Obama Talks to Buffett About Economy

Edmund Phelps, a Nobel Prize-winning economist and professor at Columbia University, discusses the outlook for the U.S. economy and Federal Reserve monetary policy. Phelps, speaking with David Tweed in Lindau, Germany, also talks about the European sovereign debt crisis and expectations for the euro. Francine Lacqua also speaks in this report on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

President Barack Obama, preparing for a post-Labor Day speech with plans for stimulating the economy, talked with billionaire Warren Buffett about how to boost job creation and spur growth.

“The president and Mr. Buffett discussed the overall outlook on the economy and the reaction to the headwinds we’ve experienced over the last couple of months,” said Josh Earnest, an administration spokesman. “They talked a little bit about some possible measures that would spur investment and increase economic growth and they also talked about some measures that could address the long-term fiscal situation in this country.”

Obama placed the call yesterday to the chairman and chief executive officer of Berkshire Hathaway Inc. (BRK/A), who has served as an informal adviser to the president, Earnest said. The president also talked with Ford Motor Co. Chief Executive Officer Alan Mulally about developments in the automotive and manufacturing sectors of the economy.

Obama plans to give an address on the economy shortly after the U.S. Labor Day holiday, which is Sept. 5. In conjunction with actions to shrink the nation’s long-term deficit, Obama is considering steps to give a quick boost to employment, including an expanded infrastructure spending program, tax incentives for hiring workers, a cut in the payroll tax paid by employers and worker retraining programs.
Republican Opposition

Any measures to spur the economy that require additional government spending are likely to run into opposition from congressional Republicans, who control the House of Representatives.

One idea that has aroused interest among the president’s advisers is a Georgia program that lets workers receiving unemployment insurance train for jobs at businesses at no cost to the employer, said a person familiar with deliberations.

At a town-hall meeting last week in Atkinson, Illinois, Obama praised the Georgia initiative as “a smart program.” The Georgia Works program lets jobless workers continue to collect unemployment insurance while a new employer trains them on the job for eight weeks. After what amounts to a no-cost trial period for a potential new employee, the company may hire or pass on the person.

“You’re essentially earning a salary and getting your foot in the door into that company,” Obama said. “If they hire you full-time, then the unemployment insurance is used to subsidize you getting trained and getting a job.”
Economic Incentives

The president previously has said he wants Congress to approve a program to increase spending on infrastructure projects such as roads to increase hiring in the construction industry and an extension of a temporary two-percentage-point cut in the payroll tax paid by employees that is set to expire at the end of the year.

Administration officials have said the president’s advisers are considering additional moves as well. Some steps could be taken administratively and others would need congressional approval.

Vice President Joe Biden told reporters traveling with him in Japan that a cut in the payroll tax paid by employers is “one of things that’s being considered” as part the package Obama plans to introduce after Labor Day. Biden said he had “extensive discussions” with Obama about the plan before he left, without giving details.
Talks With Republicans

Biden added that he already had discussed the idea of such a tax cut with Republican lawmakers during debt-limit negotiations over the summer. The tax funds the Social Security and Medicare programs and is split equally between employers and workers. The employee portion of the Social Security levy was cut to 4.2 percent from 6.2 percent as part of tax legislation passed last year.

Amid signs of sluggish growth, the unemployment rate was 9.1 percent in July and economists have raised their forecasts for unemployment next year.

The median forecast for unemployment during the fourth quarter of 2012 — when Obama is up for re-election — was 8.5 percent in a Bloomberg News survey of economists taken Aug. 2 through 12. That was up from a median forecast of 8.0 percent for the election-day quarter in a survey of the same economists taken a month earlier.

Obama is seeking to revive a version of the so-called grand bargain with congressional Republicans that would combine long- term U.S. deficit reduction through entitlement benefit cuts and tax increases with immediate steps to boost job growth. To offset the cost of the new initiatives, Obama will seek additional long-term deficit reduction.

Obama has cited Buffett to counter critics of his policy proposals, particularly on raising taxes for the nation’s wealthiest individuals and families.

During his bus tour last week through rural areas of Minnesota, Iowa and Illinois, Obama quoted from a New York Times opinion article in which Buffett wrote that the nation’s richest individuals have been “coddled long enough by a billionaire- friendly Congress.” Buffett argued for raising taxes for the “mega-rich” in the U.S.