Jump to content

For Cal, T: Buffett Slams Obama Stimulus plan

Recommended Posts



Jul 09 2009, 11:10 AM by Catherine Holahan



Billionaire investor Warren Buffett has joined the chorus of prominent political figures and businessmen calling for a second stimulus.


The CEO of Berkshire Hathaway told ABC's Good Morning America that the first $787 billion stimulus didn't do enough to help the economy and included too many earmarks for politicians' pet projects.


"Our first stimulus bill . . . was sort of like taking half a tablet of Viagra and having also a bunch of candy mixed in," Buffett said in the interview, "as if everybody was putting in enough for their own constituents."


The call came after Buffett had praised the Federal Reserve's efforts to pump money into the economy in interviews on CNBC and Bloomberg television.


It also followed comments by officials in President Barack Obama's administration maintaining that the government would continue a second stimulus should the economy continue to deteriorate. However, the administration said it is not currently discussing a second aid package.


Vice President Joe Biden said earlier this month that the government had misjudged the depth of the recession and that it would be willing to take additional action in the future. World leaders indicated a second stimulus could be called for as well during the G-8 summit in Italy.


The call for a second stimulus may seem shocking given the amount of money already spent, lent or committed by the White House and the Federal Reserve in an attempt to pull the country from the brink of depression. An analysis by Bloomberg put the figure at $12.8 trillion.


That amount includes the stimulus package, bank and insurer bailouts, loans to the auto industry, U.S. Treasury purchases, money pledged to buy back bundles of troubled mortgage securities, funds committed to backing up the FDIC, and money earmarked for helping Fannie Mae and Freddie Mac restructure mortgages.


The reason for the incredible call for more public funds is the shocking cuts in consumer spending. Personal consumption has accounted for about 70% of the U.S. gross domestic product in recent years. It is the engine that our economy runs on. But it has stalled as Americans have lost their jobs and massive amounts of wealth.


More than $14 trillion has evaporated from Americans' net worth due to steep declines in property values and market investments during the past two years. That's in addition to the trillions that Americans are no longer earning due to record unemployment and under-employment.


"The consumer is tapped out," said Diane Shand, a director at Standard & Poor's covering retail companies. "They can't access the equity in their homes anymore, and a lot of it really has to do with the unemployment picture."


The unemployment rate is at a 26-year high of 9.5% and is expected to reach 10% before the year's end. More than 14.7 million people are unemployed. The number of folks struggling to find work jumps to 25.5 million after adding all the Americans who have either given up looking for work or are stuck in part-time or temporary jobs due to the unavailability of full-time employment.


Without a recovery in consumer spending, the economy will continue its downward spiral. The GDP declined about 5.5% in the first quarter of this year, due in large part to consumer cutbacks.


The government is hoping that private money will follow its public investments. In theory, funds for stimulus projects should flow to businesses spurring them to increase spending and create more jobs, ultimately leading to a recovery in consumer spending. But, so far, the economy hasn't seen much in the way of a consumer spending boost (though private money has flowed to the rescued banks).


That's partially because the government hasn't spent much of what it has promised. Only 10% to 15% of the $787 billion stimulus has been put to work. However, even that little amount appears to have spurred some positive sentiment. Consumer spending did rise about 0.3% in May on top of a 0.7% rise in April. That's certainly not a lot. But it wasn't a decline.


The fear is that all that money flowing from the government will ultimately prove insufficient to reverse the economy's negative trajectory. If the government doesn't have a plan in place to commit more funds to truly reverse the economy's course, some argue that any good from the current stimulus will be negated by continued high unemployment and depressed consumer spending.


One problem with pledging more funds is inflation. The more money the government promises to fight the recession, the more it will stoke concerns about inflation or stagflation: a period in which the dollar's value declines despite a lack of real economic growth. The risk of either inflation or stagflation could cause investors to demand higher returns to buy U.S. debt. The U.S. doesn't want to promise to pay even more in the future when the economy's growth is uncertain. The national debt is already at $11.5 trillion -- about $36,532 per person.



Link to comment
Share on other sites

Good read, though I wish I was more learned in the ways of Economics.


Warren Buffett sure seems like a Socialist/Communist to me...

Link to comment
Share on other sites

You know what I love about Buffet, he doesn't talk shit about any political party. "Earmarks for politicians pet projects". Basically saying both parties are a bunch of f'cks that have no clue what's going on.



For a psycho/crazy dude, you don't make much sense. But, I guess that is to be expected. Ramble on.

Link to comment
Share on other sites

WHo cares what Buffet thinks. Most of the money of the FIRST hasn't been spent yet. WTF?


But he does have some good songs, like the one with Alan Jackson... :rolleyes:

Link to comment
Share on other sites

Vice President Joe Biden said earlier this month that the government had misjudged the depth of the recession


You really think so Joe? 15 million out of work, and your boss will bitch and say he inherited this problem.


Maybe they need to take a look at who is chairing all these oversight committees if anyone is. (Bwarny Fwranks)


Meanwhile back at the ranch Obumly and the Democrat $penders are printing more cash to fund their pet projects.

Link to comment
Share on other sites

I agree with Buffett here and was arguing last night with some colleagues that this wont be enough, so its interesting to read Buffetts response.



I personally think the bailout should be something like 100 trillion. Not 1 trillion. If you believe in the premise behind the stimulus package, don't piss in the wind with the 1 trillion. Blow the doors wide open with an overspending in all sectors.







Link to comment
Share on other sites


This topic is now archived and is closed to further replies.

  • Create New...