Warren Buffett on Charlie Rose - Stop Coddling the Super-Rich & Debt Ceiling Crisis

Rose reads excerpts from Buffett's famous NYT op-ed: 'Our leaders have asked for shared sacrifice but when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They too were left untouched.' While Americans fight in Afghanistan and struggle to make ends meet, 'we mega-rich continue to get our extraordinary tax breaks.' Buffett's specific proposal: Leave rates unchanged for 99.7% of taxpayers, continue 2% payroll tax reduction. For those making $1M+ (236,883 people in 2009), raise rates immediately on income, dividends, and capital gains. For $10M+ earners (8,274 people), additional increases.

Buffett's game theory explanation: 'Say you and I agreed to go to a track, get at opposite ends with our cars, and whoever flinches loses their net worth. Whether you want to play depends on how crazy you think I am.' Both make menacing gestures, trying to appear crazy. 'Right as the engines start, I throw out my steering wheel. Now you believe me.' In debt ceiling: Boehner/McConnell didn't throw out steering wheel, but 'a group behind them said throw out the steering wheel and make those people realize we're not going to agree to anything unless we get our way.' Problem: 'If you have a sane person dealing with somebody that may be insane, when they throw out the steering wheel, you say "you lose." And the American people lost, incidentally.'

Rose: S&P downgraded because 'U.S. Congress appears dysfunctional and unable to deal with the issue.' Buffett: 'I disagree with the downgrading 100%' but understands why. 'I will bet you McGraw-Hill owns S&P. If they have any short-term money around, it's in Treasuries.' Irony: after downgrade, 'Treasuries fled to Treasuries' - proving the point. 'We can print money. There's 17 countries in Europe that gave up the right to print money and believe me they know what it means.' They have 'terrible problems because they can't print money.' For U.S.: 'We don't have to worry so much about government becoming dysfunctional as we have to worry about that damn printing press becoming dysfunctional.'

On Chinese criticism of U.S. debt: 'I'm sure they're enjoying it. I would criticize too because if I were the Chinese sitting with a trillion-plus of U.S. government obligations one way or another, I would be very worried about what's going to happen to the purchasing power of that.' The certainty: 'I've got the right to get the trillion dollars back and I will get the trillion dollars back.' The question: 'What will it buy at that time?' Problem: 'Our government gives you the impression sometimes that they're quite willing to print whatever amount of money it takes to take care of things and that is the worry.'

Buffett proposes (tongue-in-cheek): If you don't reduce deficit to 3% of GDP (from current 10%), 'you are not eligible for reelection. If you had that facing them, you'd get a decision about these issues right away.' But acknowledges nuance: 'During a huge recession or all-out war you don't want them operating with 3% deficits - you need larger deficits.' Core problem: 'This is a world of incentives... when I try to think of the incentives to get somebody who comes up for reelection in a year to do something where the policy cycle goes out five or ten years, how do you do it? When the policy cycle exceeds the electoral cycle, you gotta make sure the electoral cycle's in the equation.'

Buffett: 'People do not want to see the instruments of government used as weapons. The whole idea of the law is that it's a shield not a sword. But minorities become a sword in this respect.' He doesn't blame Boehner: 'I think if he'd have members of the Tea Party, when he went back to them they said "You're not gonna have our support if you go in there and bend an inch on this." They said throw away the steering wheel.' The danger: holding government funding hostage 'on education or anything else... if you've got something that comes up like that,' it sets terrible precedent.

Buffett on Bowles-Simpson: 'You couldn't have two finer people - intelligent, good humored, on opposite sides of the aisle. They get Tom Coburn and Dick Durbin to sign on. They weren't a moderate - a conservative Republican from Oklahoma and liberal Democrat. Absolutely. Putting their country ahead of personal feelings.' They 'worked for months and months, got criticized, spent hours arguing, had to compromise, got 11 out of 18 to agree, and that just gets tossed aside. I think that was a terrible mistake.' On Coburn specifically: 'I may not agree with Tom Coburn but I think he's a real statesman. He was prepared to take reductions [in entitlements] and for corporate income tax [increases].'

Buffett on legacy beyond family and philanthropy: 'I'll settle for those.' He references Christopher Wren, creator of St. Paul's Cathedral, buried there with epitaph: 'If you seek my monument, look about you.' Buffett: 'That's the way we should think about this country. This country is a monument to what was done a few hundred years ago and the people that have followed. Just think if back in 1790 you said "I want to create a monument to this new country" and you'd envisioned the country of 2011. I don't think anybody would dream big enough.' When flying across country: 'That thought occurs to me - if you seek our founding fathers' monument, just look around you.' But worries: not because 'the system is not right or not strong enough, but there are things happening that will make it less great if they are not addressed.'