Monday, July 11, 2011


Buffett employment will improve with the housing market

By Vicki Needham - 07/08/11 03:11 PM ET
Billionaire Warren Buffett said Friday he's betting heavily against a double-dip recession and that employment will make huge gains as the residential housing market recovers.
"We will come back big-time on employment when residential construction comes back," he said in an interview with Bloomberg Television at the Allen & Co. Sun Valley Conference in Idaho.
Although Buffett didn't predict when the housing market might gain traction again, he did say "I think it actually could be reasonably soon."
Housing experts have said with the high number of foreclosures, tight lending standards and dropping prices that it still could take several years for a recovery to root.
He expressed support for President Obama and the government's efforts on the housing front.
"The president is not [making the situation worse]," he said.
"If you have too many houses, what can government do?"
Buffett made the comments as the Labor Department released a dismal June jobs report showing only 19,000 jobs added and unemployment rising slightly to 9.2 percent as job creation remains sluggish. 

He expects within the next few years that the unemployment rate will eventually drop to 6 percent but "it just depends when housing turns."

In the interview, Buffett said he backs the overall efforts of the White House to improve the nation's economic situation, saying Obama has the right ideas on the economy.

"I don’t think it’s easy to do," Buffett said.

"It takes some cooperation from Congress. But he has ideas about what America can and should be that are in synch with mine," he said.

"People get their expectations too high. The system cures itself. I would say that that’s the biggest single factor."

Buffet has carved out the opinion that wealthier taxpayers, including himself, have a responsibility to pay higher tax rates. 

About 15 years ago the 400 top U.S. taxpayers had an average income of about $45 million and that's now up to $350 million in the most recent figures while their tax rates went from 27 percent down to 16 percent, said Buffett, chief executive of Berkshire Hathaway Inc.
"That’s not my idea of America," he said. "I mean I want everybody to get rich, but I think that the rich have a responsibility to pay higher tax rates."
Buffett conceded that his friends don't necessarily agree with him.
"Yeah, I look around at my friends here paying lower tax rates than the people who are serving us the food," he said.
"I think some do [agree with this idea]. Yeah some do. And many don’t."
Buffet also warned of the risks of not raising the debt limit before the Aug. 2 deadline, although he's not sure what will happen. The uncertainty, Obama said Friday, is stalling the economic recovery, especially job creation. 

"Nothing may happen. Nobody knows," he said. "We don’t have a parallel for it in the past. But it’s crazy. I mean which would you rather have borrowing in the markets five years from now, a U.S. government that’s interrupted payments because of a squabble within its Congress.

Congressional negotiators will meet at 6 p.m. Sunday to continue discussions on a way forward on the budget and debt-ceiling increase. 

Buffett praised Elizabeth Warren, 62, the Harvard University law professor, assigned by Obama to set up the Consumer Financial Protection Bureau.

Senate Republicans are trying to change the agency's structure before a director is confirmed. The House Financial Services Committee has approved a bill that would establish a five-member committee to oversee rulemaking rather than a single director.
“She’s made a lot of enemies,” Buffett said. “But we needed a lot of correction. I mean, when you see what happened in the mortgage issuance market of five years ago, a lot of things took place that shouldn’t have taken place.
“It’s up to both the industry and the government to correct it,” Buffett said. “It’s great if the industry does it by itself, but it’s clear you need a policeman. And she’s a pretty good policeman,” he said.
Buffett also praised the work of Federal Reserve Chairman Ben Bernanke for the central bank's efforts to bolster the economic recovery, although he said there shouldn't be a need for a QE3.
"His foot has been on the gas pedal as far as it will go," he said.
"I think that he and other administration officials have done a heroic job since the fall of 2008."

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