David Warsh on Warren Buffet’s NYT op ed

David Warsh, a journalistist covering economics issues, takes a look at Warren Buffet’s op ed at Economic Principals.

The fiscal cliff negotiation is no better than a skirmish in what promises to be an epic ten-year struggle to achieve a new fiscal compact. For evidence of that, consider Warren Buffett’s entry into the debate last week, with a suggestion that negotiators seek to bring in revenues at 18.5 percent and cap spending at about 21 percent of GDP.

Those were levels that had been sustained over long periods of time in the past, Buffett wrote in an op-ed column in The New York Times; they could be reached again relatively quickly.
(Revenues were 15.5 percent of GDP in the fiscal year just ended, while spending was 22.4 percent.) His targets wouldn’t reduce the deficit, he wrote, but they would maintain a stable ratio of debt to output.

It was the right argument, but Buffett had the wrong numbers. He apparently borrowed them from the National Commission on Fiscal Responsibility and Reform, led by Erskine Bowes and Alan Simpson, now more than two years old…