2021: Does Buffett agree with Larry Summers' critique of Biden's stimulus?

Becky Quick: This question comes from Tim Medley in Jackson, Mississippi, a Berkshire shareholder since 1987. He writes, "On March 19th, respected economist Larry Summers, former president of Harvard University and former Secretary of the Treasury, was critical of President Biden’s $1.9 trillion American Rescue Stimulus Plan. In an interview with Bloomberg Television, he said, 'I am much more worried that we will have more inflation or that we will have a pretty dramatic fiscal monetary collision. This goes way beyond what is necessary.’ He also said, 'This is the least responsible macroeconomic policy we’ve had in the last 40 years.' Your thoughts?"

Warren Buffett: You guys gave me that?

Becky Quick: He didn’t specify who, so it’s open to anyone on the stage.

Warren Buffett: Well, Larry has been reading his uncle’s book, which was Paul Samuelson. Larry is incredibly smart, and he’s laying out some possibilities that have probably gained more traction since his comments on March 19th. Economics isn’t simple—you can’t just do one thing without impacting others. For instance, people used to say Japan couldn’t do what they’ve done; they even called it the "Widow Maker" when people shorted Japanese bonds. But here we are. The truth is, we don’t know exactly where current policies will lead, but Larry’s viewpoint is significant and as valid as the opposing perspectives.

Warren Buffett: We’re uncertain about the outcomes of present policies. Jay Powell recently mentioned that the idea of debt exceeding 100% of GDP as an automatic danger is outdated. Accepted wisdom changes; we’ve learned that some beliefs we held were inaccurate, but we haven’t yet confirmed whether what we’re doing now is sustainable. The best approach is to acknowledge what we don’t know and aim for policies that yield decent results regardless. That’s what we aim for at Berkshire Hathaway. We don’t try to predict macroeconomic trends; instead, we focus on ensuring a solid result under a variety of possible policies.

Charlie Munger: It’s not at all clear whether Larry is right or wrong.

Warren Buffett: He is, however, a smart man.

Charlie Munger: Yes, and it’s courageous of him to raise the point, as he’s practically the only one talking this way. I admire that.

Warren Buffett: It might mean he won’t get a position in the administration.

Charlie Munger: That’s one of the reasons I admire him. Not that there’s anything wrong with being in the administration, but I appreciate people who say what they truly believe.