem to know a thing or two about money, finance and economics, so I don't think his comments can be so readily brushed aside as say those of a typical armchair pundit.

Quote:
1.) The debt is a problem.
Yes, if, as Buffett mentions, it becomes an overly large portion of our GDP (full context).

Quote:
2.) This is the first time I have found corroboration with my own hand calculation. I took the entire US income base and divided it by the total taxpayers - and it comes out to ~$55k/year. That is hardly a great case for "redistributing the massive wealth of the USA".
Yes, if that entire U.S. income base actually was spread out more or less evenly. Of course, we know that is far from the case and indeed, the level of income inequality is surpassing levels of even the Gilded Age. The wealth and income of our nation, rather than being redistributed is, rather, becoming ever more concentrated to the very highest of economic elites.

Quote:
Like I said many times over, I don't think we can just "equalize" our current economy into prosperity. We are going to have to rebuild a middle class that MAKES something to increase our GDP. We can't have 50% of the population working unskilled, minimum wage jobs. And we can't make a minimum wage job worth $80k/year. This is a tough thing to reinvigorate, after we have wh()red ourselves out to globalization.
I would tend to agree here a bit, that perhaps relying solely/mostly on an overly progressive tax code to create a more equitable sharing of our country's economic bounty is perhaps attacking the problem one step too far down the line. Rather, how might we better assure a more equitable sharing in the first place rather than trying to equalize things after the fact? We might start looking at our policies of the past when there was less income disparity (post WWII) or decreasing rates of income disparity (Clinton administration). What were our economic policies and tax rates then? Of course, the world is not the same and this is a very complex economy, but that might at least serve as a reference point in the discussion.

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Old 01-23-2013, 11:20 AM   #19
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Well, we have been in a wartime economy for much of the last decade, two wars in fact with both being longer than WWII, except that they were essentially put on a credit card by the previous administration that, rather than asking us to give up consumption or pay greater taxes to support those great expenses, did just the opposite: significantly cut taxes (especially on those best able to shoulder the added financial burdens of two wars) and extolled consumer spending to support/prop-up our economy during that period.
The two are vastly different types of wartime economies. During WW2 a large majority of our Federal Budget went to defense spending, not to mention that most industries were re-purposed to produce items for the war. We do not have anything close to that currently. During WW2 every citizen felt the strain of the war effort. Currently? Not so much.

I do agree with the fact about taxes. We had to pay the piper for our new debt, whereas now no one wants to seem to bite the bullet.
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Old 01-23-2013, 09:59 PM   #20
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As for the rest of Buffett's statements, I think, in full context, they are basically true, but only in full context. He, as evidenced by his extensive wealth, does demonstrably seem to know a thing or two about money, finance and economics, so I don't think his comments can be so readily brushed aside as say those of a typical armchair pundit.

Yes, if, as Buffett mentions, it becomes an overly large portion of our GDP (full context).
I contend that GDP is not a measure of tax revenue, and thus comparing debt to GDP is not valid. Example - the last 4 years when GDP has grown but tax reciepts have fallen sharply. The interest payments on the debt is a problem when interest rates rise (as other astute member posted). Right now, we divert 10% of our tax revenue to the debt. When interest rates climb, the amount we spend on the debt will consume more of the tax revenue, and there is consequently less money to spend on "government services". If you want to talk about our government having a revenue problem, carrying debt is a serious liability - regardless of what Lord Buffet says.

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Yes, if that entire U.S. income base actually was spread out more or less evenly. Of course, we know that is far from the case and indeed, the level of income inequality is surpassing levels of even the Gilded Age. The wealth and income of our nation, rather than being redistributed is, rather, becoming ever more concentrated to the very highest of economic elites.
Can you explain to me how income inequality harms our economy?

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I would tend to agree here a bit, that perhaps relying solely/mostly on an overly progressive tax code to create a more equitable sharing of our country's economic bounty is perhaps attacking the problem one step too far down the line. Rather, how might we better assure a more equitable sharing in the first place rather than trying to equalize things after the fact? We might start looking at our policies of the past when there was less income disparity (post WWII) or decreasing rates of income disparity (Clinton administration). What were our economic policies and tax rates then? Of course, the world is not the same and this is a very complex economy, but that might at least serve as a reference point in the discussion.
Again, what benefit is distributing the wealth? As I calculated, "equality" equates to around $55k/year - which I think hardly makes everyone powerful consumers. And what we would be consuming with our redistributed wealth? Foreign products? I don't think redistribution of our income would bolster our economy. I think we need to improve domestic production. I welcome critique to my thinking.
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