> Warren Buffett Blog: Warren Buffett Says No Deal on Debt Ceiling Like a Nuclear Bomb

Tuesday, October 15, 2013

Warren Buffett Says No Deal on Debt Ceiling Like a Nuclear Bomb

Another 160 points down on the Dow Industrials and another meaningless press conference from President Obama promising to never pay  a “ransom” to the Republican Tea Party. The sense of  the brinksmanship suggest to me that we are wandering in a no-man’s land. You don’t hear anyone in Congress or the White House echoing Warren Buffett’s warning of a “nuclear bomb.”

I thought the whole showdown was the  Republican anathema of the Affordable Care Act, better known as ObamaCare. But the President  never mentioned the health bill today, and to me, appeared ready to accept default on the debt rather than agree to any change whatsoever in his prime domestic achievement, which even leading Democrats feel is faulty and requires some overhaul. And by the way, there is not enough time to negotiate changes in ObamaCare or or the costly entitlements before the deadline, either Oct 17 or November 1.

The only reasonably pragmatic item on the President’s laundry list today was a verbal promise to sit down and negotiate once the debt limit is raised, even if only for a limited period. I’d like to know why he didn’t press for this weeks ago. Both the White House and Congress are playing Russian Roulette with the American economy and the financial markets. You can tell Obama will never go down in history as The Great Compromiser as he insists that he has already reduced the trillion dollar budget deficit in half, glory be.

There’s even less downside for the intransigent Tea Partyers whom Speaker Boehner has to serve, or be in  danger of losing his Speakership. Why should the Tea Partyers compromise with a President they hate when they know full well they will be re-relected for this very intransigence?

Denial  of the dangers afoot for the economy and the financial markets is as alive and prevalent as it was in Wall Street in 2008 when hardly anyone in charge  anticipated the true declining value of the securities they held either on or off their balance sheet. That was one key reason Lehman Brothers went bankrupt and threw the global economy into a  painful descent.

All this developing chaos just because there are haters of Obama and ObamaCare? Where’s the patriotism and realpolitik to maintain the credit worthiness of the U.S. and hold level the value of ordinary American’s 401k plans? There’s still time to gather the resolve and wits to make sure the 6% decline in the stock market does not become 20%, or 30% or 40%.

Obama better come forward and explain to us why raising the debt limit does not raise the amount of our debt, as he promised in his press conference. There’s 300 million people out there who don’t want to see America’s credit rating downgraded again. No one wants to see the US be able to pay some bills and not others. For example, Harvard economist Martin Feldstein emailed  another Harvard economist, Greg Mankiw, yesterday saying “there really is no need for a default on the debt even if the debt ceiling is not raised,” because ” the US government collects enough in taxes each month to finance the interest on its debt.”

Yes, but the US government will lack the money to pay Social Security benefits, or pay veterans benefits, and will tarnish its image as the anchor to the global economy. We just don’t have our act together, and we seem to be lackadaisicly sliding into another crisis of our own making. Look out below!