Warren Buffett says second economic stimulus may be needed
Speaking on ABC's "Good Morning America", Buffett, a vocal Obama supporter during the presidential campaign, said the economy is "not in a free fall, but we're not in a recovery either." He also predicted that unemployment may top 11 percent, a view shared by many economists.
"I think a second one may well be called for," he told the program. "It is not a panacea. A stimulus is the right thing. You hope it doesn't get watered down."
Earlier this year, the Obama administration pushed a $787 billion economic stimulus plan through the U.S. Congress. Unfortunately, while the government spending plan slowly began to take effect, unemployment ratcheted up to its highest level in 25 years. Although housing markets are starting to rebound, they remain weak in hard-hit areas such as California and Florida. At the same time, rising oil prices are continuing to erode the fragile confidence of U.S. consumers, and the recent market turmoil has forced many people to delay their plans for retirement.
Even so, it isn't clear that a second stimulus will help. Though Buffett seems to say "yes," the Obama administration has not joined the bandwagon yet.
"The stimulus is on track," Larry Summers,.director of the White House National Economic Council, told the New York Times. "We planned for a program that would stimulate the economy over a two-year period, with a force that increases significantly over calendar year 2009. The implementation is on track to deliver that."
Still, with the 2010 midterm elections looming and President Obama's support eroding, the Administration may have little choice but to deliver another jolt to the financial system. The Financial Times reported that the Administration wants to keep "door to further stimulus ajar," leading to confusing signals from Obama and his Chief of Staff Rahm Emanuel.
Meanwhile, America's main economic rival continues to weather the economic storm. Experts are predicting that China's economy will grow 8 percent this year and that the Asian country will become the world's top car market. So, when people wonder whether a second economic stimulus is needed, it's useful to remember how well the first one has worked.
As usual, Buffett has a succinct way of explaining things. As he put it, the stimulus was like having "half a tablet of Viagra and then having also a bunch of candy mixed in --- it doesn't have really quite the wallop."