Billionaire investor Warren Buffett has been around long enough to know a few things about the causes and effects of reckless government spending. On Wednesday’s “Squawk Box” on CNBC, the Berkshire Hathaway Chairman and CEO made no bones about the culprits.
The current 40-year-high inflation cycle is the responsibility of Washington’s policies of spending money to get votes.
Think about this.
The $100 you put in the bank when Biden first took office is now worth less than $87.
Inflation is a TAX.
— Rep Andy Biggs (@RepAndyBiggsAZ) April 12, 2023
As Buffett explained, “It’s fun sending money out to people if you want to stay in office.” Unfortunately, the goods and services to absorb those trillions of dollars will not just magically appear.
And as every school kid knows or at least should know, increased demand without expanding the necessary supply to accompany it leads to higher prices. It’s rather elementary.
Of course, President Joe Biden announced that his so-called Inflation Reduction Act enacted last year would cut the deficit as well as fight higher prices. This would be accomplished by making “the wealthy and big corporations finally begin to pay part of their fair share.”
But, as the Wall Street Journal reported, higher-than-projected costs for its green subsidies will in fact add to deficits. And as even Democrats fully realized, it did nothing to address inflation.
Co-host Joe Kernen asked Buffett for his opinion on the course of events that led to the 40-year highs. Acknowledging that pandemic spending and supply chain issues played a role, he questioned if the Federal Reserve enabled too much spending.
Buffett concurred that this misplaced Washington generosity is part of the problem with our political system.
He added that “if you tell every one of your constituents that they just won the lottery and here’s $5,000 or $15,000, something’s going to happen. And that something is inflation.”
The lack of goods and services produced to soak up the money the federal government flooded into the economy is key, according to Buffett. He declared that Washington’s fiscal policy currently is to spend much more than it takes in.
And while this misguided agenda may be a blast to implement and helps incumbents hold onto their positions, Buffett noted that “it isn’t necessarily the best thing to do for your kids.”
In other words, both present and future generations will be left holding the tab for Biden’s fiscal irresponsibility.