Warren Buffett has said he expects the US government to raise taxes rather than cut spending.
The statement, issued Saturday, comes as the United States is hard-pressed to address a growing fiscal deficit, and as the national debt recently surpassed $34 trillion, an amount nearly as large as the entire U.S. economy. .
More worrying is the fact that the Federal Reserve and other money-conscious officials have no plan in sight, paving the way for the Berkshire Hathaway boss’ ominous prediction. He delivered it at his hallowed hedge fund’s annual shareholder meeting in Omaha, attended by some of the country’s top CEOs.
There, the conglomerate reported that its group of companies generated about $11.2 billion in operating profits, 39 percent more than the previous year.
Even though those results are a sign of a relatively robust economy, the 93-year-old, valued at more than $131 billion, said he believes a federal tax increase is on the horizon.
Warren Buffett has warned that he expects the US government to raise taxes rather than cut spending. The 93-year-old appears here at Fortune’s Most Powerful Women Summit in Washington, DC, in 2015.
The statement, issued Saturday, comes as the United States is struggling to address a growing fiscal deficit and as the national debt recently surpassed $34 trillion.
“I think taxes are likely to go up,” he said, noting how the Congressional Budget Office has estimated in its latest long-term budget projections that federal deficits will rise to 8.5 percent of GDP in fiscal year 2054 since the 5.5 percent seen today.
“They may decide that one day they don’t want the fiscal deficit to be so large because that has some important consequences,” he added.
“Therefore, they may not want to reduce spending and may decide to take a larger percentage of what we own and have us pay for it.”
The unprecedented problem comes as US budget deficits are expected to dissipate if tax cuts introduced in 2017 are renewed next year.
But given current market conditions, rate cuts remain uncertain and inflation also remains stubbornly high.
These factors led Buffett’s Berkshire to reduce its stake in Apple, one of many blue-chip manufacturers, homebuilders, insurance companies or retailers in its group.
As a result, Berkshire reported a $135.4 billion stake in the iPhone maker at the end of the first quarter, up from $174.3 billion seen in December.
The move quickly became a topic of discussion as the meeting unfolded in real time, with CEO Tim Cook one of the high-powered figures in the room.
More worrying is the fact that the Federal Reserve and other money-conscious officials have no plan in sight, paving the way for the Berkshire Hathaway boss’ ominous prediction. He broadcast it at his hallowed hedge fund’s annual shareholder meeting in Omaha (seen here).
Shareholders found their seats for Berkshire Hathaway’s annual meeting on Saturday, which was attended by thousands of people. Among them were prominent CEOs such as Apple’s Tim Cook, whom Buffet mentioned by name after explaining a recent $40 billion sale of Apple’s position in Berkshire.
There, the conglomerate reported that its group of companies generated about $11.2 billion in operating profits, 39 percent more than the previous year.
Even though those results are a sign of a relatively robust economy, the 93-year-old, valued at more than $131 billion, said he believes a federal tax increase is on the horizon.
“I think taxes are likely to go up,” he said, noting how the Congressional Budget Office has estimated in its latest long-term budget projections that federal deficits will rise to 8.5 percent of GDP in fiscal year 2054 since the 5.5 percent seen today. “They may decide that one day they don’t want the fiscal deficit to be so large because that has some important consequences.”
Despite the sale of more than $40 billion, Buffett assured thousands of people in Nebraska that Apple is an “even better” stock than American Express and Coca-Cola, two of the other “wonderful” businesses in the company’s portfolio. Berkshire.
He said that unless something changes drastically, Apple will continue to hold the distinction of being Berkshire’s most important position — glowing praise coming from one of the country’s most respected minds when it comes to finance.
He added that the iPhone, launched in 2007, was one of the best products of all time, and hinted that tax implications influenced the sale.
When asked if he was worried about the rapid rise in US debt, Buffett, who continues to serve as president despite his age, said what really worries him is that the fiscal deficit is now larger than the US bond market. Treasury, which itself is almost 27 trillion dollars.
Pointing to the US dollar’s place as the world’s primary reserve currency, he theorized: “My best guess is that US debt will be acceptable for a long time because there aren’t many alternatives.”
He added that while the main focus right now may be on the Federal Reserve’s next steps to quell inflation following a litany of interest rates, the bank’s looming fiscal policies could be the real problem.
“Jay Powell is… a very, very wise man,” he said, referring to the central bank’s top official. “But he doesn’t control fiscal policy.”
He added that while the main focus right now may be on the Federal Reserve’s next steps to quell inflation following a litany of interest rates, the bank’s looming fiscal policies could be the real problem. In the photo, the head of the Fed, Jerome Powell, whom the billionaire also mentioned by name.
“Jay Powell is… a very, very wise man,” he said, referring to the central bank’s top official. “But he does not control fiscal policy”
Throughout the day, Buffett also talked about his age and the prospect of a successor.
When asked, he assured shareholders that the company’s future was in good hands and said Greg Abel, his designated successor and vice president of Berkshire’s non-insurance operations, should take over capital allocation when the need arises.
‘When you have someone like Greg and Ajit, why settle for me?’ Buffett said, referring to Ajit Jain, Berkshire’s vice president of insurance operations.
“It has worked very well.”
Buffett also cited the changing of the guard that occurred a few years ago at Apple, when Cook replaced longtime boss and iPhone visionary Steve Jobs.
“Buffett made it very clear that the structure of the company is in place,” J. Dennis Jean-Jacques, founder and chief investment officer of Ocean Park Investments, told Bloomberg of Buffett’s words on Sunday.
“It’s going to be more important for shareholders to make sure the board and managers keep the structure intact – they’re smart people and they’re not afraid to write to the CEO to let him know things are going wrong.”
