July 10, 2009 — -- Billionaire investor Warren Buffett believes that the U.S. will emerge from the current economic recession "stronger than ever," but he said the behavior of the American consumer may be forever changed.
"We were on a binge before," the CEO of Berkshire Hathaway told "Good Morning America" in an exclusive interview. "I mean, we are not saving extraordinary sums now but the savings behavior has changed. ... I don't necessarily think that we will go back to behaving the way that we were two years ago."
The man known as the "Oracle from Omaha" because of his history of successful investments, shared his top three pieces of advice for average Americans who want to grow their savings and keep their money safe.
Number one: "If it seems too good to be true, it probably is."
Number two: "Always look at how much the other guy is making if he is trying to sell you something."
Number three: Don't go into debt.
"Stay away from leverage," he said. "Nobody ever goes broke that doesn't owe money."
The "binge," he said, was fueled largely by over-borrowing by both individuals and companies.
"The U.S. public as a whole has gotten into problems from leverage, financial institutions have gotten into problems through leverage," he said. "A long, long time ago a friend said to me about leverage, 'If you're smart you don't need it, and if you're dumb, you got no business using it.'"
At a time when many college graduates face uncertain futures and are struggling to find jobs, Buffett said he still believes that "investing in yourself is the best thing you can do. Anything that improves your own talents. And I always advise students to do that, high school students, college students and obviously investing in your children is, in some ways, investing in yourself."
No matter what happens in the economy, "if you have true talent yourself, and you have maximized your talent, you have a terrific asset."
Warren Buffett on Budget Deficit
Buffett showed some support for the idea of a second economic stimulus package, but cautioned that it should be handled differently to restore the American public's confidence.
The number of earmarks included in the bill were "part of what has affected the American psyche," he said. "When we go on and we talk about earmarks and that sort of thing, and then we get the kind of behavior we've got, I mean, that is not reassuring to the American public."
He called the first stimulus "like taking half a tablet of Viagra and having also a bunch of candy mixed in, you know, as if everybody was putting in enough for their own constituents."
He also cautioned that the American public will have to be patient and give the economy time to recover, particularly when it comes to the surplus of houses on the market that resulted from overbuilding.
"The American public will get disappointed, but it is going to take time to work through the overhang of houses, for example," he said. "You can't cure that in a day or a week or a month, so a stimulus doesn't cure that."
Buffett also expressed confidence in Federal Reserve Chairman Ben Bernanke, and dismissed rumors that the Fed chief may not return once his current term is up at the end of the year.
"Well, I think he should keep his job," he said. "And as to what people say, well they are going to say something, they have always talked about Fed chairmen when their terms are coming up. But taking Bernanke out of the lineup would be like if you had the Ryder Cup, taking Tiger Woods out of it. It just doesn't make any sense."
Buffett acknowledged that the actions taken by the government will lead to an even bigger budget deficit. "It will happen and I worry about it, but I would worry more if we weren't doing anything right now."
He compared the current situation to "a friend that is sinking in quicksand."
"You throw them a rope and they tie it around themselves and a car pulls them out, they may dislocate a couple of shoulders but it's still the right thing to do. And we are doing things which will have negative consequences down the road, but they are still the right thing to do to get us out of this particular economic quicksand that we are in."
Warren Buffett on Health Care Reform
Asked if he agreed with President Obama that passing health care reform would help limit the ballooning budget deficit, Buffett replied, "I really don't think that I'm an expert on health care," but said the system needs to be drastically changed.
"I think it's a moral imperative that everybody have access to health care," he said. "It's a terrible problem."
Despite the pressing economic concerns, he said he would be in favor of the government devoting resources to devising a plan for health care reform "if there's a well-thought-out program that actually promises to bring down the cost of health care."
"We are spending 2 trillion plus on health care a year," he said. "If we could come up with something that even maintains the present cost and promises not to have a greater-than-inflation rate of gain in the future, and brings health care to the people that aren't getting it now, then I think that will be a huge improvement. I don't think that is an easy task."
In anyone's lifetime, "you will see many recessions, some bubbles," he said, but he's optimistic about the future.
"If we sat down here [at the] start of the 20th century, and I said there is going to be the panic of 1907, there is going to be a world war. It will be followed by a Great Depression with 35 percent unemployment, and then we will have another war that it looks like we are going to lose, and then we are going to have a nuclear bomb like no one has ever seen ... by the time I got through, you'd be crying. But the Dow went from 66 to 11,497 during that same century, and the average person's standard of living went up 7 to 1. We have a system that unleashes human potential like nobody has ever seen, and it has done it in the past, it will do it in the future. So I'm a huge bull on America -- it does let people like you and me do far more than we could have done 200 years ago."