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Warren Buffett Addresses Simpson-Bowles

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In an interview with CNBC's Becky Quick, Warren Buffett discussed the Simpson-Bowles approach to deficit reduction.

Becky Quick: When Erskine Bowles was on with us the other day, he said [the sequester] was three times stupid, because it’s dumb cuts, the way you use it, and it’s not attacking what we should be attacking, which is really the entitlements.  Where do you come down on this argument?

Warren Buffett: Well, Congress originally set it up and said, we’re going to propose something so dumb that we can’t possibly do it, and then they did it.  So it is a stupid way to enact a cut in the budget, and like I say, it was designed to be stupid.  Congress at some point will face up to the fact that it’s their job to design a responsible, long-term budget plan and some things immediately that make sense in terms of where the economy is now and where expenditures should be made, where taxes should be raised and whatever the case.  This business of getting it in the middle of the night in some crazy compromise and then letting things like the sequester kick in, we deserve a Congress better than that.

BQ: The biggest issue that you’ve talked about for a long time is health care costs, that’s something that Erskine has spoken an awful lot about as well, and we’ve done just about nothing to get those costs under control.

WB: That’s right.  We can get away with sort of deferring things like that.  I mean, we can mismanage in significant ways, but because we’re so rich, we don’t go under.  We’re not a Greece or something like that because of it.  But health care costs are the biggest factor that make us noncompetitive, certain industries noncompetitive, in the world.  We have anywhere from a six cents on the dollar to maybe eight cents on the dollar disadvantage on costs on that one item against the rest of the world.  Imagine if we faced a six percentage point disadvantaged on the costs of our steel or something – it would be a national emergency.  But health care marches on.

BQ: People say, hey, we’ve done a much better job, and maybe we’ll be okay if there’s not a grand bargain that gets reached on either end.  Maybe we’ve already cut enough.  What do you think of that?

WB: Well, we are so rich, we can afford a lot slop, but that’s no reason to have it.  But we’re not so rich that we can afford all kinds of slop, and there are choices that are going to have to be made.  I admire Erskine and Alan Simpson enormously.  They were given the task of working in a bipartisan manner to come up with something that made sense over the longer term.  Nobody likes it a hundred percent, but they got Tom Coburn and Dick Durbin to vote for it, they got eleven votes out of eighteen.  That’s a monumental achievement, and they’ve basically been ignored.

 

You can watch the rest of Buffett's interview here.

May 6 2013