'US is safe unless European crisis spills over' - Warren Buffett
Speaking about Europe, the 81-year old legendary investor and billionaire referenced Abraham Lincoln, saying a house divided cannot stand as he addressed the Economic Club of Washington.
“They can't have a common currency, but not common fiscal policy or culture,” Buffett said. “It can't be half slave and half free.” “European leaders need to resolve some of the union’s weaknesses.”
Buffet’s comments come as finance ministers and central bank governors from the Group of Seven economies agreed on Tuesday to coordinate responses to the crisis which threatens to destroy the region’s 17-nation currency union as Greece considers leaving the euro.
As Buffett touched upon the US, he was more positive, saying there is little chance the nation will slip back into recession in the near term, warning however that a second recession is unlikely “unless events in Europe develop in some way that spills over in a big way.”
He said Washington must address an unsustainable fiscal situation, claiming that both political parties deserve blame for the federal government's failure to reduce the deficit. Buffet said Democrats must give in on cutting some social programs while Republicans can't continue to stand in the way of tax increases.
Buffett, who is the Chairman of the Berkshire Hathaway holding company, also reaffirmed his support for the so-called "Buffett Rule." The White House's website describes the rule that no household making more than $1 million should pay a smaller share of their income in taxes than middle-class families pay.
"The Buffett Rule would limit the degree to which the best-off can take advantage of loopholes and tax rates that allow them to pay less of their income in taxes than middle-class families."
The plan would require wealthy Americans to pay a 30 percent tax rate – a levy that would surely hit the billionaire more than the average American. Currently, like many wealthy Americans, much of Buffett's income comes in the form of capital gains and dividends, which are taxed at lower rates than incomes.
Buffett joined the tax debate last August as he said he paid a lower tax rate than his secretary, claiming this to be unfair.