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Buffett: Congress Playing Russian Roulette With Debt Ceiling

Thursday, 07 Jul 2011 10:29 AM

Nobody knows what will happen if the Congress fails to lift the $14.3 trillion debt ceiling by an Aug. 2 deadline, which would lead to a government default.

But lawmakers are playing Russian Roulette with the economy when they threaten to default as part of their negotiation tactics, says famed investor Warren Buffett.

"If you gave me a six shooter and stuck a bullet in one chamber and said 'spin it' and five times out of six nothing bad is going to happen, but we really haven't done this before, so we're not sure what is going to happen when the sixth one is pulled. It's just silly to do."

The government has hit the borrowing limit and needs Congress to give it the green light to lift it.

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Raising the debt ceiling isn't new. The government did it seven times under the Bush administration, Buffett adds. "You really don't have any business by playing Russian Roulette to get your way," he says.

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Warren Buffett
(Getty Images photo)
"We should be more grown up than that."

It's not the first time the U.S. has been in serious debt as well.

"We had debt at 120 percent of GDP — far higher than this — after World War II, and no one went around threatening 'we're going to ruin the credit of the United States or something to get a better balance of debt to GDP," Buffett says.

"We just went about our business then. People did it in a cooperative way."

Nobody knows what is going to happen if the country does default, but the odds are good that the nation's leadership will get things straightened out, Buffett says.

But threatening to even go there is making the country look bad.

"You're playing with fire when you don't need to play with fire. We don't need to tell the rest of the world that any time people in Congress start throwing a tantrum, that we're not going to pay our bills."

"It is not a great pattern to project to the rest of the world."

President Barack Obama's National Commission on Fiscal Responsibility, headed by Democrat Erskine Bowles and Republican Alan Simpson, made reasonable recommendations to narrow the country's deficits, Buffett says.

Corporations should also consider prepaying taxes they are going to have to pay anyway.

Buffett's own Berkshire Hathaway, for example, will owe somewhere around $3 billion in September.

Construction, meanwhile, continues to slow the economy's recovery, although it will improve and bring unemployment levels down with it, Buffett says, adding the country will be "amazed" at how well unemployment rates drop when the housing--and construction--sector recovers.

Others have warned that the U.S. could suffer if it defaults on its debts.

Credit ratings agencies have said the country could lose its AAA rating.

The International Monetary Fund has echoed those sentiments.

"The federal debt ceiling should be raised expeditiously to avoid a severe shock to the economy and world financial markets,” the IMF says in a recent report, according to Bloomberg.

Failure to reach a budget and debt compromise could result in a "sudden increase in interest rates and/or a sovereign downgrade."

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Nobody knows what will happen if the Congress fails to lift the $14.3 trillion debt ceiling by an Aug. 2 deadline, which would lead to a government default. But lawmakers are playing Russian Roulette with the economy when they threaten to default as part of their...
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2011-29-07
Thursday, 07 Jul 2011 10:29 AM
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