Difficult times need wise men to tell difficult truths.
And, for many years, Warren Buffett, the "Sage of Omaha," has done just that. For example, he was one of the first to sound the alarm about the danger of derivatives, warning in 2003 that they were "financial weapons of mass destruction" that could lead to a "corporate meltdown."
So it was deeply distressing to watch his recent CNBC town hall meeting with a group of Columbia business students, followed the next night by an hour spent talking about the economy with Charlie Rose, and see Buffett joining in the economic victory lap the Obama administration — and much of the media — are taking.
“The financial panic is behind us,” Buffett told the Columbia crowd. Sure, he conceded, the economy “still is sputtering some,” but his tone was overwhelmingly upbeat.
The cheerleading continued with Rose: The economy "will come back, Charlie," said Buffett. "I want to emphasize that." And he did, again and again.
All this pompom shaking would have been OK if it had been accompanied by some ideas for what steps need to be taken for "the American economy to come back." The assumption being that it would, somehow, just happen. That the rising tide of unemployment, foreclosures and bankruptcies drowning so many Americans would, somehow, reverse itself. But the bout of truth-telling we so desperately need was absent.
Instead, Buffett assured Rose "we'll create new jobs" because… well, because we always have. As proof, he pointed to the early '80s recession when unemployment was at 10 percent and people were deeply concerned about America's economic future. "We've created millions and millions and millions of jobs since then," he said. "But, you know, who would have thought when Paul Allen and Bill Gates were in Albuquerque, you know, eating pizza and drinking Coke at 2 in the morning, you know, that they were a big part of our future."
This echoed his rah-rah salute to American can-do at Columbia: "The plants haven't gone away. The cornfields haven't gone away. The talent of the American people hasn't gone away."
But all those same things could have been said last October, when Wall Street was melting down. The plants hadn't gone away then, either. The cornfields hadn't gone away. The talent of the American people hadn't gone away. But since it was the banks in crisis, we didn't just offer pep talks and rosy predictions for the future, we convened all-night meetings and brought together big wigs over a weekend and told them not to leave without a solution. And, oh yeah, we ponied up trillions of our taxpayer dollars.
But even with unemployment at a 26-year high of 10.2 percent (which is actually 17.5 percent when you include workers no longer looking for work or only partly employed), we're not seeing anything remotely resembling the urgency and aggressive action we saw when it was the banks that needed saving.
Instead of Buffett raising his prophetic voice to sound the alarm as he'd done in the past, and as we desperately need him to do again, he's sounding a trumpet blast: "behold and rejoice." And the best the White House can muster is a summit on joblessness — to be held next month. What's the rush, right? The plants are still there — and so are the cornfields.
Despite Buffett's acknowledgment that "we've got 60 million people living in households where the top income is $21,000 or less," it looks as if, at least for the moment, he's out of the truth-telling business.
But the real economy doesn't need upbeat rhetoric. It needs serious action. For a snapshot of what kind of action, check out Nouriel Roubini's latest post. It's a dose of bracing truth-telling — and the perfect counterweight to Buffett's cheerleading. Roubini puts forth more truth in less than 600 words than Buffett managed in a full hour on Charlie Rose and a full hour at the Columbia town hall.
“There's really just one hope for our leaders to turn things around,” writes Roubini, “a bold prescription that increases the fiscal stimulus with another round of labor-intensive, shovel-ready infrastructure projects, helps fiscally strapped state and local governments and provides a temporary tax credit to the private sector to hire more workers.”
Without such action, says Roubini, "we can expect weak recovery of consumption and economic growth; larger budget deficits; greater delinquencies in residential and commercial real estate and greater fall in home and commercial real estate prices; greater losses for banks and financial institutions on residential and commercial real estate mortgages, and in credit cards, auto loans and student loans and thus a greater rate of failures of banks; and greater protectionist pressures."
The Wall Street economy and the real economy both went down together. But the one that caused the plunge has gotten the lion's share of government attention and money — while the other one has continued to plummet.
And since it's tragically clear which economy has Larry Summers' and Tim Geithner's attention, we are in even more urgent need of truth tellers to point out the grave human consequences of the White House's lackadaisical response.
Consequences such as the 35.8 people million who used food stamps in July — up almost 7 million from the same time last year. Or the 17 million American households that have had difficulty putting enough food on the table during the last year — an increase of 4 million from last year.
Or the 1.3 million unemployed female heads of household who, according to the Center for American Progress, are unemployed. Or the 42-percent rise in homeless schoolchildren in Las Vegas — the result of Nevada's highest-in-the-country foreclosure rate.
The media spotlight needs to move off Wall Street and the green shoots sprouting across the Dow's ticker and onto ways to turn the real economy around. It's not going to happen by clicking our heels together three times and saying, "The American economy will come back... The American economy will come back... The American economy will come back."
We need Warren Buffett to put down his pompoms and tell the president, and the American people, the truth about the economy.
Tribune Media Services