CNBC Transcript: Warren Buffett, Alan Simpson, & Erskine Bowles On Fixing the Debt Problem

JOE: Okay. I just wanna a— ask one thing because we— we frame the Si— all— a lot of Simpson/Bowles talk in the— tryin' to get the 25 percent government spending and the 15 percent in— in revenue somewhere. For a while we were at 18 or 19 percent and they kinda matched up and it— it went along pretty well.

So we gotta do both and hopefully, if the economy improves we won't be at 25 percent. And the 15 percent will come up if we don't do anything. But obviously, we do need to act. But yesterday, referencing again, this conversation we had with— with Paul Krugman, I kept asking, "What is the— the acceptable amount of— government spending as a percentage of GDP?" And— and Alan Simpson or even Warren, I— I got him to— to say that 50 percent — was— in some European countries— once it gets above 50 he'd have a problem with it. But 50 percent is—

ERSKINE BOWLES: 50 percent?

JOE: Fif— 50. Five, zero. Now everybody ran with this—

BOWLES: Crazy.

JOE: Everybody ran with this interview yesterday because he used— he said ourideas were zombies. And he disparaged all of CNBC and our macro economics. No one led with him saying that 50 percent was an acceptable level. But he also said he fa— he favored— he favors a free market welfare state— was— was what he favored. But can you imagine someone— saying that 50 percent is an acceptable level?

BUFFETT: Run with 21 from this— from this interview.

BOWLES: Yeah. (LAUGH) Absolutely. It's unanimous.

JOE: No— no higher than 21?

SIMPSON: We can do 21.

BUFFETT: We can do— we can do 21. And— and— and you know, and there'll be certain years in the future— yeah, because— business is cyclical. You know, what— when it'll go up or— that— that's why you have to get it down to—

BOWLES: Yeah. And— and it's a little harder now because of aging of the population to get it to 21. But you can. You gotta work at it, but you can get it to 21 if you're really serious about it.

JOE: Would there be any negative consequences for 50 percent? (LAUGH) I know, it's laughable. It's laughable and yet— it's laughable. And— I— I— I know. Okay.

ANDREW ROSS SORKIN: And can— can I throw one more out there real quick? Larry Summers— two weeks ago wrote an op-ed in the FT, also came on this broadcast. Talked about— since the— since the cost of a loan, right now interest rates are so low we should move forward, huge infrastructure projects, spend a lotta money now on projects that we would otherwise have to do over the next ten, 20, 30 years. Given what you've been talkin' about today, I don't know if you got a chance to read that or see what he had to say, what did you think?

BOWLES: Look, I'm for— look, I'm for spendin' the money we spend today more wisely. You know— I could give you lots of examples havin' run a university, havin' worked in state government, havin' worked in the federal government. You know, it's a little bit like this guy who was— a Nobel Prize winning scientist, you know, who said— his Nobel Prize— he was runnin' outta money and he turned to his team and said, "Hey, we're runnin' outta money, now we gotta start thinkin'." (LAUGH) And that's what we gotta do. We're running out of money, we have to start thinkin'. We gotta make tough choices, tough political choices.

BUFFETT: The way to get to 21 is to get to 21.

BOWLES: Right. (LAUGH) And just do it. We can do it.

BUFFETT: And the way to— and the way to get 18 1/2 or 19 is to get to 18 1/2 or 19. And— and lot— you could design a plan— Joe could design a plan— most people— everybody would have— a be— a little unhappy with something. But it would certainly be better than floating along, you know, like we're doing now. We— we need something done.

SIMPSON: But the real driver is— is health care. And it doesn't matter what you call it. Forget the Obamacare label. You call it Elvis Presley Care, there's nothing in it that has cost containment, not a thing. And people say, "Well, it'll happen." Let me tell ya, it won't happen. And the reason is very simple.

You're gonna have pre-existing conditions of a three year old that'll live to be 60. One person in the United States weighs more than the other two. You got diabetes A and B. You gotta do some tort reform. You gotta do somethin' with docs. You gotta do somethin'— 10,000 a day turning 65. Gotta make hospitals keep one set of books instead of two.

Come on, let's quit fooling each other. This is absolute madness. And this baby is on automatic pilot and will suck up all the discretionary budget of the United States. So I say to people, "What do you love?" "Well, I love education, I love this, I love that, I love"— Well, pal, that stuff will be wiped out unless you put the screws to this system. We said $400 billion we'd knock off and not let it go up one percent over GD— one percent of GDP a year. No. What more can you do?

BECKY: Gentlemen, in the commercial break you were joking around. And you asked, "Is there anybody we haven't insulted yet?" Anybody left?

SIMPSON: Let's see—

BUFFETT: We're— we're tryin' to think of one. (LAUGH) We'll get to you.

SIMPSON: If you— if we have not offended you, please write to this—. (LAUGH)

BECKY: On— on— on a serious note you— you mentioned at the beginning of the interview that you were looking for ten million signatories to sign off to put some pressure on Washington to take these plans very seriously. If someone's invo— and someone's interested in getting involved what do they need to do?

BOWLES: FixTheDebtCampaign.org. That's where we want people to go. That's where we're— got our CEO Fiscal Leadership Council. We're bringin' in names of people there. But that's what— that's what— that is— that is our social media campaign number that we are gonna be launchin' next week. Fix the debt— Fix— FixTheDebtCampaign.org.

BECKY: FixTheDebtCampaign.org? When you look out— across everything that's happening we started this interview, Erskine, and you said that you think we will go off the fiscal cliff.

BOWLES: Yeah.

BECKY: What happens at that point?

BOWLES: I think it's— I think it's— I think if they don't— if they don't turn around very quickly and fix it shortly thereafter, then I think it could be really a disaster for the country. It's $7 trillion worth of economic events. It's— it'll have an effect of at least one and a half percent decline in GDP next year. You know, that's— that's enough to put us back into recession.

SIMPSON: And Dick Durbin kept asking where's the tipping point. You— you tell us where it is.

BOWLES: Yeah, we don't have to do it. That's the whole— this is not only the most predictable economic crisis— history, it's the most avoidable if we just come together, put partisanship aside, and pull together.

BECKY: We have about 30 seconds left and Warren, if you look at this from the markets perspective, if we do go off the fiscal cliff, if we don't, how— how do you—

BUFFETT: I'm a huge bull on the country. I mean, this country works over time. And we'll do the right thing in the end. It— we just shouldn't w— wait till the very end. But the— I'd still think the luckiest person that's ever been born in the world is a baby born in the United States today. And— and I'll stick with that.

And I love owning businesses in the United States. We'll invest $9 billion almost in the United States in Berkshire this year. So I— I am a bull on America. But I— I think we have to— we have to run it right, that's all. And— but we— it— it— I— I don't want anybody to get discouraged about how— this world is gonna turn out because w— it can be done. I mean, you got people like this working on it.

BECKY: And— and gentlemen, we can't thank the three of you enough for joining us this morning, and— you two gentlemen, for all your hard work. Mr. Buffett, Mr. Simpson, Mr. Bowles, thank you very, very much for your time. And we hope to check in with you again soon. Gentlemen, we'll send it back to you in the studio.

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