The Oracle of Omaha has always had a bold view on the American economy and is not afraid to stick to his convictions. It is, after all, why he is one of the most successful investors and businessmen of all time. A little over a year ago, Buffett made a comment about how he could end our swarming debt problems in 5 minutes. As our total debt has now surpassed that of our GDP and continues to grow, we revisit Buffett’s commentary to see if it has any kind of clout or if it is a realistic option [for more economic news and analysis subscribe to our free newsletter].
In his eyes it is a simple solution; Buffett would pass a law that dictates that anytime there is a deficit higher than 3% of GDP, all sitting members of congress would be ineligible for re-election. He feels that the biggest problem with today’s congress is their incentives to work and that this legislation certainly would shift their priorities. While it could make for an interesting law, there is one fundamental issue; congress would have to pass the law in the first place. It seems nearly impossible that a group of politicians would ban together to vote on legislation that holds them accountable for their job. Besides, they would probably be dead-locked on the issue anyway forcing yet another law to die in their hands.
In the eyes of Buffett, this is certainly capable of being done and while he made the comments rather matter-of-factly, there is still some truth in what he said. Sure, the law has almost 0% chance of passing, but it certainly illustrates one of the biggest problems propelling our deficit. Are the incentives of our nation’s leaders and politicians in the right place? I would venture to guess that most people would think not, as the government has had enough trouble with conspiracy theories and less-than-ethical practices in the past [see also Top Seven Warren Buffet Quotes on Gold Investing].
But one thing is for sure, with a growing pile of debt and constant money printing from Ben Bernanke and the Fed sure to debase the dollar, our debt problems are only going to get worse. Some feel that Bernanke has been attempting to inflate our way out of debt, although he has since publicly chastised critics and opposed such a view. Buffett’s ideological law may never come to fruition, but it does make for some interesting conversation about how Washington operates and if we will ever be able to make a major change that so many are seeking.
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Disclosure: No positions at time of writing.
[...] day, and another not-so-small accusation of our government manipulating data. This time it came with Friday’s jobs report, as a sudden and massive dip in unemployment [...]
[...] day, and another not-so-small accusation of our government manipulating data. This time it came with Friday’s jobs report, as a sudden and massive dip in unemployment made [...]
[...] This could actually have a negative impact on gold, as one of the biggest reasons that gold has become so attractive is that many see our massive debts as a looming crisis. For as long as we owe massive amounts of money to other countries, trusting the greenback will be next to impossible, making gold extremely lucrative. But a reduction in our debt could actually restore some of the dollar’s long lost power, which could cause a few bumps in the road for gold [see also How Warren Buffett Could End The Deficit in 5 Minutes]. [...]
Please sign my petition to End the deficit! If the US deficit exceeds 3% of GDP, all sitting members of Congress become ineligible for re-election
Warren Buffett, in a recent interview with CNBC, offers one of the best quotes about the debt ceiling: “I could end the deficit in 5 minutes,” he told CNBC. “You just pass a law that says that anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election. The 26th amendment (granting the right to vote for 18 year-olds) took only 3 months & 8 days to be ratified! Why? Simple! The people demanded it. That was in 1971 – before computers, e-mail, cell phones, etc. Of the 27 amendments to the Constitution, seven (7) took one (1) year or less to become the law of the land – all because of public pressure.
Pressure your Representatives & demand they make it happen today!
http://wh.gov/E8mh
Of course, this doesn’t end the deficit. It actually probably locks it in at 3% a year. Other unintended consequences are sure to arise as well.