Buffett Watch

Praising Social Security and Grading Obama: Ask Warren Transcript - Part 4

Praising Social Security and grading Barack Obama.   This is part four of the transcript and video of Warren Buffett's 'Ask Warren' appearance on CNBC's Squawk Box on Monday, March 1, 2010.


ANNOUNCER: Welcome back to SQUAWK BOX. Here now from Piccolo's restaurant in Omaha, Nebraska, Becky Quick and Warren Buffett.

Buffett on Obama

QUICK: All right, welcome back, everybody. We are live in Omaha this morning, speaking to Berkshire-Hathaway chairman and CEO Warren Buffett. We have received thousands of questions from viewers.  And now it's time, Warren, to get to a few more of these questions and try and see what people are thinking about.  The first question I want to touch on still stays on the government theme because we did receive a lot of shareholder questions on that. This comes from Hank Durany, who's in Pompton Lakes, New Jersey. He says, "I did not vote for Mr. Obama, but the moment he was elected, he became my president [as well]. Your upport for Mr. Obama prior to the election was well known, given what transpired over the last 12 months. At what level would you rate your approval of his results on a scale from one to 10, assuming it was a 10 prior to the election."

BUFFETT: Yeah, well, I'm very glad I voted for him.

QUICK: Mm-hmm.

BUFFETT: That has not changed. I think the problems he's run into are, you know, are monumental and particularly in terms of the economy. I mean, you know, we're running huge deficits now that--which we should be running from a Keynesian standpoint to try and get this economy moving, but they have consequences, too. I mean, I do not envy the job of being president, but I give Obama high marks.

QUICK: You do? OK.  Here's another question that came in from Kevin Loken in Minneapolis, Minnesota, and this has to do with the Tea Party that we've heard so much about. "Does the Tea Party have it correct, reduce the size of the government? It seems if you give someone, a man or a woman, an unlimited amount of funds like the government, they're bound to screw things up."

BUFFETT: Well, that's--we've worried about that for a couple of hundred years and, overall, we've done OK with it.

QUICK: Mm-hmm.

BUFFETT: I mean, the government has disappointed people, I'm sure, many of times over the 200 years. But, overall, I mean, just look at our country now compared to what it's been in the past. We've always had these motivations of people worrying about the next election and all that sort of thing. But if I'm going to comment on the Tea Party, I'll have to look at my notes here.

QUICK: On exactly what happened with that.  All right, here's another question from Henry Solomon in New York who says, "Should governments phase out Social Security and health entitlements?"

BUFFETT: Oh no. Social Security is one of the most important things that our country has done. I mean, if you look back to the '30s, if I were to pick the two most important economic things that came out of the '30s, I would say the FDIC and Social Security and both of them had the same goal, which was to relieve people of unnecessary fears. And our country was $45,000 plus of GDP per capita is rich enough to make sure that those who get the short straws in life have some minimum level of subsistence once they get past their productive years, so...

QUICK: But Social Security, you could be looking at it, Medicare too, these are programs that could be insolvent in the not-too-distant future, especially when you look at demographics and the number of people who will be retiring and who will be working to pay for that. How do you fix it?

BUFFETT: Social Security is now about 4 and a fraction percent, the payout, as I remember, in terms of GDP. Even projecting out 50 years, it gets up to 6 percent or something like that, and that's a vastly increased GDP. So if we treat our seniors to 4 1/2 percent of GDP now, when they're past their productive years or even 6 percent 50 years from now, we take care of our young. I mean, in this country, the people in their productive years take care of the young. They educate them, they do all of these things, even if you don't have any children or anything of the sort, and we take care of our old, and a rich society should do that.

QUICK: A question comes in from Mark Blizzard in Mooresville, North Carolina.  It's number 17, "In your opinion, do you feel that the tax incentives being offered to businesses to create jobs will be effective? Can you offer another approach?" You touched on this, but we've got a lot of people who wrote in.

BUFFETT: Yeah. It's very tough. I don't think job incentives do that much. What creates jobs is demand, and, you know, it does go back to Keynes and the economists on that. And, you know, we--if we have 10,000 fewer people or close to it working on a railroad now than we had a couple of years ago, it's because, you know, the box cars aren't moving. If we have 6500 people fewer in our--in our carpet business, it's because the orders for carpet aren't coming in. And so it isn't like you go out and hire a bunch of people and then that creates orders. Orders create jobs, jobs don't create orders.

QUICK: So what can the government really do? When people are so focused on jobs, unemployment at 10 percent, what can the government really do?

BUFFETT: They should do various stimulative things. They should put money in the pockets of people who are going to go spend it.

QUICK: Like we got with the original stimulus package...

BUFFETT: Some of that.

QUICK: ...(unintelligible).

BUFFETT: It doesn't work perfectly.

QUICK: Right.

BUFFETT: I mean, you know, these are not easy problems in that there's a quick solution to. But basically, you don't want more money in my pocket.  I'm not going to change my spending habits at all. If my--if my taxes are higher, I'll still, you know, I'll buy the same things I bought anyway.  But...

QUICK: Yeah, but you're the second richest man in the world.

BUFFETT: Well, I know that, but if you take wealthy generally. If you take--if you take people at the lower end, if they have more money, they'll spend it.

QUICK: And that's what you think needs to be focused on?

BUFFETT: Well, you need--if you're going to stimulate, you need to stimulate buying.


BUFFETT: And buying comes from people who can't buy what they want to buy because they don't have enough dollars in their pocket.

QUICK: OK. We're going to have more from Warren Buffett in just a few moments. In the meantime, though, we're going to take a very quick break and Joe, I'll send it back to you for a look at what we've been seeing in the markets right now.

KERNEN: OK. Beck, thanks. We will be back to Omaha and our interview with Warren Buffett in just a minute. But first, let's look at some of these headlines, though, this morning.

(News headlines)

QUINTANILLA: When we come back this morning, we'll go back to Omaha, back to Piccolo Pete's. We'll talk investment strategy, stock ideas and a lot more with the Oracle of Omaha, Warren Buffett and Becky, who's on camera. SQUAWK continues in a moment.


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