President Barack Obama and the Republican Party are “pretty damn dumb” if they can’t reach a deal on the debt ceiling, said Warren Buffett in an interview with CNBC. He said that “the market is not gonna fall apart, because [investors] expect Washington will only act irrationally for a certain length of time,” but it’s clear that he considers the entire controversy to be a distraction at best and a possible disruption to a recovering economy.
Republicans historically use debt ceiling as bargaining chip
Republicans have used the debt ceiling as a bargaining chip multiple times during the Obama presidency, threatening to shut down the government if they don’t get demands such as extension of the Bush tax cuts. In the past, one side or the other has always backed down, but some political analysts think this time could be different.
The Republican-led House of Representatives has been fixated on the idea of repealing Obamacare, which Obama considers his biggest achievement as president, and they’ve said they won’t raise the debt ceiling without de-funding the program. This is a non-starter for the president, so the question is how far the Republicans are willing to push before they come up with a different set of demands.
Raising debt ceiling means paying bills as a nation
For anyone who missed it the last time around, raising the debt ceiling isn’t a spending increase, it’s the decision to pay our bills as a nation. The decision not to pay our bills will hurt our credit, as any deadbeat can tell you. As long as the lapse is temporary, most investors understand that the U.S. will make good on its debts, even if there is some political wrangling before that happens, but an extended fight that leaves creditors hanging and interrupts investment strategy will have lasting repercussions.
Buffett says amount spent on healthcare is a huge problem
As for Obamacare itself, Buffett says that the amount we spend on health care is a “huge problem for the country…but that’s not the fault of Obamacare.” Healthcare costs have been trending up much faster than inflation for decades. Even if Obamacare doesn’t reign them in, blaming the program for the amount we are paying now is disingenuous. “Health-care costs in this country are a tapeworm of American business,” says Buffett. “Overall, the economy has a 17 percent-plus of GDP going to health-care costs.”