Buffett Cites Gov’t Spending As Top Cause Of Inflation

Although the latest inflation data indicates that consumer price increases slowed last month, the annual rate remains 5% — or more than twice as high as the Federal Reserve’s target. 

Each new monthly report further demonstrates how wrong President Joe Biden was in 2021 when he said that soaring prices were “expected to be temporary.”

Many critics of the Biden administration have blamed its economic policies and excessive spending for exacerbating the problem, and renowned investor Warren Buffett appears to agree.

During a recent CNBC interview, “Squawk Box” co-host Joe Kernen asked his guest to weigh in on the causes of the current inflationary period, suggesting that the pandemic and supply-chain interruptions were largely to blame. 

He went on to ask: “Do you ascribe anything to the Fed enabling too much fiscal spending, profligate spending by the federal — or by the government in general? Do you think that added to it, the increase in the money supply?”

Buffett clearly believed that runaway government spending was a central factor, noting that handouts have long been a popular way for politicians to increase or maintain support.

“It’s fun sending money out to people if you want to stay in office and you want their vote,” the Berkshire Hathaway CEO said. “And that’s always been a problem of our political system and around the world.”

He added that the U.S. “has generally done a pretty good job of keeping inflation from getting out of control,” at least in comparison to nations that have reacted to economic crises by simply printing more money.

Nevertheless, Buffett asserted: “It’s popular to send money out if you’re in politics. If you tell every one of your constituents that they just won the lottery and here’s $5,000 or $15,000, something’s going to happen.”

If the recipients of that largesse do not have enough places to spend the cash, he explained that inflation is the natural result.

“And it’s fiscal policy in that case, and we are spending a lot more than — our government is spending a lot more than it’s taking in,” he concluded. “And that’s a lot of fun if you want to stay in office, but it isn’t necessarily the best thing to do for your kids.”