The New ‘Buffett Rule’ Everyone Is Ignoring
Taking our eyes off the overwhelmingly important goal of returning the economy to robust growth is a waste of valuable time.
Warren Buffett, recently expressing his disgust with the debt ceiling debate, condensed a profound truth about our federal debt into just a few short words. Although this gem of wisdom (below) deserves to be elevated to the status of a new “Buffett Rule,” that will not happen in the foreseeable future, because both presidential candidates are choosing to ignore it. Why? Apparently, they would rather not complicate the economic debate, especially during election season. Nonetheless, the new “Buffett Rule” deserves some airtime, because both candidates have some explaining to do.
The rule comes from Buffett’s recent answer to a question about the debt ceiling: “As this country grows, our debt capacity grows.”
That simple statement packs a lot of meaning into eight words. It means that a growing economy can neutralize the impact of growing debt. It means that “paying down the debt” is not necessary when the economy grows at a sufficient pace. It means that taking our eyes off the overwhelmingly important goal of returning the economy to robust growth is a waste of valuable time.
Below is a screenshot from a campaign ad the Obama team aired in Texas in late July.
If paying down the debt actually is in the Obama plan, that begs some questions. Given that “paying down the debt” requires running budget surpluses instead of deficits, just when does the Obama plan call for those surpluses to begin? Why has not one Obama budget ever called for any surpluses? Besides that, haven’t Obama’s Democratic supporters and Keynesian advisers (as well as many conservative Republicans) been telling us, correctly, that running surpluses in a sluggish economy is a really dumb idea?
And, lastly, if running surpluses is not in fact in the Obama plan, why does it say so in the ad? Could the ad merely be his campaign’s attempt to avoid complicating the economic message during the campaign—instead of admitting that Buffett’s new rule teaches us that paying down debt is not necessary with sufficient growth?