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Buffett: Government showing ‘extreme idiocy’

Lawrence Lewitinn
Talking Numbers
Buffett: Government showing ‘extreme idiocy’

Is Buffett right in saying the budge feud will be resolved in the nick of time?

Congressional Republicans and the president seem hopelessly deadlocked over passing a resolution to continue funding the government and “Obamacare”. But, Warren Buffet says he thinks a deal will eventually be reached.

Appearing Wednesday on CNBC’s Squawk Box, Buffett said:

“We will go right up to the point of, you know, extreme idiocy but we won’t cross it… if it goes one second beyond the debt limit, that will do us in. But if it goes one year beyond, that will be unbelievable.”

(Watch: Buffett speaks out against DC's 'extreme idiocy')

The Republican-controlled House of Representatives wants a delay in implementing provisions of the Affordable Care Act (“Obamacare”) as part of a continuing resolution to keep the government funded for a short amount of time. President Obama and the Democrat-controlled Senate don’t want to give up on what they consider to be their signature piece of legislation which was signed into law three years ago. Without a continuing resolution, the government furloughed 800,000 federal employees on October 1.

But another important deadline looms – October 17. That’s when the US government hits its $16.7 trillion debt ceiling. At that point, unless something is done, the Treasury will have just $30 billion in cash. That’s not enough to pay its bills, warns US Treasury Secretary Jack Lew.

(Read: Boehner tells Republicans he won’t let the nation default)

So, is Buffett right that this will be resolved in the nick of time?

Looking at the fundamentals of the US bond market is John Stephenson, portfolio manager at First Asset Investment Management. Analyzing the charts for the benchmark 10-year US Treasury bond is Steven Pytlar, Chief Equity Strategist at Prime Executions.

Are bonds a safe bet or should we worry about default? Watch the video to see what the fundamentals and technicals have to say about it.

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