Bonnie Erbe

Warren Buffet Wrong on Push for a Second Stimulus Package

July 9, 2009 RSS Feed Print

By Bonnie Erbe, Thomas Jefferson Street blog

I thought Warren Buffett was smarter than this. He told ABC News the United States may need a second federal stimulus package:

Buffett, a supporter of President Barack Obama during last year's election campaign, said a second economic stimulus package might be needed. The Obama administration says it does not see a need for a second stimulus yet.

"I think a second one may well be called for. It is not a panacea. A stimulus is the right thing. You hope it doesn't get watered down," he said.

Huh? The first one hasn't worked (at least not yet), so spend us deeper into debt? I don't think so. According to the General Accounting Office, the reason the first one hasn't yet fueled a recovery is that few funds from the first stimulus package have yet been released:

A report released Wednesday by Congress' investigative arm, the Government Accountability Office (GAO), says the bulk of the money will be released in 2010, later than expected due to bureaucratic delays. 

We won't even start to feel the inflationary effects of the overspending produced by the first package until 2011 or later, if it is going to take more than a year for those funds to turn into a significant number of new jobs. Now is too soon to talk about the second package. Even White House sources are downplaying such talk. Buffett should, too.

Tags:
Warren Buffett,
economic stimulus

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Robert Schiller (great economist) predicted the sub prime meltdown and the dot com crash. I did my own research and looked at all the problems with sub prime loans in the economy and moved 90 percent of my portfolio into cash one year prior to the crash. Mr Schiller thinks we need to consider a second stimulus just like Buffet. Mr Schiller just recently stated in relevant pasrt as follows:

"The real fact is that we are in a global recession that we haven’t seen since 1930s. We are in a serious economic – that is what aborted the recovery in a great depression is that people were afraid of the government deficit and believe it or not people were afraid of inflation during the Great Depression. So the government didn’t stimulate as much as it should have been and they stayed in the depression for 10 years. We don’t want to make that mistake again".

I would not bet against Mr. Buffet or Mr. Schiller. The derivative market is over 500 trillion and can blow at any time. In addition, there are many mortgage loans due for refinance in 2011 that will cause problems. Moreover, private equity covenant lite loans are additional toxic assets that have not yet exploded. Bottom line: There is a high probability that we need a second stimulus. Not fun but necessary.

Larry Weber of WA 9:35PM July 16, 2009

Robert Schiller (great economist) predicted the sub prime meltdown and the dot com crash. I did my own research and looked at all the problems with sub prime loans in the economy and moved 90 percent of my portfolio into cash one year prior to the crash. Mr Schiller thinks we need to consider a second stimulus just like Buffet. Mr Schiller just recently stated in relevant pasrt as follows:

"The real fact is that we are in a global recession that we haven’t seen since 1930s. We are in a serious economic – that is what aborted the recovery in a great depression is that people were afraid of the government deficit and believe it or not people were afraid of inflation during the Great Depression. So the government didn’t stimulate as much as it should have been and they stayed in the depression for 10 years. We don’t want to make that mistake again".

I would not bet against Mr. Buffet or Mr. Schiller. The derivative market is over 500 trillion and can blow at any time. In addition, there are many mortgage loans due for refinance in 2011 that will cause problems. Moreover, private equity covenant lite loans are additional toxic assets that have not yet exploded. Bottom line: There is a high probability that we need a second stimulus. Not fun but necessary.

Larry Weber of WA 9:35PM July 16, 2009

i agree with bonnie erbe 150 % !!!

i never took him as politicly smart !!!!

I AM ASKING MR. WARREN BUFFET OVERRATED AMERICAN CITIZEN

WHAT HE DID FOR AMERICA DURING THIS RCESSION.

DID HE EVER HEAR PRESIDEN T J.F. KENNEDY SPEACH WHA HE COULD DO FOR AMERICA ????

MR. W. BUFFET HOW MANY JOBS YOU CRIATE WITH YOU BILLIONS LAT SIX MONTHS ?????????????????????????????

MARK W.LESNIEWICZ of IL 3:23PM July 12, 2009

Bonnie Erbe

Bonnie Erbe

Bonnie Erbe is a contributing editor at U.S. News & World Report and hosts PBS's weekly news analysis program, To the Contrary with Bonnie Erbe. She also writes a weekly syndicated newspaper column for Scripps Howard News Service.

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