Buffett Warns Against Rising Debt-to-GDP Ratio

Aug 19, 2009

Warren Buffett has written in the New York Times that significant levels of U.S. spending will prove to pose problems for our economy and currency down the road. Noting that the Federal Reserve and key economic officials responded to the financial crisis in a way that avoided total meltdown and put the economy on the slow path to recovery, he added that the spending administered during this crisis (as well as continued spending) will have serious side effects that Congress and government officials must address.

Buffett points out that our country's level of net debt to G.D.P. is "mushrooming," which, among other effects, could cause us to lose our global reputation for financial integrity. He sums up his argument by saying:

With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can't come close to bridging that sort of gap.... Our immediate problem is to get our country back on its feet and flourishing - "whatever it takes" still makes sense. Once recovery is gained, however, Congress must end the rise in the debt-to-G.D.P. ratio and keep our growth in obligations in line with our growth in resources.