Failure to raise US debt limit would be 'asinine'

WARREN BUFFETT said he expects the US Congress to raise the nation’s debt ceiling before it expires in mid-May, adding that it would be that body’s “most asinine act” ever if it failed.

Speaking on Saturday at the annual shareholder meeting of his company, Berkshire Hathaway, in Omaha, Nebraska, Mr Buffett said imposing a debt ceiling was a mistake in the first place.

Still, he projected that “the United States is not going to have a debt crisis of any kind as long as we keep issuing our notes in our own currency”.

The removal of the debt ceiling, which would allow the US to borrow more, is the next economic hurdle faced by the Obama administration.

“We’re a growing country and we’re going to have a growing debt capacity,” Mr Buffett said at the Berkshire Hathaway meeting.

“In my view, there’s no chance that they don’t increase the debt ceiling.”

The Obama administration has also expressed confidence that Congress will agree to raise the $14.3 trillion cap on how much Washington can borrow.

The US treasury department estimates that the federal government will reach the borrowing limit by May 16th and is pressing for it to be lifted to avoid “catastrophic economic consequences”.

Raising the cap would let the government keep paying its bills and commitments to investors, retired people, soldiers and other citizens.

But many Republican lawmakers and some Democrats want any increase to be accompanied by a clear plan to cut spending.

Berkshire Hathaway vice-chairman Charlie Munger attacked the political posturing and rhetoric that he believes Democrats and Republicans have used in the debate, saying both were competing to see “who can be the most stupid”.

Mr Buffett is the world’s third-richest man, according to Forbes magazine, with an estimated fortune of $50 billion. He was a supporter and adviser to Barack Obama during his campaign for the White House.

Treasury secretary Timothy Geithner has said inaction on the ceiling would be “irresponsible” and could spark a financial crisis because it would raise questions about the country’s commitment to meeting obligations to bondholders.

Speaking in Dublin on Friday, Democratic congressman Richard Neal said he would vote in favour of the move. Failure to raise the debt limit would make the federal government shutdowns of the 1990s “look like a tea party”, he said.

“Everyone agrees that the ceiling will be raised. It is just a question of how close to the precipice we will go,” he told a meeting of the Ireland-US Council.

Mr Neal said the US had a track record of meeting its financial obligations.

“We should never shrink from that reputation that has been so hard-earned,” he said.

– (Reuters/Bloomberg)