Congressional Republicans aren’t stupid enough to hold America’s full faith and credit hostage to politics, but they'll get pretty close, according to Warren Buffett.
The billionaire investor told Andrew Ross Sorkin on CNBC Thursday that Congress will probably raise the nation’s debt ceiling in time to avoid defaulting on all its obligations, though it likely won't happen until the final hours.
“We will go right up to the point of extreme idiocy, but we won’t cross it,” Buffett said Thursday on “Squawk Box.”
If Congress fails to raise the nation’s borrowing limit -- also known as the debt ceiling -- by October 17, America won’t have enough money to pay its bills, according to Treasury Secretary Jack Lew. Congressional Republicans have said they will use the debt ceiling as leverage to do things like delay a critical provision of President Obama's Affordable Care Act or get backing for the controversial Keystone pipeline.
But if debate over the debt ceiling results in an impasse, it could potentially cause a financial meltdown. Though Congress ultimately reached a deal, a similar stalemate in 2011 cost the U.S. its top credit rating from Standard & Poor’s, hurt consumer and business confidence and shook the stock market.
“Many people in Congress, they feel if they can’t get their way on some other issue they will use the threat of defaulting on the government’s credit to get their way,” Buffett said Thursday. “That won’t work long term.”
Still, there might be cause for concern despite Buffett’s nonchalance. Obama warned Wall Street CEOs Wednesday that this time around, the debate over the debt ceiling might be “different,” saying they shouldn’t assume Republicans would agree to a deal in time.
“I think they should be concerned," Obama said on CNBC.