h1>Ohio Senators, Heeding Advice from World's Richest Man, Act Quickly to Avoid New Depression

Columbus, Ohio:

Calling it an "economic Pearl Harbor,"Warren Buffett, the world's richest man, told Charlie Rose of PBS Wednesday evening that the full Congress must act quickly to restore confidence in America's financial system, otherwise, the "cardiac arrest" caused by mortgages gone bad and a liquidity crisis that's putting a tourniquet on credit lending for big banks and individuals and families, is real and needs to be stanched, before it boils over into a real modern-day Depression, with the only tool that can do the job: the financial clout and staying power of the US Government.

Voinovich, Brown Vote for Bailout Bill

It's doubtful that Ohio's two senators saw Rose's popular show, but Sens. George Voinovich, a Republican and self-described deficit hawk, and Sherrod Brown, a progressive populist who won his first 6-years term in 2006, took the plunge and voted for the bill. Voinovich told the (Cleveland) Plain Dealer that even worse than the federal budget damage created by the bailout was the crippling damage to the country's economy if Congress failed to act. "While deciding to vote for a package of this magnitude feels like being punched in the gut, the thought of what would happen to average Americans if we didn't do this is much more painful,"Voinovich said. The former mayor of Cleveland and governor of Ohio said that "doing nothing is simply not an option" and said he had spoken with "Ohio employers large and small this week who will have to make choices like laying off workers because they can't get money from the banks to make payroll. I cannot sit back and allow that to happen," he told the CPD.

Brown, a Democrat, who decried "Wall Street greed" in the article, cited similar reasons to the CPD for his vote. "If we do not pass this economic stabilization plan, Ohio's middle class will pay even more for Wall Street's greed." He said pensions and retirement savings accounts will suffer, causing financial insecurity for millions of Americans, and that credit will tighten, making it harder for college students to get loans. "Cities and counties will have to pay more to finance their operations -- and that means higher taxes and fewer services," he said in written comments before the vote. "Inaction will cause small businesses to shed jobs...Ohio has lost more than 200,000 manufacturing jobs over the past seven years, overall employment has been flat, and unemployment has skyrocketed. Inaction is not an option."

Ohio Struggles With More Job Losses

Ohio’s job market continues to lose steam, as employment slackens and unemployment claims grow, according to the most recent JobWatch report from Policy Matters Ohio, a non-profit, non-partisan economic think tank. In its September report, PMO reported that for each of the last 10 weeks, initial claims for unemployment compensation in the state have risen by more than 30 percent from the same week a year earlier. And according to seasonally adjusted payroll numbers for nonfarm wage and salary jobs released Sept. 19 by the Ohio Department of Job and Family Services (ODJFS), Ohio employment has fallen by more than 19,000 jobs in the past year.

It reported that two states crucial to winning the White House by either Democratic Sen. Barack Obama or Republican Sen. John McCain, Ohio and Michigan, are the only two states in the country that do not have as many jobs as they did when the last recession officially ended more than six years ago. Since then, Ohio has lost 79,000 jobs, or 1.4 percent of its total.

Buffett Says Confidence Like Oxygen -- You Focus On It When It's Gone

Buffett, the president of Berkshire Hathaway, the company he formed in the 1960s that has grown as a result of his wise and timely decisions, said he has full confidence in the American system over time, but is fearful in the short term that if the rescue Washington lawmakers isn't large enough or timely enough, the trickle down of pain from Wall Street to Main Street in the form of tight credit that can clog and "gum up" the flow of funds from one part of the system to another could come within weeks or months, bringing joblessness and higher inflation for many more.

Buffett, known as the Oracle of Omaha, the city in Nebraska where he lives and where his company is located, took a break from attending a conference in San Diego to honor women to speak to Rose, whose eponymous late-night talk show features discussions with a wide variety of private and publicnewmakers. An economic adviser to Illinois Sen. Barack Obama, a Democrat running for president this year against John McCain, the Republican candidate, Buffett acknowledge that risk and leverage were at the heart of the worst financial crisis he's seen in his life. He said the plan proposed by Treasury Secretary HenryPaulson, the former CEO of Goldman Sach's , a large investment house, of $700 billion should be enough now to stop the bleeding of economic heartache that is underway now.Buffett was emphatic that if these funds are "invested" in assets that are sold "wisely," the people's funds would likely bring a profit over time, but only if the assets were valued at today's market prices. Hespeculated that $700 billion could actually buy tarnished assets whose future market value he speculated could be valued at upwards of $2 trillion and result in a future profit of about 15 percent, a handsome return indeed.

He cautioned the House of Representatives, where appropriations bills start by law but which failed to pass the bill before it yesterday because Republicans, by a 2 to 1 margin, voted against it to placate their constituencies who saw it as a bailout of fat cat Wall StreetCEO's who were making lots of money whether their companies performed well or not. Buffett applauded the oversight provisions contained in the new and improved version of the bill, passed in the Senate this evening by a vote of 74-25, a comfortable margin that included supporting votes fromObama and McCain, who returned to the capital to cast their first votes since early in the year.

Waxing wisely for the hour-long program, Buffett said confidence is like oxygen, you never thing of it when you have it but when you don't' have it, even if it's for only five minutes, that all you can think about. He said Congress can help restore confidence in the financial system by acting quickly, like paramedics who are tasked to treat a patient gone into cardiac arrest. Doing something is far better than doing nothing, he said. Being approximately right is better than being precisely wrong, he said in answering a question about whether it made sense for Republicans and Democrats in the House who had opposed the measureyesterday to continue their opposition because they wanted to argue over where to apply their resuscitating skills on the patient. He said it wasn't the right time to lecture the patient on the causes of their cardiac problem, that there was time for that later. But in pointing to the housing bubble, which he said wasfueled by the expectation among sellers, buyers and financiers that housing values could only go up, he said bubbles have come and gone through history and will likely come and go again, as that's the nature of humans and markets to leave rational thoughts behind when the social proof shows that prices can rise. He said the only thing that can make a smart man go broke overnight is leverage, but if you buy wisely, paying as you go, you'll always make money over time. He said the time to fearful is when everyone else is greedy and the time to be greedy is when everyone else is fearful.

And just as no heart attack victim can spring back up and resume their life as if nothing happened, Buffett said the financial pain being inflicted on America, and to a lesser extent on other counties who are intertwined with American finances, will only grow worse in the near term as the credit crunch works its way through the system.

Despite his rainy day attitude about today's problems, he said things will be better for everyone in the next 10 or 20 years. His confidence in America prospering over time was clear and convincing. But he said Americans are oriented towards consumption not saving, which results in a trade deficit with the rest of the world that amounts to about $2 billion a day in over consumption. By buying more than it exports, he said Americans are giving away a bit of their country each day to countries that buy US backed securities. Exports are at 12% of GDP, a statistic he said is very good compared to a figure of less than half of that fewer than 15 years ago. He also made it clear that the rich people, like himself, need to pay more to the government. The government, he said, needs to get its money from somewhere to do all the things its citizens expect of it, and to taxcapital gains from dividends at half the rate of the payroll tax, which affects workers, is not right and should be changed. He said the next administration should push more money to workers, who will spend it, rather than reducing capital gains taxes for investors who tend not to spend but save.

John Michael Spinelli is a former Ohio Statehouse government and political reporter and business columnist. He now serves as the OhioNews Bureau Chief for ePluribus Media Journal. Find ONB archives here.
Photo credits: (c) 2008 AnHarris, istockphoto

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