Like many others, I used to hold 82-year old billionaire Warren Buffett in the highest regard, that is, back when he would talk about such things as our ballooning trade deficit or our bubbly stock market that he didn’t understand and wanted no part of. But, lately, he seems to be showing his age and his latest ramblings about the nation’s debt as recounted in this Marketwatch story are pretty stunning.
“It is not a good thing to have it going up in relation to GDP, that should be stabilized, but the debt itself is not a problem,” the CEO of Berkshire Hathaway said in an interview broadcast Sunday on the CBS “Sunday Morning” news show. The nation’s debt is “a lower percent of GDP [gross domestic product] than it was when we came out of World War II. You’ve got to think about it in relation to GDP,” added Buffett, a vocal advocate for increased taxes on the nation’s wealthiest, a stance he alluded to in the broadcast.
“It is not a good thing to have it going up in relation to GDP, that should be stabilized, but the debt itself is not a problem,” the CEO of Berkshire Hathaway said in an interview broadcast Sunday on the CBS “Sunday Morning” news show.
The nation’s debt is “a lower percent of GDP [gross domestic product] than it was when we came out of World War II. You’ve got to think about it in relation to GDP,” added Buffett, a vocal advocate for increased taxes on the nation’s wealthiest, a stance he alluded to in the broadcast.
The chart below from a paper(.pdf) by Daniel Thornton of the St. Louis Fed might be worth studying here.
However you count the debt, it’s way to big by historical measure and, as shown above, it used to only grow during a time of war and then, when hostilities ceased, some of the debt would be paid off. But, that’s not been the case for decades now and to say that, somehow, today’s debt-to-GDP ratio is OK because it’s less than it was after World War II is, well, kind of stupid. My God – it was a world war!
