Is the U.S. economy weaker than some of the data might show?
No less than the Sage of Omaha thinks it might be. In an interview with CNNMoney on Friday (Nov. 11), the world’s second richest man (and he didn’t get there by lack of insight) said that the latest GDP numbers, which show the economy growing at 2.9 percent on an annualized basis, demonstrate that in fact, the economy is “softer than I think people think it is …. I don’t mean it’s weak, but it’s softer than people think.”
In fact, said the famed billionaire, if he had to bet on where the revisions might come to those third-quarter numbers, he would bet to the downside.
No surprise that the Buffett interview touched on the election. Income inequality helped shape the election’s surprise outcome and contributed not just to the Trump ascension, but to Bernie Sanders’ as well. And as for that income gap, Buffett noted that the U.S.’ has become a specialized economy, awarding higher pay for more specialized knowledge (in a throwback to agrarian societies, he said workers wouldn’t get multiples of wealth than the next highest paid just for being a slightly better farmer). In essence, he added, people can capitalize on the value of their ideas.
One potential salve for incomes would be the earned income tax credit, which Buffett has said would do relatively more to help average Americans in a capitalist system that he said works.
“You want to keep a system where the goose lays more golden eggs every year … [but] how do those eggs get distributed? That is where the system needs some adjusting,” Buffet said.